As filed with the Securities and Exchange Commission on January 21, 2025
Registration No. 333-281682
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 2
to
FORM S-1/A
REGISTRATION STATEMENT
Under
The Securities Act of 1933
NUBURU, INC.
(Exact name of Registrant as specified in its charter)
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Delaware | 3690 | 85-1288435 |
(State or other jurisdiction of
incorporation or organization) | (Primary Standard Industrial
Classification Code Number) | (I.R.S. Employer
Identification Number) |
7442 S Tucson Way, Suite 130
Centennial, CO 80112
Telephone: (720) 767-1400
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Brian Knaley
Chief Executive Officer
7442 S Tucsoan Way, Suite130
Centennial, CO 80112
Telephone: (720) 767-1400
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Amy Bowler
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, CO 80202-3921
Tel: (650) 493-9300
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.☐
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):
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Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
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| 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 to Section 7(a)(2)(B) of the Securities Act.☐
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-281682
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 21, 2025
PRELIMINARY PROSPECTUS
NUBURU, INC.
Up to 1,905,904 Shares of Common Stock
This prospectus of Nuburu, Inc., a Delaware corporation (the “Company” or “Nuburu”), relates to the resale by the investors listed in the section of this prospectus entitled “Selling Stockholders” (collectively, with any of such stockholders’ transferees, pledgees, assignees, distributees, donees or successors-in-interest, the “Selling Stockholders”) of up to 1,905,904 shares (“Offered Shares”) of our common stock, par value $0.0001 per share (“Common Stock”), issuable upon conversion of certain convertible notes described below (the “Subordinated Convertible Notes”) and as consideration for certain advisory services.
Our registration of the Offered Shares covered by this prospectus does not mean that the Selling Stockholders will offer or sell any of the Offered Shares. The Selling Stockholders may sell the Offered Shares covered by this prospectus in a number of different ways and at varying prices. For additional information on the possible methods of sale that may be used by the Selling Stockholders, you should refer to the section of this prospectus entitled “Plan of Distribution.” We will not receive any of the proceeds from the Offered Shares sold by the Selling Stockholders.
No underwriter or other person has been engaged to facilitate the sale of our Common Stock in this offering. The Selling Stockholders and any broker-dealers or agents may, individually but not severally, be deemed to be an “underwriter” within the meaning of the Securities Act, of the shares of Common Stock that they are offering pursuant to this prospectus. We will bear all costs, expenses and fees in connection with the registration of the Offered Shares. The Selling Stockholders will bear all commissions and discounts, if any, attributable to their respective sales of Common Stock.
Our Common Stock is traded on the NYSE American under the symbol “BURU.” On January 17, 2025, the last quoted sale price for our Common Stock as reported on the NYSE American was $0.44 per share. We have not listed, nor do we intend to list, our Preferred Stock on any securities exchange or nationally recognized trading system.
We are a “smaller reporting company” and an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.
Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in the section titled “Risk Factors” beginning on page of this prospectus.
You should rely only on the information contained in this prospectus or any prospectus supplement or amendment hereto. We have not authorized anyone to provide you with different information. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 21, 2025.
Table of Contents
About This Prospectus
This prospectus is part of a registration statement on Form S-1 that we filed with the U.S. Securities and Exchange Commission (the “SEC”). Under this registration process, the Selling Stockholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by the Selling Stockholders of the securities offered by them described in this prospectus, other than any proceeds from any cash exercise of the Warrants.
We may also file a prospectus supplement or post-effective amendment to the registration statement of which this prospectus forms a part that may contain material information relating to this offering. The prospectus supplement or post-effective amendment may also add, update or change information contained in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement or post-effective amendment, you should rely on the prospectus supplement or post-effective amendment, as applicable. Before purchasing any securities, you should carefully read this prospectus, any post-effective amendment, and any applicable prospectus supplement, together with the additional information described under the headings “Where You Can Find More Information”.
Neither we nor the Selling Stockholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any post-effective amendment, or any applicable prospectus supplement prepared by or on behalf of us or to which we have referred you. We and the Selling Stockholders take no responsibility for and can provide no assurance as to the reliability of any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should not assume that the information contained in this prospectus or any applicable prospectus supplement is accurate on any date subsequent to the date set forth on the front of the document, even though this prospectus or any applicable prospectus supplement is delivered, or securities are sold, on a later date.
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the section entitled “Where You Can Find More Information.”
Market and Industry Data
We obtained the industry and market data used throughout this prospectus from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies, publicly available information and research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable.
In some cases, we do not expressly refer to the sources from which this data is derived. In addition, while we believe the industry and market data included in this prospectus is reliable and based on reasonable assumptions, such data involve material risks and other uncertainties and are subject to change based on various factors, including those discussed in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties or by us.
Trademarks
We use our registered trademark and trade name, such as NUBURU®, in this prospectus. This prospectus may also include trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® and ™symbols, but those references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks, trade names and service marks. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of, any other entity.
Basis of Presentation and Glossary
As used in this prospectus, unless otherwise noted or the context otherwise requires, references to:
•“2022 Plan” are to the Nuburu, Inc. 2022 Equity Incentive Plan, which was adopted in connection with the Business Combination;
•“Anzu Holders” are to Anzu Partners and the Anzu SPVs;
•“Anzu Partners” are to Anzu Partners LLC;
•“Anzu Partners Warrant” are to the warrant issued by Legacy Nuburu to Anzu Partners with a strike price of $0.01 per share for 500,000 shares of Preferred Stock, which was exercise in connection with the Closing;
•“Anzu Representative” are to the representative designated by Anzu Partners to be a member of the Company’s board of directors pursuant to the Anzu Designee Letter Agreement;
•“Anzu SPVs” are to Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC;
•“ASC” are to the Accounting Standards Codification;
•“ASU” are to the Accounting Standards Update;
•“Business Combination” are to the Merger and the other transactions consummated pursuant to the Business Combination Agreement, collectively;
•“Business Combination Agreement” are to that certain Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time) by and among the Company, Merger Sub, and Legacy Nuburu, dated August 5, 2022;
•“Business Combination Shares” are to shares of Common Stock issued to certain former stockholders of Legacy Nuburu, including our officers and directors, in connection with the Business Combination, which are being registered for resale pursuant to the registration statement of which this prospectus forms a part;
•“Bylaws” are to the Company’s Amended and Restated Bylaws;
•“Certificate of Designations” are to the Company’s Certificate of Designations, which was filed on the Closing Date and which establishes the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions of the shares of Preferred Stock;
•“Certificate of Incorporation” are to the Company’s Amended and Restated Certificate of Incorporation, which was filed on the Closing Date;
•“Class B Common Stock” or “Founder Shares” are to the 8,355,393 shares of Class B common stock, par value $0.0001 per share, of the Company that were initially issued to the Sponsor in a private placement prior to the IPO, and which automatically converted, on a one-for-one basis, into shares of Common Stock in connection with the Business Combination (other than 7,205,393 shares that the Sponsor surrendered and forfeited in connection with the Closing for no additional consideration and 200,000 shares that the Sponsor transferred to third parties in connection with the Closing);
•“Closing” are to the closing of the Business Combination;
•“Closing Date” are to January 31, 2023, the date of closing of the Business Combination;
•“Code” are to the U.S. Internal Revenue Code;
•“Common Stock” are to shares of common stock, par value $0.0001 per share, of the Company;
•“Company” are to Nuburu, Inc., a Delaware corporation f/k/a Tailwind Acquisition Corp.;
•“Company Notes” are to convertible promissory notes issued by Legacy Nuburu, which immediately prior to the consummation of the Business Combination, automatically converted into shares of Legacy Nuburu Common Stock that, upon consummation of the Business Combination, entitled the holders of the Company Notes to receive shares of Common Stock and shares of Preferred Stock;
•“CST” are to Continental Stock Transfer & Trust Company;
•“DGCL” are to the Delaware General Corporation Law;
•“Effective Time” are to the effective time of the Merger;
•“Equity Award Shares” are to 515,394 shares underlying restricted stock units issued to an officer of the Company, which are being registered for resale pursuant to the registration statement of which this prospectus forms a part;
•“ESPP” are to the Nuburu, Inc. 2022 Employee Stock Purchase Plan, which was adopted in connection with the Business Combination;
•“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
•“GAAP” are to generally accepted accounting principles in the United States;
•“Governing Documents” are to the Certificate of Incorporation, the Certificate of Designations and the Bylaws;
•“Initial Registration Statement” are to the Company’s registration statement on Form S-1 (File No. 333-269610) (as amended on March 13, 2023 and March 30, 2023), which was declared effective by the SEC on March 30, 2023;
•“IPO” are to our initial public offering, which was consummated on September 9, 2020;
•“IRS” are to the Internal Revenue Service;
•“Legacy Nuburu” are to Nuburu Subsidiary, Inc. a Delaware corporation f/k/a Nuburu, Inc.;
•“Legacy Nuburu Common Stock” are to the shares of Legacy Nuburu common stock, par value $0.0001 per share;
•“Legacy Nuburu Series A Preferred Stock” are to the shares of Series A Preferred Stock of Legacy Nuburu, $0.0001 par value per share;
•“Legacy Nuburu Series A-1 Preferred Stock” are to the shares of Series A-1 Preferred Stock of Legacy Nuburu, $0.0001 par value per share;
•“Legacy Nuburu Series B-1 Preferred Stock” are to the shares of Series B-1 Preferred Stock of Legacy Nuburu, $0.0001 par value per share;
•“Legacy Nuburu Series C Preferred Stock” are to the shares of Series C Preferred Stock of Legacy Nuburu, $0.0001 par value per share;
•“Lincoln Park” are to Lincoln Park Capital Fund, LLC, an Illinois limited liability company;
•“Lincoln Park Purchase Agreement” are to that certain Purchase Agreement (as it may be amended, supplemented or otherwise modified from time to time) by and among the Company, Legacy Nuburu and Lincoln Park, dated as of August 5, 2022;
•“Merger” are to the merger of Merger Sub with and into Legacy Nuburu, with Legacy Nuburu as the surviving company in the Business Combination, and after giving effect to such Merger, continuing as a wholly owned subsidiary of the Company;
•“Merger Sub” are to Compass Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company prior to consummation of the Business Combination;
•“Nuburu” are to Nuburu, Inc., a Delaware corporation f/k/a Tailwind Acquisition Corp.;
•“NYSE American” are to the NYSE American LLC;
•“NYSE” are to the New York Stock Exchange;
•“Preferred Stock” are to shares of Series A preferred stock, par value $0.0001 per share, of the Company;
•“Preferred Stock Issuance” are to the issuance in the form of shares of Preferred Stock to the holders of record of Common Stock as of the close of business on the Closing Date (other than (a) stockholders of Legacy Nuburu who waived such stockholders’ entire right, title and interest in, to or under, any participation in the Preferred Stock Issuance (provided that such waiver did not apply with respect to shares of Common Stock received as a result of the conversion of any Company Note) and (b) the Sponsor, which waived, for no consideration, its right, title and interest in, to or under, a portion of the Preferred Stock Issuance, with one share of Preferred Stock issued in respect of each such share of Common Stock;
•“Private Placement Warrants” are to the 9,700,000 warrants purchased by the Sponsor simultaneously with the closing of the IPO, at a price of $1.00 per Private Placement Warrant, or $9,700,000 in the aggregate, which warrants the Sponsor canceled pursuant in connection with the Closing;
•“Public Warrants” are to the 16,710,785 whole warrants of the Company sold to public investors in the IPO as part of the units;
•“Registration Rights and Lock-up Agreement” are to that certain Amended and Restated Registration Rights and Lock-up Agreement between the Company and the Holders (as defined therein), dated August 5, 2022 (as amended by the Amendment to Registration Rights and Lock-Up Agreement, dated November 22, 2022, the Second Amendment to Registration Rights and Lock-Up Agreement, dated January 31, 2023, the Third Amendment to Registration Rights and Lock-Up Agreement, dated January 31, 2023, and the Fourth Amendment to Registration Rights and Lock-Up Agreement, dated March 10, 2023, and as it may be further amended, supplemented or otherwise modified from time to time), which amended and restated in its entirety the Registration and Stockholder Rights Agreement between the Company and the Sponsor, dated September 9, 2020 and obligates the Company to file a registration statement to register the resale of certain shares of Common Stock held by the Holders and subjects certain Holders to a lock-up period;
•“Sale Option Agreement” are to the Preferred Stock Sale Option Agreement between the Company and the Anzu SPVs, dated as of August 5, 2022 (as amended by the Amendment to Preferred Stock Sale Option Agreement, dated November 22, 2022, the Second Amendment to Preferred Stock Sale Option Agreement, dated November 28, 2022, and the Third Amendment to Preferred Stock Sale Option Agreement, dated March 10, 2023, and as it may be further amended, supplemented or otherwise modified from time to time), pursuant to which, in the event an Anzu SPV transfers any shares of Common Stock beneficially owned or owned of record by such holder prior to the expiration of the lock-up period applicable to such holder in a Permitted Transfer (as defined in the Registration Rights and Lock-up Agreement), such holder must notify the Company of the Permitted Transfer, whereupon, the Company has the right, but not the obligation, to cause such holder to use up to 2/3 of the gross proceeds of the Permitted Transfer to purchase Preferred Stock from the Company at a price equal to $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like);
•“Share Transfer Agreement” are to the Share Transfer Agreement, between the Sponsor and an unaffiliated third party (the “Purchasing Party”), dated January 25, 2023, whereby the Purchasing Party agreed to use commercially reasonable efforts to seek to acquire 100,000 shares of Class A Common Stock of Tailwind (the “Acquired Shares”) from a third party which had previously submitted an election to redeem for the purposes of the Purchasing Party reversing such election to redeem on or following the date of the agreement. In exchange for the foregoing commitment to acquire and reverse the redemption of the Acquired Shares, the Sponsor agreed to transfer to the Purchasing Party an aggregate of 150,000 shares of Common Stock held by the Sponsor immediately following the consummation of the Business Combination if the Purchasing Party continued to hold such Acquired Shares through the consummation of the Business Combination;
•“SEC” are to the United States Securities and Exchange Commission;
•“Securities” are to Common Stock offered for resale by the Selling Stockholders;
•“Securities Act” are to the Securities Act of 1933, as amended;
•“Selling Securityholders” are to the selling stockholders named in this prospectus (or their permitted transferees);
•“Special Meeting” are to the special meeting of stockholders of the Company to be held to approve issuances of Securities in excess of 19.9% of the Company’s outstanding Common Stock;
•“Sponsor” are to Tailwind Sponsor LLC, a Delaware limited liability company and the sponsor of the Company prior to the Closing;
•“Tailwind” are to Tailwind Acquisition Corp. prior to giving effect to the Business Combination;
•“Underlying Common Shares” are to the shares of Common Stock issuable upon the conversion of Subordinated Convertible Notes, which are being registered for resale pursuant to the registration statement of which this prospectus forms a part;
•“Warrant Agreement” are to the Warrant Agreement (as it may be amended, supplemented or otherwise modified from time to time) between CST, as warrant agent, and the Company, dated September 9, 2020, pursuant to which the Public Warrants were issued; and
•“Warrants” are to the Private Placement Warrants and Public Warrants.
Beneficial ownership throughout this prospectus with respect to the Company’s stockholders is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days of such disclosure.
Unless specified otherwise, amounts in this prospectus are presented in United States dollars.
Defined terms in the financial statements contained in this prospectus have the meanings ascribed to them in the financial statements.
Cautionary Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, and product development and commercialization timelines, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•our ability to obtain additional financing, including through public or private offerings of our securities;
•our public securities’ potential liquidity and trading;
•our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
•the ability to maintain the listing of our Common Stock on a securities exchange;
•the outcome of any legal proceedings that may be instituted against us related to the Business Combination or otherwise;
•existing regulations and regulatory developments in the United States and other jurisdictions;
•the need to hire additional personnel and our ability to attract and retain such personnel;
•our plans and ability to obtain, maintain, enforce, or protect intellectual property rights;
•our business, operations and financial performance, including:
•expectations with respect to financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;
•future business plans and growth opportunities, including revenue opportunity available from new or existing clients and expectations regarding the use of blue laser technology in 3D printing applications;
•expectations regarding product development and pipeline;
•expectations regarding research and development efforts;
•expectations regarding market size;
•expectations regarding the competitive landscape;
•expectations regarding future acquisitions, partnerships or other relationships with third parties; and
•future capital requirements and sources and uses of cash, including the ability to obtain additional capital in the future.
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business 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 statements. These risks and uncertainties include, but are not limited to, those factors under the heading "Risk Factors" in this prospectus, as well as the following important factors:
•our inability to obtain financing;
•our ability to meet NYSE American’s continued listing standards;
•our inability to protect our intellectual property;
•whether the market embraces our products;
•whether we achieve full commercialization in a timely manner;
•the outcome of any legal proceedings that may be instituted against us;
•the occurrence of events of default under the terms of our existing indebtedness;
•our ability to retain or recruit key employees;
•costs related to being a public company;
•changes in applicable laws or regulations;
•the possibility that we may be adversely affected by economic, business or competitive factors;
•volatility in the financial sector and markets caused by geopolitical and economic factors; and
•other risks and uncertainties set forth under the heading “Risk Factors” and elsewhere in this prospectus.
Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. 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.
PROSPECTUS Summary
This summary highlights selected information included in this prospectus and does not contain all of the information that may be important to you. You should read this entire document and its annexes and the other documents to which we refer before investing in our Common Stock. You should carefully consider, among other things, our financial statements and the related notes and the sections titled “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Unless the context otherwise requires, the terms “Nuburu,” the “Company,” “we,” “us,” and “our,” or other similar terminology, refer to Nuburu, Inc. and its consolidated subsidiaries.
Corporate Overview
Nuburu is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high value applications including welding and 3D printing. By delivering increased speed and quality Nuburu hopes to enhance productivity for manufacturers in the e-mobility, consumer electronics, aerospace and defense and 3D printing markets.
Corporate History and Background
We were originally incorporated in Delaware on July 21, 2020 under the name “Tailwind Acquisition Corp.” as a special purpose acquisition company, formed for the purpose of effecting an initial business combination with one or more target businesses. On September 9, 2020 (the “IPO Closing Date”), we consummated our initial public offering (the “IPO”). On January 31, 2023, we consummated a business combination with Nuburu Subsidiary, Inc. f/k/a Nuburu, Inc. (“Legacy Nuburu”), a privately held operating company which merged into our subsidiary Compass Merger Sub, Inc. (the “Business Combination”) and changed our name to “Nuburu, Inc.,” and we became the owner, directly or indirectly, of all of the equity interests of Nuburu Subsidiary, Inc. and its subsidiaries.
On January 31, 2023, upon the consummation of the Business Combination, all holders of 10,782,091 issued and outstanding shares of Legacy Nuburu common stock and 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock received shares of Nuburu common stock at a deemed value of $400.00 per share after giving effect to the exchange ratios set forth below (the “Exchange Ratios”):
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Legacy Nuburu Class / Series | | Exchange Ratio | |
Legacy Nuburu Common Stock | | | 0.013 | |
Legacy Nuburu Series A Preferred Stock | | | 0.014 | |
Legacy Nuburu Series A-1 Preferred Stock | | | 0.015 | |
Legacy Nuburu Series B Preferred Stock | | | 0.021 | |
Legacy Nuburu Series B-1 Preferred Stock | | | 0.013 | |
Legacy Nuburu Series C Preferred Stock | | | 0.029 | |
This resulted in 783,098 shares of Nuburu Common Stock issued and outstanding as of the Closing and all holders of 7,132,467 issued and outstanding Legacy Nuburu equity awards received Nuburu equity awards covering 91,899 shares of Nuburu Common Stock at a deemed value of $400.00 per share after giving effect to the Exchange Ratios, based on the following events contemplated by the Business Combination Agreement:
•the cancellation and conversion of all 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock into 580,943 shares of Nuburu Common Stock at the conversion rate as calculated pursuant to Legacy Nuburu's Certificate of Incorporation, multiplied by the Exchange Ratios at the date and time the Business Combination became effective (“Effective Time”);
•the cancellation and conversion of all 10,782,091 issued and outstanding shares of Legacy Nuburu common stock into 138,922 shares of Nuburu Common Stock as adjusted by the Exchange Ratios;
•the net exercise of all 4,000,000 outstanding warrants to purchase shares of Legacy Nuburu common stock immediately prior to the Effective Time in accordance with its terms and subsequent conversion into 29,189 shares of Nuburu Common Stock at the Effective Time;
•the cancellation and conversion of all Legacy Nuburu Company Notes into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time, which 2,642,239 shares were then outstanding as Legacy Nuburu common stock as of immediately prior to the Effective Time and subsequently converted into 34,045 shares of Nuburu Common Stock and 1,361,787 shares of Nuburu Series A preferred stock at the Effective Time; and
•the cancellation and exchange of all 6,079,467 granted and outstanding vested and unvested Legacy Nuburu options, which became 78,332 Nuburu options exercisable for shares of Nuburu Common Stock with the same terms and vesting conditions except for a number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio; and
•the cancellation and exchange of all 1,053,000 granted and outstanding vested and unvested Legacy Nuburu RSUs, which became 13,568 Nuburu RSUs for shares of Nuburu Common Stock with the same terms and vesting conditions except for the number of shares, which was adjusted by the Legacy Nuburu common stock Exchange Ratio.
The other related events that occurred in connection with the Closing are summarized below:
•Tailwind and the Tailwind Sponsor entered into a letter agreement (the “Sponsor Support and Forfeiture Agreement”), dated as of August 5, 2022 (as amended by the Amended and Restated Sponsor Support and Forfeiture Agreement, dated January 31, 2023). In connection with the Business Combination, the 8,355,393 Tailwind Sponsor Class B shares were forfeited other than 28,750 shares of Common Stock (of which, 3,750 shares were transferred to Nautilus Maser Fund, L.P. and 1,250 shares were transferred to Cohen & Company Capital Markets at Closing) and 650,000 shares of Series A preferred stock. Additionally, upon the Closing, the Sponsor cancelled the 9,700,000 Private Placement Warrants that were held by the Sponsor.
•Tailwind, Legacy Nuburu and Lincoln Park entered into a purchase agreement pursuant to which Nuburu may direct Lincoln Park to purchase up to $100 million of Common Stock from time to time over a 48-month period, subject to certain limitations contained in the Lincoln Park Purchase Agreement. At the Closing, Nuburu issued 5,000 shares of Nuburu Common Stock to Lincoln Park.
•Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 (the “Services Agreement”) relating to this arrangement pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $500,000 to Anzu Partners upon the closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing.
After giving effect to the Business Combination as described above, the number of shares of Common Stock and Series A preferred stock issued and outstanding immediately following the consummation of the Business Combination was as follows:
| | | | | | | | |
| | Common Shares | | | Series A
Preferred Shares | |
Tailwind public shares | | | 7,905 | | | | — | |
Tailwind Sponsor Class B shares | | | 208,885 | | | | — | |
Total shares of Tailwind common stock outstanding immediately prior to the Business Combination | | | 216,790 | | | | — | |
Less: forfeiture of the Tailwind Sponsor Class B Common Stock other than 28,750 shares of Common Stock and 650,000 shares of Series A Preferred Stock | | | (180,135 | ) | | | — | |
Tailwind Sponsor Series A Preferred Stock | | | — | | | | 650,000 | |
Tailwind public shares issuance of Series A Preferred Stock | | | — | | | | 316,188 | |
Legacy Nuburu shares | | | 783,098 | | | | 1,377,265 | |
Lincoln Park Commitment Shares | | | 5,000 | | | | — | |
Anzu Warrant Shares | | | — | | | | 500,000 | |
Total shares of Nuburu Common Stock outstanding immediately after the Business Combination(1)(2) | | | 824,752 | | | | 2,843,453 | |
(1)Excludes 91,899 shares of Common Stock as of the Closing of the Business Combination to be reserved for potential future issuance upon the exercise of Nuburu options or settlement of Nuburu RSUs.
(2)Excludes 417,770 Public Warrants issued and outstanding as of the Closing of the Business Combination.
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP because Legacy Nuburu has been determined to be the accounting acquirer. Under this method of accounting, Tailwind, which is the legal acquirer, is treated as the accounting acquiree for financial reporting purposes and Legacy Nuburu, which is the legal acquiree, is treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Nuburu have become the historical financial statements of Nuburu, and Tailwind’s assets, liabilities and results of operations have been consolidated with Legacy Nuburu’s beginning on the acquisition date. For accounting purposes, the financial statements of Nuburu represent a continuation of the financial statements of Legacy Nuburu with the Business Combination being treated as the equivalent of Legacy Nuburu issuing stock for the net assets of Tailwind, accompanied by a recapitalization. The net assets of Tailwind are stated at historical costs and no goodwill or other intangible assets have been recorded. Operations prior to the Business Combination will be presented as those of Legacy Nuburu in future reports of Nuburu.
Corporate and Other Information
The mailing address of Nuburu’s principal executive office is 7442 S Tucson Way, Suite 130, Centennial, CO 80112, and the telephone number of Nuburu’s principal executive office is (720) 767-1400. Our investor relations website is located at https://ir.nuburu.net. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, the information we provide will be different than the information that is available with respect to other public companies that are not emerging growth companies. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we qualify as a “large accelerated filer”, which, in addition to certain other criteria, means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter or (ii) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30 or (ii) our annual revenue exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.
Recent Developments
The Company has not yet achieved commercialization and expects continued losses until it can do so. The Company must rely on capital from investors to support its operations. From inception through September 30, 2024, the Company has incurred operating losses and negative cash flows from operating activities. For the nine months ended September 30, 2024, the Company has incurred operating losses, including net losses of $22,765,563, and the Company has an accumulated deficit of $120,052,352 as of September 30, 2024. The Company anticipates that it will incur net losses for the foreseeable future and, even if the Company generates revenue, there is no guarantee that it will ever become profitable. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
During 2024, management negotiated several funding agreements with multiple investors. Certain of these investors have not fully performed their obligations under such agreements and the Company was also enjoined from making certain issuances until 30 days after this registration statement is declared effective. As a result, the Company has not yet received the funding necessary to maintain operations, fill orders or implement its sales and marketing program. Given the lack of funding, management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations. In response to the furloughs and financing challenges, several employees have resigned entirely. If the Company is unable to obtain additional financing through any of the funding agreements with investors, the Company will not be able to sustain operations and will need to consider alternatives, which could include a sale, liquidation, or dissolution of the business.
In June 2023, the Company entered into Note and Warrant Purchase Agreements with certain investors for the sale of (i) convertible promissory notes in the aggregate principal amount of $9,225,000 (the “June Notes”), and (ii) warrants to purchase up to 335,210 shares of the Company’s common stock. The June Notes were exchanged for secured notes with substantially similar terms in November 2023 (collectively, the “Senior Convertible Notes”). The Senior Convertible Notes are payable on the earlier of June 23, 2026 or the occurrence of an Event of Default, as defined in the Senior Convertible Notes. The outstanding aggregate principal amount of the Senior Convertible Notes as of December 16, 2024 was approximately $6.8 million. On December 16, 2024, the Lead Investor (as defined in the Senior Convertible Notes) issued a notice of default and acceleration, as well as a demand for payment, to the Company as a result of the failure of the Company to make certain required repayments under existing debt obligations, which constituted an event of default under the terms of the Senior Convertible Notes. Because the Company does not currently have resources to repay the Senior Convertible Notes, the Senior Convertible Note holders may pursue foreclosure, which could result in the loss of all or a material portion of the Company’s assets and ultimately the liquidation or dissolution of the business.
On January 13, 2025, the Company entered into a letter agreement with S.F.E. Equity Investments SARL (“SFE EI”), pursuant to which SFE EI agreed to engage in efforts and commit capital, together with its partners, to repay, settle, or acquire, certain outstanding promissory notes issued by the Company (which are currently in default as described above) and finance the operations of the Company for the next twelve months pursuant to a business plan focused on building a stable foundation for the future business (the “Transformation Plan”) to be agreed by the parties.
In exchange, the Company agreed to certain governance changes, including Ron Nicol’s resignation from the Board of Directors, the appointment of Alessandro Zamboni as Executive Chairperson, and reinstatement of Matteo Ricchebuono as a director. In the event that SFE EI and its partners are able to acquire the outstanding notes that are currently in default, the parties also agreed to amend such notes, with the objective of having such notes ultimately converted and extinguished.
On January 14, 2025, the Company entered into a settlement and mutual release agreement with Liqueous LP (“Liqueous” pursuant to which the parties provided an immediate mutual release of claims and obligations and Liqueous agreed to provide to the Company (i) payments for an aggregate of $1,000,000 in three installments, and (ii) a payment of $500,000 at such time as the parties are able to negotiate the amendment of the terms of outstanding pre-funded warrants held by Liqueous to reflect current market price. Such payments are conditioned on the Company’s continued performance under funding arrangements executed by the Company with Liqueous before July 31, 2024. The settlement with Liqueous rendered the previously disclosed Master Agreement (and agreements contemplated by the Master Agreement) no longer effective.
Convertible Note Transaction
On August 6, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Esousa Group Holdings LLC (“Esousa”) pursuant to which, in exchange for a capital infusion of $500,000, the Company issued an unsecured, subordinated convertible note for the same amount, with 5% original issue discount ("OID"), 15% interest, and a 6-month maturity date, and which is convertible into common stock at the lower of a 20% discount to: (a) a 10% premium to the price as of the date of execution, or (b) the lowest daily VWAP during the 10 days prior to conversion. Issuances of common stock on conversion are (i) subject to approval by NYSE American of a supplemental listing application, and (ii) limited to an amount equal to 19.9% of the outstanding common stock as of the date of execution, until such time as the transaction is approved by stockholders. On August 19, 2024, the Company entered into an identical transaction with Esousa, except that the capital provided was $148,000, for an aggregate of $648,000 provided by Esousa pursuant to both transactions. The notes issued in the August 6, 2024 and August 19, 2024 transactions are referred to herein as the “Subordinated Convertible Notes” and the Common Stock issuable upon conversion of the such notes are referred to herein as the “Underlying Common Shares.”
Esousa also holds senior convertible notes of the Company, $648,000 of which it agreed to extinguish in exchange for an unsecured, subordinated convertible note that bears no interest for so long as it is not in default, and has a 6-month maturity date and a conversion price equal to 25% of the closing price the day prior to the conversion date.
The notes issued to Esousa are unsecured and subordinated to the Company’s outstanding senior convertible notes and junior bridge notes in right of payment, whether in respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.
The transaction documents relating to the Subordinated Convertible Notes contain customary representations, warranties, and covenants, and the notes include customary events of default including, but not limited to, failure to pay amounts due when required, default in covenants, bankruptcy events, failure to obtain stockholder approval, and suspension or delisting from trading of the common stock on an eligible exchange.
Advisory Services
On June 10, 2024, the Company engaged J.H. Darbie & Co. Inc. (“J.H. Darbie”) to provide certain financial advisory services to the Company. In consideration for such engagement, the Company agreed to issue 442,478 shares of Common Stock to J.H. Darbie or its principals and to register such shares for resale.
The Offering
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Common Stock offered by the Selling Stockholders pursuant to this prospectus | Shares of Common Stock issuable upon conversion of Subordinated Convertible Notes and in consideration for certain financial advisory services. |
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Common Stock outstanding (as of December 31, 2024) | 20,274,238 |
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Preferred Stock outstanding (as of December 31, 2024) | 2,388,905 |
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Use of Proceeds | We will not receive any of the proceeds from the sale or other disposition of shares of Common Stock by the Selling Stockholders. See the section of this prospectus titled “Use of Proceeds.” |
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Risk Factors | See the section titled “Risk Factors” in this prospectus and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our Securities. |
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NYSE American Symbol | “BURU” for our Common Stock. |
Unless otherwise noted, the number of our shares of Common Stock outstanding is based on 20,274,238 shares of Common Stock outstanding as of December 31, 2024, assumes conversion prices in effect as of December 31, 2024 (as applicable) and excludes:
•Up to 417,770 shares of our Common Stock issuable upon the exercise of the Public Warrants, each with an exercise price of $460.00 per share;
•Up to 119,445 shares of Common Stock issuable upon the conversion of 2,388,905 outstanding shares of Preferred Stock;
•Any shares of Preferred Stock that we may choose to cause the Anzu SPVs to purchase pursuant to the Sale Option Agreement and any underlying shares of Common Stock issuable upon the conversion of any such shares of Preferred Stock;
•Up to 218,764 shares of our Common Stock issuable upon the exercise of stock options outstanding under the Nuburu, Inc. 2015 and 2022 Equity Incentive Plans;
•Up to 5,237 shares of our Common Stock issuable upon the vesting of RSUs outstanding under the Nuburu, Inc. 2015 and 2022 Equity Incentive Plans;
•Up to 229,607 shares of our Common Stock issuable upon the conversion of the Senior Convertible Notes;
•Up to 4,745,508 shares of our Common Stock issuable upon the conversion of the Subordinated Convertible Notes with Esousa;
•Up to 11,586,223 shares of our Common Stock issuable upon the conversion of outstanding junior notes pursuant to conversion and settlement agreements relating to such notes;
•Up to 335,211 shares of our Common Stock issuable upon the exercise of the Senior Note Warrants;
•Up to 879,207 shares of our Common Stock issuable upon the exercise of the Junior Note Warrants; and
•Up to 837,116 shares of our Common Stock issuable upon the exercise of the pre-funded warrants issued under the Program.
RISK Factors
Investing in our securities involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus. All of the aforementioned information may be relevant to decisions regarding an investment in or ownership of our securities. The occurrence of any of these risks could have a significant adverse effect on our reputation, business, financial condition, results of operations, growth and ability to accomplish our strategic objectives. The risks described in these documents are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations and financial condition. Please also read carefully the section titled “Cautionary Note Regarding Forward-Looking Statements,” where we describe additional uncertainties associated with our business and the forward-looking statements included in this prospectus.
Risks Relating to This Offering
The Selling Stockholders may sell a large number of shares, resulting in substantial diminution to the value of shares of Common Stock held by our current stockholders.
Pursuant to the terms of the Subordinated Convertible Notes, they may not be converted into shares of Common Stock to the extent that the issuance of shares of Common Stock would cause the Selling Stockholder to beneficially own more than 9.9% of our then outstanding shares of Common Stock. However, we do not have the right to control the timing and amount of any sales by the Selling Stockholders of the shares registered for resale hereunder. In addition, these restrictions do not prevent the Selling Stockholders from selling shares of Common Stock received in connection with such conversions or exercises and then receiving additional shares of Common Stock in connection with a subsequent issuance. In this way, the Selling Stockholders could sell more than 9.9% of the outstanding shares of Common Stock in a relatively short time frame while never holding more than 9.9% at any one time.
The market price of shares of our Common Stock could decline as a result of substantial sales of our Common Stock, particularly sales by our directors, executive officers and significant stockholders. Further, the registration of the sale of shares of our Common Stock hereunder may create a circumstance commonly referred to as an “overhang” whereby a large number of shares of our Common Stock become available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.
The existence of an overhang and the anticipation of such sales, whether or not sales have occurred or are occurring, could cause the market price of our Common Stock to fall. It could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Our outstanding convertible notes, preferred stock, and warrants contain anti-dilution protection, which may cause significant dilution to our stockholders.
The issuance of shares of Common Stock upon the conversion of convertible notes, preferred stock, and warrants would dilute the percentage ownership interest of holders of our Common Stock, dilute the book value per share of our Common Stock and increase the number of our publicly traded shares, which could depress the market price of our Common Stock.
In addition, certain of these securities generally contain weighted average anti-dilution provisions which, subject to limited exceptions, would increase the number of shares issuable upon conversion of such securities (by reducing the conversion or exercise price) in the event that we in the future issue Common Stock, or securities convertible into or exercisable to purchase Common Stock, at a price per share lower than the conversion price then in effect.
Our commitments to issue shares of Common Stock or securities that are convertible into shares of Common Stock may cause significant dilution to our stockholders.
The issuance of additional shares of Common Stock on conversion of outstanding securities and obligations, or issuance of shares of Common Stock upon the conversion of the Subordinated Convertible Notes, would dilute the percentage ownership interest of holders of our Common Stock, dilute the book value per share of our Common Stock and increase the number of our publicly traded shares, which could depress the market price of our Common Stock.
Our commitment to issue shares of Common Stock pursuant to the terms of the Subordinated Convertible Notes and other outstanding securities and obligations could encourage short sales by third parties, which could contribute to the future decline of our stock price.
Our commitment to issue shares of Common Stock pursuant to the terms of the Subordinated Convertible Notes and other outstanding securities and obligations has the potential to cause significant downward pressure on the price of our Common Stock. In such an environment, short sellers may contribute to or exacerbate any decline of our stock price. If there are significant short sales of our Common Stock, the share price of our Common Stock may decline more than it would in an environment without such activity. This may cause other holders of our Common Stock to sell their shares. If there are many more shares of our Common Stock on the market for sale than the market will absorb, the price of our Common Stock will likely decline.
The Selling Stockholders may participate in short sales of our Common Stock. They may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of Common Stock in the course of hedging in positions they assume. The Selling Stockholders may also sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The Selling Stockholders may also loan or pledge shares of Common Stock to broker-dealers that in turn may sell such shares. Such activity could cause a decline in the market price of the shares of our Common Stock.
Pursuant to the terms of the Securities Purchase Agreement, the Company may not be able to sell securities in order to obtain additional financing, which could force us to delay, limit, reduce or terminate our business development efforts or other operations.
During the period commencing on the execution date of the Securities Purchase Agreement and ending on the date immediately following the 30th day after the latest of: (i) the execution date, (ii) the date on which a registration statement (or registration statements) registering for resale all registrable securities under the Registration Statement has been declared effective by the SEC, and (iii) the date on which the Company has obtained stockholder approval of the transaction, the Company agreed, with certain exceptions, not to directly or indirectly issue, offer, sell, or otherwise dispose of (or make any announcement) any equity security or any equity-linked or related security, any convertible securities, debt (with or related to equity), any preferred stock or any purchase rights. It the Company is unable to sell securities, then we may not have the necessary financing to carry out our business plan. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our establishment of sales and marketing, manufacturing or distribution capabilities, development activities or other activities that may be necessary to commercialize our proposed products or other development activities. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
We have had to restate previously issued consolidated financial statements and, as part of that process, we identified material weaknesses in our internal control over financial reporting. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and may adversely affect our business, financial condition and results of operations.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud.
On October 21, 2024, our Board of Directors and management, upon the recommendation of the Audit Committee of our Board of Directors, concluded that our previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and unaudited condensed consolidated financial statements as of and for each of the interim quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 should no longer be relied upon due to material weaknesses in our control environment related to the accounting and presentation of complex financial instrument transactions.
To remediate such weaknesses, we intend to implement the following changes during our fiscal year ending December 31, 2025: (i) hire additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. These remediation measures may be time-consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate or are not filed on a timely basis, we could be subject to regulatory scrutiny, investigations or enforcement actions, which could have an adverse effect on our business, financial condition and results of operations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can provide no assurance that the measures that we plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or a circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
Risks Relating to Our Business and Operations
We are an early-stage company with a history of losses. We have not been profitable historically and may not be able to achieve profitability in the future.
Our financial statements as of and for the year ended December 31, 2023 have been prepared assuming we will continue as a going concern. If we are unable to generate sufficient cash flow to sustain our operations or raise additional capital in the form of debt or equity financing, this could affect our ability to continue as a going concern in the future. Since its inception in 2015, Nuburu has incurred significant net losses and has used significant cash in its business. As of December 31, 2023, Nuburu had an accumulated deficit of approximately $97.3 million, and for the year ended December 31, 2023, Nuburu had a net loss of approximately $20.7 million. We expect to continue to expand our operations, including by investing in manufacturing, sales and marketing, research and development, and infrastructure to support our growth. We anticipate that we will incur net losses for the foreseeable future and, even if we increase our revenues, there is no guarantee that we will ever become profitable. Our ability to achieve profitability in the future will depend on a number of factors, including:
•successfully implementing our products on a commercial scale;
•achieving meaningful sales volumes;
•identifying opportunities for other businesses to integrate our product into their operations;
•attracting customers in the United States and internationally;
•improving the effectiveness of our sales and marketing activities and any independent distributors or sales representatives;
•developing manufacturing techniques to produce the volume required to achieve our forecasted production;
•executing on any strategies to reduce costs, in the amount and on the timing projected;
•procuring sufficient quantities of raw materials and components and entering into agreements with new suppliers if necessary;
•fluctuations in the costs of needed raw materials and components;
•attracting and retaining key talent in a competitive labor market, and minimizing delays in hiring employees;
•delays associated with obtaining patents, licenses, and potential regulatory review;
•meeting cashflow needs despite any delays in payment from domestic or international customers;
•unforeseen technology issues in product development that could delay product releases;
•delays in finding suitable replacement components for components with long lead times due to any supply chain disruptions;
•delays in redesigning systems to compensate for supply chain disruptions;
•unrecoverable product development delays due to underfunded activities conducted prior to the Closing;
•the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights;
•the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; and
•the cost of enforcing or defending against non-competition claims.
Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the long term and our business may be disrupted at any time due to numerous factors outside of our control, including changes in the general macroeconomic outlook, local and regional volatility, global trade disputes, political instability, expropriation or nationalization of property, public health emergencies, and related government policies and restrictions designed to mitigate the effects of such emergencies, civil strife, strikes, insurrections, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflict, acts of war, including sanctions or other restrictive actions, by the United States or other countries, and natural disasters.
We received fewer proceeds from the Business Combination than we initially anticipated. We will require additional capital to finance our operations and implement our business plan and strategy and if we are unable to raise such capital when needed, or on acceptable terms, that could have a material adverse effect on our ability to meet our financial obligations and support continued growth and development.
In connection with the Business Combination, we received cash of $3,243,079, prior to deducting transaction and issuance costs, which costs exceeded this amount received.
We plan to continue to use our cash on hand to fund our operations going forward. Such operations may include additional research and development spending, hiring additional personnel, capital expenditures, including for additional production and applications laboratories facilities, and the costs of operating as a public company. The development, design, manufacture, and sale of our products is a capital-intensive business. Advancing the development of our current and any future products will require a significant amount of capital, including to fund ongoing costs relating to our products and technologies, the construction and tooling of prototypes, the design and building of our production units, as well as any significant unplanned or accelerated expenses, and new strategic investments. As a result, we expect for some time to continue to incur substantial operating expenses without generating sufficient revenues to cover expenditures. We will need to obtain substantial additional funding in order to maintain our continuing operations. In addition, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
On August 5, 2022, the Company entered into the Lincoln Park Purchase Agreement pursuant to which Lincoln Park agreed to purchase from the Company, at the option of the Company, up to $100,000,000 of Common Stock from time to time over a 48-month period. However, the Lincoln Park Purchase Agreement is subject to certain limitations including but not limited to, the effectiveness of a registration statement covering Common Stock that are issuable to Lincoln Park under the Lincoln Park Purchase Agreement (the “Lincoln Park Registration Statement”). The Company will also be required to satisfy various conditions in order to be able to commence purchases by Lincoln Park under the Lincoln Park Purchase Agreement. Once such conditions are satisfied, purchases by Lincoln Park under the Lincoln Park Purchase Agreement are subject to volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.99% of the then total outstanding Common Stock and a floor price of $1.00 below which Lincoln Park is not required to purchase any shares of Common Stock under the Lincoln Park Purchase Agreement. If any of these conditions are not satisfied or limitations are in effect, we may not be able to utilize all or part of the Lincoln Park Purchase Agreement, which could have an adverse impact on our ability to satisfy our capital needs and could materially adversely impact our business.
We may also obtain further funding through public or private equity offerings, private investment in public equity, or PIPE, offerings, debt financings, joint ventures, partnerships, collaborations, and licensing arrangements, through obtaining credit from financial institutions or other sources. If we raise additional funds through future issuances of equity or convertible debt securities, our then 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. If we raise additional funds through issuances of debt, we may be subject to restrictions on our operating activities. However, if we are unable to raise capital when needed or on acceptable terms, that could have a material adverse effect on our continued growth and development and/or we may be forced to cease operations. In addition, if adequate capital is not available to us, it may create substantial doubt among third parties, including suppliers and potential customers. Such doubt could adversely impact our business, reputation, prospects, and our financial statements. The report from our auditors for our financial statements for the year ended December 31, 2023 included a qualification expressing substantial doubt about our ability to continue as a going concern. The inclusion of a going concern qualification could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise.
Our business is currently dependent on a limited number of customers and end markets. A decline in revenue from, or the loss of, any significant customer, could have a material adverse effect on Nuburu’s financial condition and operating results.
Nuburu currently depends upon a small number of customers for a substantial portion of its revenue. During the year ended December 31, 2023, two customers accounted for 39% and 29% of Nuburu's revenue, respectively. During the year ended December 31, 2022, two customers accounted for 47% and 22% of Nuburu’s revenue, respectively. As of December 31, 2023, four customers accounted for 50%, 18%, 13%, and 10% of Nuburu's accounts receivable, respectively. As of December 31, 2022, three customers accounted for 62%, 26%, and 8% of Nuburu’s accounts receivable, respectively. A decline in revenue from, or the loss of, any significant customer could have a material adverse effect on Nuburu’s financial condition and operating results. Nuburu cannot assure: (i) that orders that may be completed, delayed, canceled, or reduced will be replaced with new business; (ii) that Nuburu’s current customers will continue to utilize Nuburu’s services consistent with historical volumes or at all; and/or (iii) that Nuburu’s customers will renew their manufacturing or services contracts with Nuburu on acceptable terms or at all.
Our limited operating history and the novelty of our blue laser systems make evaluating our business, the risks and challenges we may face and our future prospects difficult.
From our inception in 2015 to the present, we have focused principally on developing our blue laser systems, which are the systems we are seeking to commercialize. As a result, we have a limited history operating our business, and therefore a limited history upon which you can base an investment decision.
We began the first shipments of our high performance blue laser system, the BL-250, in 2023. We are also developing additional enhancements to the BL-250, a single mode fiber blue-laser system and blue laser 3D-printing products, which are still in the research and development stage.
Our blue laser systems are new types of products. In light of the fact that the laser industry has already undergone major transitions, from CO2 lasers to infrared fiber lasers, predicting our future revenue depends on the evolution of the market itself and market acceptance of our technology and systems. Moreover, budgeting for our expenses presents some uncertainty because of the unpredictability of the prices of raw materials and components and other 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 position could be materially and adversely affected. You should consider our prospects in light of the risks and uncertainties emerging companies encounter when introducing new technologies into a competitive landscape.
The engineering of certain of our laser systems is still in the prototype stage, and there is no guarantee that we will be successful in implementing production of our laser systems on a commercial scale.
Our business depends on our ability to succeed in achieving production of our laser systems on a commercial scale. As our laser systems are highly complex, this process is costly and time-consuming, and there can be no guarantee that we will be successful. We have already shipped units of our primary blue laser system, the BL-250, but the ramping up of production and shipment on a commercial scale may be delayed, and we may incur more costs than we expect due, for example, to global supply chain issues that have increased the cost of certain electronic components or have forced us to redesign the system to work around supply chain shortages. In addition, the processes by which we engineer and manufacture our laser systems are still developing rapidly as we explore new processes and different techniques. Our business, reputation, results of operations and financial condition may be materially adversely affected if we are not able to successfully produce our laser systems on a commercial scale or to the extent that it takes us longer to do so or costs more than we expect.
If our laser systems contain design or manufacturing defects, our business and financial results could be harmed.
To date, we have completed prototypes of our laser systems and are ramping up commercial production and shipments of our systems. As our systems also have limited history of commercial operation, we have a limited frame of reference from which to evaluate the longevity and long-term performance of our products. There can be no assurance that we will be able to detect and fix any defects in our products prior to the sale to potential customers. Once we have commenced with commercial production of our laser systems and they are shipped to and installed and put into use by our customers, we may discover latent defects in design, manufacture or construction that may cause our systems not to perform as expected or that may require repair. Our laser systems also require software to operate which may need to be modified and updated over the life of our systems. Software products are inherently complex and often contain defects and errors when first introduced.
There can be no assurance that we will be able to detect and fix any defects in the hardware or software of our laser systems in the design and production phase, and such defects may not become apparent until our systems are adopted and used by customers. In most cases, we should be able to resolve software defects through the application of patches and updates, which can be completed remotely; however, hardware defects may be more difficult to address remotely and may require a system to be returned to us for maintenance and repair.
Our laser systems may not perform consistent with customer expectations or consistent with other laser systems which are currently or may yet become available. Any product defects or any other failure of our laser systems to perform as expected could harm our reputation and result in negative publicity, lost revenue, canceled or delayed deliveries, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
Insufficient warranty reserves to cover future warranty claims could adversely affect our business, prospects, financial condition, and operating results.
Once we begin shipping our laser systems to customers on a commercial scale, we will need to increase our warranty reserves to cover warranty-related claims. If our warranty reserves are inadequate to cover future warranty claims on our laser systems, our business, prospects, financial condition and operating results could be materially adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that our then-existing warranty reserves will be sufficient to cover all claims.
The failure of our suppliers to deliver necessary raw materials and components that meet the specifications for our laser systems in a timely manner could cause installation delays, cancellations, and damage to our reputation.
We rely on a limited number of third-party suppliers for some of the raw materials and components for our laser systems, including laser diodes, micro-optics, optics, optical filters, bulk optics, cooling components, electronic components, and other materials that may be in limited supply and which are critical to our ability to produce our laser systems. If any of our suppliers provide insufficient inventory at the level of quality required or if our suppliers are unable or unwilling to provide us with the contracted quantities or in the time frame requested for whatever reason, our results of operations could be materially and negatively impacted. If we fail to develop or maintain our relationships with any of our suppliers and are unable to obtain raw materials or comparable components from alternative suppliers without considerable delay, expense, or at all, or if there is otherwise a shortage or lack of availability of any required raw materials or components, we may be unable to manufacture our laser systems or we may be able to do so only at a higher cost or after a long delay. For example, in recent years there have been, and there continue to be, supply chain bottlenecks and other issues, including a prolonged shortage of microchips, which has required us to redesign our system’s control electronics and has resulted in delays in bringing our systems to market. We have also experienced, and continue to experience, delays with respect to deliveries of various other parts, including electronic components and power supply components. Any further delays could prevent us from delivering our laser systems to customers within required time frames and cause order cancellations.
Moreover, we have in the past and may in the future also experience unanticipated disruptions to operations or other difficulties with our supply chain or internalized supply processes due to exchange rate fluctuations, volatility in regional markets from where materials are obtained, changes in the general macroeconomic outlook, global trade disputes, political instability, expropriation or nationalization of property, public health emergencies and related government policies and restrictions designed to mitigate the effects of such emergencies. The failure by us to obtain raw materials or components in a timely manner or to obtain raw materials or components that meet our quantity and cost requirements could impair our ability to manufacture our products or increase their costs. If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from delivering our laser systems to customers within required time frames, which could result in sales and installation delays, cancellations, penalty payments, or damage to our reputation, any of which could have a material adverse effect on our business and results of operations. In addition, we rely on our suppliers to meet quality standards, and the failure of our suppliers to meet or exceed those quality standards could cause delays in the delivery of our products, cause unanticipated servicing costs, and cause damage to our reputation.
We depend on sole source or limited source suppliers, as well as on our own production capabilities, for some of the key components and materials, including, but not limited to, laser diodes and optical filters, which makes us susceptible to supply shortages and other supply chain disruptions and to price fluctuations that could adversely affect our business, particularly our ability to meet our customers’ delivery requirements.
We currently purchase several key components and materials used in the manufacture of our products, including, but not limited to, laser diodes and optical filters, from sole source or limited source suppliers, which may make us more susceptible to supply chain disruptions and cost increases, which may materially adversely affect our operating results and financial condition. If we seek to ramp up production or accelerate delivery schedules of our products, our key suppliers may not have the ability to increase their production in line with our production schedule and our customers’ demands. This may become acute during times of high growth in our customers’ businesses. Our failure to timely receive these key components and materials would likely cause delays in the shipment of our products, which would likely negatively impact both our customer relationships and our business. Some of our products require designs and specifications that are at the cutting edge of available technologies and change frequently to meet rapidly evolving market demands. By their very nature, the types of components used in our products can be difficult and unpredictable to manufacture and in future we may be required to source additional components from sole source or limited source suppliers, which may further expose us to the risks described above.
Many of our customers may also rely on sole source or limited source suppliers. In the event of a disruption of our customers’ supply chain, orders from our customers could decrease or be delayed.
We face various other risks with respect to the supply chain that could adversely affect our business, prospects, financial condition, and operating results.
Some of our suppliers are relatively small private companies that may discontinue their operations at any time and may be particularly susceptible to prevailing economic conditions. Some of our suppliers are located in regions susceptible to natural and man-made disasters, such as the United States, Germany and China, which have experienced severe flooding, earthquakes, wildfires, extreme weather conditions and power loss. Furthermore, financial or other difficulties faced by these suppliers or significant changes in demand for the components or materials produced by these suppliers could limit their availability, as suppliers may choose to discontinue production in the event of falling demand or may be unable to fill orders in the event of increasing demand.
If we are required to identify alternative sources of supply for certain components or redesign our product or production process, this could be difficult and costly, result in management distraction in assisting our current and future suppliers to meet our and our customers’ technical requirements, and cause delays in shipments of our products while we identify, evaluate and test the products of alternative suppliers. Any such delay in shipment would result in a delay or cancellation of our ability to convert such order into revenues.
Any interruption or delay in the supply of any components or materials that we require, or the inability to obtain these components and materials from alternate sources at acceptable prices and within a reasonable amount of time, would impair our ability to meet scheduled product deliveries to our customers and could cause customers to cancel orders or incur substantial penalties. Since many of our products have lengthy qualification periods, our ability to introduce multiple suppliers for parts may be limited. In addition, our failure to achieve adequate manufacturing yields of these items at our manufacturing facilities may materially and adversely affect our operating results and financial condition.
We are highly dependent upon the ability to ship products to customers and to receive shipments of supplies from suppliers.
We are also highly dependent upon the ability to ship products to customers and to receive shipments of supplies from suppliers. In the event of continued disruptions in worldwide or regional shipping, such as the current shipping constraints in the Red Sea and Middle East, our access to supplies and the delivery of products to customers by us or our distributors may correspondingly be negatively impacted. Any such disruptions would likely materially and adversely affect our operating results and financial condition.
If we fail to accurately forecast component and material requirements for our products, we could incur additional costs and significant delays in shipments, which could result in a loss of customers.
We use rolling forecasts based on anticipated product orders and material requirements planning systems to determine our product requirements. It is very important that we accurately predict both the demand for our products and the lead times required to obtain the necessary components and materials. We depend on our suppliers for most of our product components and materials. Lead times for components and materials that we order vary significantly and depend on factors including the specific supplier requirements, the size of the order, contract terms and current market demand for components. For substantial increases in our sales levels of certain products, some of our suppliers may need significant lead time and therefore may not be able to keep up with our needs if we are unable to provide sufficient advanced notice of our requirements. If we overestimate our component and material requirements, we may have excess inventory, which may lead to both an increase in cash usage and an increase in net loss if such excess inventory becomes obsolete and can no longer be sold or only sold at discounted prices. If we underestimate our component and material requirements, we may have inadequate inventory, which could interrupt and delay delivery production and the associated delivery of our products to our customers. The occurrence or continuance of any of the foregoing risks may materially adversely affect our business and results of operations.
Our systems involve a lengthy sales and installation cycle, and if we fail to close sales on a regular and timely basis it could harm our business. The long sales cycles for our products may cause us to incur significant expenses without offsetting revenues.
In order to make a sale, we must typically provide a significant level of education to prospective customers regarding the use and benefits of our product and our technology. The period between initial discussions with a potential customer and the sale of our product typically depends on a number of factors, including the potential customer’s attitude towards innovative products, the potential customer’s budget and whether the potential customer requires financing arrangements. Prospective customers often undertake a significant evaluation process, which may further extend the sales cycle. While our customers are evaluating our products we may incur substantial sales, marketing and research and development expenses in exploring and demonstrating the suitability of our products to a customer’s needs. Once a customer makes a formal decision to purchase our product, the fulfillment of the sales order by us requires a substantial amount of time. This lengthy sales and installation cycle is subject to a number of significant risks over which we have little or no control. Because of both the long sales and installation cycles, we may expend significant resources on attracting prospective customers without having certainty of generating sales.
These lengthy sales and installation cycles also increase the risk that our customers fail to satisfy their payment obligations or cancel orders before the completion of the transaction or delay the planned date for installation. If a customer terminates for convenience, we may be unable to recover some of our costs that we incurred prior to cancellation. We may need to procure long lead time items or place large order lot quantities for critical material well in advance of a termination leaving us with excess inventory. Our operating expenses are based on anticipated sales levels, and certain of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience delays or cancellations, we may incur significant expenses without ever receiving revenue to offset those expenses, which would materially adversely affect our business and results of operations.
Because of the long sales cycles, our operating results and financial condition may fluctuate significantly from quarter to quarter.
We expect that long sales cycles may cause fluctuations in our operating results from quarter to quarter. In light of the standards under which we expect to recognize revenue, small fluctuations in the timing of the completion of our sales transactions could also cause operating results to vary materially from period to period.
In addition to the foregoing described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis:
•fluctuations in costs associated with the production of our laser systems;
•the timing of customer adoptions of our products, which may depend on many factors such as availability of inventory and product quality or performance issues;
•size of particular customer orders;
•delays or cancellations of purchases and installations;
•delays in service revenue;
•fluctuations in our service costs;
•weaker than anticipated demand for our products due to changes in government regulation, incentives and policies;
•interruptions in our supply chain;
•interruptions in our shipping to customers or deliveries from vendors;
•the timing and level of additional purchases by existing customers;
•unanticipated expenses incurred due to changes in governmental regulations, such as with respect to health and safety requirements;
•disruptions in our sales, production, service, or other business activities resulting from our inability to attract and retain qualified personnel;
•shortage of raw materials or components from our suppliers and associated price increases due to fluctuations in commodity prices; and
•availability of spare parts from our suppliers.
In addition, our revenue, key operating metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our Common Stock.
There is no assurance that non-binding letters of intent and other indications of interest from customers will be converted into binding orders, sales, bookings or committed offtake contracts. As a result, our operating results may be materially lower than our expected results of operations.
Our success depends on our ability to generate revenue and operate profitably, which depends in part on our ability to identify target customers and convert such contacts into meaningful orders or expand on current customer relationships. Potential customers may abandon their indications of interest, and non-binding letters of interest may be canceled or delayed by a customer or its terms may be amended in a manner adverse to us in connection with negotiating a definitive sales agreement. For that reason, there can be no assurance that any current or future indications of interest or non-binding letters of intent will result in binding orders or sales. Furthermore, in light of our limited operating history, it is difficult for us to predict the rates at which the non-binding letters of interest in our pipeline will result in binding orders or sales. It is also difficult for us to predict how quickly we will be able to fill binding orders in the event that we obtain multiple orders with the same requested delivery date. In addition, revenue is expected to be recognized in stages, and customers may in some cases delay actual cash payments regardless of progressive billings. Additionally, a customer’s ability to make payments or meet minimum purchase orders could decline during the sales process, as a customer may struggle to procure necessary financing, especially in a higher interest rate environment, or may become insolvent or declare bankruptcy. As a result, our operating results and cash flow may be materially lower than we expect.
If we fail to meet our customers’ price expectations, demand for our products could be negatively impacted and our business and results of operations could suffer.
Our long-term success will depend in part on our ability to price our products competitively. Many factors, including our production and personnel costs and our competitors’ pricing and marketing strategies, can significantly impact our pricing strategies. If we fail to meet our customers’ price expectations in any given period, demand for our products could be negatively impacted and our business and results of operations could suffer.
We expect to contract with a number of large companies that have considerable bargaining power, which may require us to agree to terms and conditions that could have an adverse effect on our business or ability to recognize revenues.
We expect that a number of our potential customers will be large companies. These customers generally have greater purchasing power than smaller entities and, accordingly, often request and receive more favorable terms from suppliers. As we seek to expand our sales, we may be required to agree to terms and conditions that are favorable to our customers and that may affect the timing of our ability to recognize revenue, increase our costs, and have an adverse effect on our business, financial condition, and results of operations. Furthermore, large customers have increased buying power and ability to require onerous terms in our contracts with them, including pricing, annual cost reduction targets, warranties, and indemnification terms. If we are unable to satisfy the terms of these contracts, it could result in liabilities of a material nature, including litigation, damages, additional costs, loss of market share, and loss of reputation.
Additionally, the terms these large customers require, such as most-favored customer or exclusivity provisions, may impact our ability to do business with other customers and generate revenues from such customers. Such customers may also have a greater ability to push back on attempts to pass on increases in our operating and procurement costs.
We currently partner with and derive a portion of our revenue from government entities, and significant changes in the contracting or fiscal policies of such government entities could have an adverse effect on our business and operating results.
We currently partner with and derive a portion of our revenue from contracts with certain government entities, and the growth of our business may be impacted by our partnerships with such government entities and on our successful procurement of additional government contracts. However, demand is often unpredictable from government entities, and there can be no assurance that we will be able to generate further revenue from the public sector. Revenue from government entities for the years ended December 31, 2023 and 2022 amounted to approximately 47% and 47% of our total revenue, respectively. Factors that could impede our ability to generate revenue from government contracts, include, but are not limited to:
•public sector budgetary cycles and funding authorizations;
•changes in fiscal or contracting policies;
•decreases in available government funding;
•changes in government programs or applicable requirements;
•disadvantageous terms contained in such contracts, including with respect to pricing, milestones and payment terms;
•the adoption of new laws or regulations or changes to existing laws or regulations;
•potential delays or changes in the government appropriations or other funding authorization processes;
•higher expenses associated with, or delays caused by, diligence and qualifying or maintaining qualification as a government vendor; and
•if we are party to a multi-year, multi-company government contract, it may be difficult to determine what revenue, if any, will be generated by such contract.
The occurrence of any of the foregoing could cause governments and governmental agencies to delay or refrain from purchasing our blue laser technology in the future or otherwise have an adverse effect on our business, operating results, and prospects.
Declines in the prices of our products and services, or in our volume of sales, together with our relatively inflexible cost structure, may adversely affect our financial results.
Our business is subject to price competition. Such price competition may adversely affect our results of operation, especially during periods of decreased demand, as decreased demand would adversely impact the volume of our sales. If our business is not able to offset price reductions resulting from these pressures, or decreased volume of sales due to contractions in the market, by improved operating efficiencies and reduced expenditures, then our operating results will be adversely affected.
Certain of our operating costs are fixed and cannot readily be reduced, which would diminish the positive impact of any cost-saving measures or restructuring programs on our operating results. To the extent the demand for our products slows, or the market for laser systems contracts, we may be faced with excess manufacturing capacity and related costs that cannot readily be reduced, which will adversely impact our financial condition and results of operations.
If we are not able to continue to reduce our cost structure in the future, our ability to become profitable may be impaired.
Over time, we must achieve commercial production levels and effectively manage the manufacturing costs for our laser systems. While we have sought, and will continue to seek, to manage our manufacturing and services costs, the cost of components and raw materials, for example, could increase in the future, particularly if high rates of inflation continue. Any such increases could slow our growth and cause our financial results and operational metrics to suffer. In addition, we may face increases in our other expenses, including increases in wages or other labor costs, as well as marketing, sales, or related costs. We may continue to make significant investments to drive growth in the future. Increases in any of these costs or our failure to achieve expected or contractually required cost reductions could adversely affect our results of operations and financial condition and harm our business and prospects. If we are unable to reduce our cost structure sufficiently in the future, we may not be able to achieve profitability, which could have a material adverse effect on our business and prospects. In addition, until we generate meaningful revenue from sales of our products, we will remain limited in our ability to pass on the cost of any price increases in the cost of components or our operations to our customers.
In the event of future growth, our information technology systems and our internal control over financial reporting and procedures may not be adequate to support our operations.
In the event of future growth, our information technology systems and our internal control over financial reporting and procedures may not be adequate to support our operations. To manage such growth in operations and personnel, we will need to continue to improve our operational, financial and management controls, and reporting systems and procedures. Failure to manage growth effectively could result in an increased risk of fraud, information security vulnerabilities, or other operational difficulties, any of which could adversely affect our business and results of operations.
We are highly dependent on current key executives and if we are unable to attract and retain key employees and hire qualified management, technical, engineering, and sales personnel, our ability to compete and successfully grow our business could suffer.
We believe that our success and our ability to reach our strategic objectives are highly dependent on our ability to recruit and retain key management, technical, engineering, production and sales personnel. In particular, we are highly dependent on the services of Brian Knaley, our Chief Executive Officer, and Brian Faircloth, our Chief Operating Officer. If we are unable to recruit or retain any of our key employees, this could disrupt our operations, delay the development and introduction of our products and services and negatively impact our business, prospects, financial condition, and operating results. For example, a lack of qualified labor to operate our production process may slow our production and impact our production cost and schedule.
We cannot assure you that we will be able to successfully recruit and retain key management, technical, engineering, production and sales personnel, especially the senior leadership necessary to grow our business. Competition for qualified personnel is especially intense in the laser industry and is increasing as there is and for the foreseeable future will continue to be a scarcity of skilled personnel with the requisite experience. As a manufacturing company, many employee roles require the employee to be on-site at our facilities and cannot be conducted remotely, which limits the pool of potential employees for such roles to persons located in proximity to our facilities or who are willing to relocate or commute longer distances.
If we lose a member of our management team or other key employee, it may prove difficult for us to replace him or her with a similarly qualified individual with experience in the laser industry, which could impact our business and operating success. In addition, we do not have “key person” life insurance policies covering any of our officers or other key employees.
Labor disputes could disrupt our ability to serve our customers or lead to higher labor costs.
None of our full-time employees are currently represented by unions or covered by collective bargaining agreements. If a union sought to organize any of our employees, such organizing efforts or collective bargaining negotiations could potentially lead to work stoppages or slowdowns or strikes by certain of our employees, which could adversely affect our ability to serve our customers. Further, settlement of actual or threatened labor disputes or an increase in the number of our employees covered by collective bargaining agreements can have unknown effects on our labor costs, productivity and flexibility.
Our expectations and targets regarding the times when we will launch our products depend in large part upon assumptions, estimates, measurements, testing, analyses and data developed and performed by us, which if incorrect or flawed, could have a material adverse effect on our actual operating results and performance.
Our expectations and targets regarding the times when we will launch our products reflect our current expectations and estimates. Whether we will achieve these objectives when we expect depends on a number of factors, many of which are outside our control, including, but not limited to:
•success and timing of our development activity and ability to develop systems that achieve our desired performance metrics and achieve any requisite industry validations;
•unanticipated technical or manufacturing challenges or delays;
•difficulties identifying or constructing the necessary research and development and manufacturing facilities;
•whether we can obtain sufficient capital when required to ramp up our manufacturing facilities and operations and sustain and grow our business;
•competition, including from established and future competitors;
•our ability to manage our growth;
•adverse developments in relationships with any partners, including termination of any partnerships or changes in our partners’ timetables and business plans, which could hinder our development efforts;
•whether we can manage relationships with key suppliers and the availability of the raw materials and components we need to procure from them;
•our ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel;
•the availability of sufficient funding, an absence of which may delay our ability to launch new products due to our inability to hire key personnel and procure critical equipment needed to prepare for larger scale manufacturing and commercialization; and
•the overall strength and stability of domestic and international economies more generally and the effect of economic factors on further investments on capital equipment in particular.
Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our ability to achieve our objectives when planned and our business, results of operations and financial results.
Certain estimates of market opportunity and forecasts of market growth may prove to be inaccurate.
This prospectus includes estimates of our target addressable market and our serviceable addressable market. Market opportunity estimates and growth forecasts, whether obtained or derived from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. Recent years have been marred by unexpected events and crises, including natural and man-made disasters, financial crashes, pandemics and political upheaval. If this trend continues, forecasts may prove to be especially unreliable.
The estimates and forecasts in this prospectus relating to the size and expected growth of our target addressable market and our serviceable addressable market, market demand and adoption, capacity to address this demand and pricing may also prove to be inaccurate. In particular, estimates regarding our target addressable market and our serviceable addressable market are difficult to predict, especially in light of the nascent stage of our industry. The estimated target addressable market and serviceable addressable market may not materialize for many years or at all, and even if the markets meet the size estimates and growth forecasted in this document, our business could fail to capture a meaningful share of the market or grow at similar rates.
Incorrect estimates or assumptions by management in connection with the preparation of our consolidated financial statements could adversely affect our reported assets, liabilities, income, revenue, or expenses.
The preparation of our consolidated financial statements requires management to make critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, income, revenues or expenses during the reporting periods. Incorrect estimates and assumptions by management could adversely affect our reported amounts of assets, liabilities, income, revenues, and expenses during the reporting periods. If we make incorrect assumptions or estimates, our reported financial results may be over- or understated, which could materially and adversely affect our business, financial condition and results of operations.
Operational costs can be difficult to predict and may include costs from requirements related to the decommissioning of our systems.
We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our laser systems will be comprised of many components. The components of our laser systems may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of our laser systems or their constituent components may significantly affect the intended operational efficiency and performance. In addition, our laser systems may need to be decommissioned from time to time, and the related costs could be significant given the expected size and complexity of our laser systems and of our powder bed metal printers in particular. Operational performance and costs, including those related to project stoppage, can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with manufacturing, assembling, commissioning, testing or decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity, and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, administrative fines, increased insurance costs, and potential legal liabilities, all of which could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.
We expect to incur significant research and development expenses and devote substantial resources to commercializing new products, which could increase our losses and negatively impact our ability to achieve or maintain profitability.
We require significant capital to develop our laser systems and expect to incur significant expenses, including, but not limited to, those relating to research and development, procurement of raw materials and components, capital spending, leases, sales and distribution as we build our brand and market our laser systems, and general and administrative costs as we scale our operations. Our ability to become profitable in the future will not only depend on our ability to successfully develop and market our laser systems, but also to control our costs. If we are unable to efficiently design, appropriately price, and cost-effectively produce, sell and distribute our laser systems, our anticipated margins, profitability and prospects would be materially and adversely affected.
Our ability to use net operating loss (“NOL”) carryforwards and other tax attributes may be limited in connection with the Business Combination and other ownership changes.
We have incurred significant net losses during our history and our ability to become profitable in the near future is uncertain. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all). As of December 31, 2023, we had approximately $56 million and $30 million of federal and state net operating loss carryforwards (“NOLs”), respectively. These amounts included approximately $1.6 million of federal research and development tax credits.
Federal NOLs incurred in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding such loss, and NOLs arising in tax years beginning after December 31, 2020 may not be carried back. Moreover, federal NOLs generated in taxable years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs may be limited to 80% of our taxable income annually for tax years beginning after December 31, 2020. Our NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”), and state tax authorities. In addition, in general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or tax credits to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who own at least 5% of a corporation’s stock increases their ownership by more than 50 percentage points over their lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from previous ownership changes, and we underwent an ownership change in connection with the Business Combination, which may further limit our ability to utilize NOLs or credits under Sections 382 and 383 of the Code. In addition, future changes
in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. If we determine that an ownership change has occurred and our ability to use our historical NOLs or credits is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. Section 382 and 383 of the Code would apply to all net operating loss and tax credit carryforwards, whether the carryforward period is indefinite or not. If we earn taxable income, such limitations could result in increased future tax liability to us and our future cash flows could be adversely affected.
Our insurance coverage may not adequately protect us from harm or losses we may suffer.
We may be subject, in the ordinary course of business, to losses resulting from product liability, accidents, acts of God, and other claims against us, for which we may have no insurance coverage. As a general matter, the policies that we do or may have may include significant deductibles, and we cannot be certain that our insurance coverage will be sufficient to cover future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results. Furthermore, although we plan to obtain and maintain insurance for damage to our property and the disruption of our business, this insurance may be challenging to obtain and maintain on terms acceptable to us and may not be sufficient to cover all of our potential losses.
There is no assurance that we will be able to execute on our business model.
Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of establishing or entering new markets, developing and commercializing new products and technologies, organizing operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. We will continue to encounter risks and difficulties frequently experienced by pre-commercial and early-commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. Any investment in our Company is therefore highly speculative and could result in the loss of your entire investment.
Expanding operations internationally will subject us to a variety of risks and uncertainties that could adversely affect our business and operating results.
We already use suppliers and have made shipments of prototypes and products to customers that are located in different jurisdictions, and as we continue to expand our business we may seek to partner with customers, suppliers and other partners around the world. Managing further international expansion will require additional resources and controls. Any expansion internationally could subject our business to risks associated with international operations, including:
•difficulties in establishing legal entities in foreign jurisdictions;
•challenges in arranging, and availability of, financing for our customers;
•availability and cost of raw materials and components, labor, and equipment for manufacturing our laser systems;
•difficulties in staffing and managing foreign operations due to differences in culture, laws and customer expectations, and the increased travel, infrastructure, and legal and compliance costs associated with international operations;
•installation challenges which we have not encountered before which may require the development of adaptions of our products for a given jurisdiction;
•compliance with multiple, potentially conflicting and changing governmental laws, regulations, and permitting processes including environmental, banking, employment, tax, privacy, safety, security and data protection laws and regulations;
•compliance with U.S. and foreign anti-bribery laws including the Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act;
•greater difficulties in securing or enforcing our intellectual property rights in certain jurisdictions, or in potential infringement of third-party intellectual property rights in new jurisdictions;
•difficulties in collecting payments in foreign currencies and associated foreign currency exposure;
•increases or decreases in our expenses caused by fluctuation in foreign currency exchange rates;
•restrictions on repatriation of foreign earnings;
•compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and compliance with applicable U.S. tax laws as they relate to international operations, including product transfer pricing, the complexity and adverse consequences of such tax laws, and potentially adverse tax consequences due to changes in such tax laws;
•changes in import and export controls and tariffs imposed by the United States or foreign governments;
•changes in regulations regarding recycling and the end of life of our products;
•changes in regulations that would prevent us from doing business in specified countries;
•failure of the supply chain in local countries to provide us with materials of a sufficient quality and quantity delivered on timelines we expect; and
•regional economic and political conditions.
As a result of these risks, any potential future international expansion efforts that we may undertake may not be successful.
Risks Relating to Our Industry
Our future growth is dependent upon the competition, pace and depth of blue laser adoption, as well as on the growth of certain end markets. If such markets do not develop as we expect, or if they develop more slowly than we expect, our business, prospects, financial condition, and operating results could be adversely affected.
Our future growth depends upon several factors, including the speed at which the market is willing to adopt blue lasers and our ability to penetrate such market. Because the laser industry continues to evolve and is characterized by rapidly changing technologies, changing government regulation and industry standards, and changing consumer and industrial demands and behaviors. Our growth also depends on the growth of and adoption within certain end markets such as electric passenger cars, trucks and buses, healthcare, battery storage technology, consumer electronics, metal 3D printing, and aerospace and defense. The development of such end markets may be influenced by changes in regulatory environments, customer demand, and many other factors beyond our control. If such end markets do not develop as we expect, including if they develop more slowly than we expect, or if they develop in a way that reduces or eliminates the need for metal welding, demand for our laser systems and thus our business, prospects, financial condition, and operating results could be adversely affected.
If the cost of competitive technologies continues to decline, our blue laser technology may not be considered as cost-effective when compared to such competing technologies.
The growth and profitability of our business is also dependent upon our technology being more cost-effective than competing existing technologies, such as infrared lasers, ultrasonic welding and resistance welding. If the cost of competing existing technologies, declines sufficiently, our laser system may not be considered as cost-effective for potential customers, which would decrease the demand for our products. Such a decrease in demand would materially adversely affect our business, prospects, and results of operations.
Our systems are based on novel technologies to produce blue wavelength lasers, and potential customers may be hesitant to make a significant investment in our technology or switch from the technology they are currently using.
The design of our laser systems are based on novel technologies that are deployed in a novel way and will compete with currently existing technologies, such as infrared fiber lasers. Even if our laser systems are superior to existing lasers in terms of welding speed and energy efficiency, potential customers may choose products from our competitors that are based on existing technologies, such as infrared fiber laser technology, due to wider market acceptance and familiarity with such technologies. Additionally, potential customers who previously invested in alternatives to our laser systems may not deem a transition to our laser systems to be cost effective. Moreover, given the limited history of our technology, potential customers may be hesitant to make a significant investment in our products, and our business, results of operations, financial condition and prospects could be adversely affected to the extent that customers, for any reason, do not adopt our systems or refuse switching to our systems from the technology they currently employ. If blue laser technology does not achieve market acceptance then our business and results of operations would be materially adversely affected.
The average selling prices of our products could decrease over the life of the product, which may negatively affect our revenue and margins.
The average selling price of our product may decrease over the life of the product, which may reduce our revenue and gross margins. The average selling price for our products may decline as a result of competitive pricing pressures, promotional programs and customers who are able to negotiate price reductions. The pricing of our products depends on the specific features and functions of the product, purchase volumes and the level of sales and services support. We expect competition in our industry to increase in the future. As we experience pricing pressure, we anticipate that the average selling price and gross margin per product will decrease over product lifecycles. We cannot assure you that we will be successful in developing and introducing on a timely basis new products with enhanced features, or that these products, if introduced, will enable us to maintain our average selling price, revenue and gross margins at current levels. Our revenue and gross margin has been and will continue to be affected by a variety of factors including competition, the product mix and average selling price of products, new product introduction, enhancements and the cost of components, overhead absorption, and manufacturing labor. We must manage each of these factors competitively for our gross margins to remain at our desired levels.
We operate in a highly competitive industry and there is increasing competition. Many of our competitors and future competitors may have significantly more financial and other resources than we do and if we do not compete effectively, our competitive positioning and our operating results will be harmed.
The markets in which we intend to compete continue to evolve and are highly competitive. Many of our current and potential competitors are large entities with longer operating histories and in some cases have significantly more financial and other resources, including larger numbers of managerial and technical personnel. These factors may allow our competitors to respond more quickly or efficiently than we can to new or emerging technologies, such as green laser technologies or other technologies yet to be developed. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to compete for customers more effectively.
Our market is characterized by rapid technological changes and evolving standards demanding a significant investment in research and development, and, if we fail to address changing market conditions, our business and operating results will be harmed.
Our market is subject to rapid innovation and technological change. While we intend to invest substantial resources to remain on the forefront of technological development, continuing advances in industrial welding and 3D printing technology, changes in customer requirements and preferences and the emergence of new standards, regulations and certifications could adversely affect adoption of our products either generally or for particular applications. Our ability to compete in the industrial welding and 3D printing market depends, in large part, on our success in developing and introducing our products in a timely fashion, in improving our existing products and technology and finding new applications for our technology. We believe that we must continuously enhance and expand the functionality and features of our products and technologies in order to remain competitive. However, we may not be able to:
•develop cost-effective new products and technologies that address the increasingly complex needs of prospective customers;
•enhance our existing products and technologies;
•respond to technological advances and emerging industry standards and certifications on a cost-effective and timely basis;
•adequately protect our intellectual property as we develop new products and technologies;
•identify the appropriate technology or product to which to devote our resources; or
•ensure the availability of cash resources to fund research and development.
Even if we successfully introduce all of the laser welding and powder bed metal printing products currently under development, it is possible that our competitors will develop new products and technologies that will replace our own. As a result, any of our products may be rendered obsolete or uneconomical by our or our competitors’ technological advances, leading to an inability to capture or retain market share, a decline in revenue, and adverse effects to our business and prospects.
Global economic conditions and macroeconomic events may adversely affect us.
In recent years, the United States and other significant markets have experienced cyclical downturns. As a result of the rapid increase in interest rates in 2022 and 2023, many central banks raised target interest rates, which may increase the risk of a recession. Further, the current inflationary environment has caused volatility in the capital and credit markets and uncertainty with respect to the health of the financial markets.
Global economic conditions and macroeconomic events over which we have no control may adversely affect our industry and our business. Economic uncertainty and associated macroeconomic conditions make it extremely difficult for our partners, suppliers, and us to accurately forecast and plan future business activities, especially as investment decisions on capital equipment are highly susceptible to changes in global economic factors.
A significant downturn in the domestic or global economy, or increases in the cost of equipment financed with leases or debt, may cause our customers to pause, delay, or cancel spending on our products or seek to lower their costs by exploring alternatives. To the extent purchases of our products are perceived by customers and potential customers as discretionary, our revenue may be disproportionately affected by delays or reductions in spending. Also, competitors may respond to challenging market conditions by lowering prices and attempting to lure away our customers.
We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, or any industry in particular or how global business and political conditions may change. To the extent that general business, economic or political conditions, including overall changes in demand for our products, decline, our business, financial condition, and results of operations, including revenues, could be materially adversely affected.
The laser industry is experiencing declining average selling prices, which could cause our gross margins to decline and harm our operating results.
Our products may in the future experience a decline in average selling prices (“ASPs”) as a result of increased competition, pressure to reduce prices from significant customers and new product and technology introductions. Newer market participants, particularly in China, have reduced and may continue to reduce, prices of competing products to gain market share. If we are required to reduce the ASPs of our products and we are unable to offset such reductions through increasing our unit volumes, reducing manufacturing costs or introducing new or enhanced products with higher margins, our operating results may be adversely affected. In addition, because of our significant fixed costs, we are limited in our ability to reduce total costs quickly in response to any revenue shortfalls. Because of these factors, we may in the future experience material adverse fluctuations in our operating results on a quarterly or annual basis if the ASPs of our products decline.
If OEM customers and system integrators are reluctant to incorporate our products into their production processes, our financial condition or results of operations may be adversely affected.
Our existing and potential customers include original equipment manufacturers (“OEM”) and system integrators. Our current and future revenues will therefore depend in part upon the ability of our current and potential OEM customers and system integrators to incorporate our laser products into their production processes. The commercial success of such arrangements will depend to a substantial degree on the efforts of these OEM customers and system integrators to develop and market products that are produced using our technologies. Relationships and experience with traditional laser makers, limited marketing resources, reluctance to invest in research and development and other factors affecting these OEM customers and third-party system integrators could have a substantial impact upon our financial results. If OEM customers or integrators are not able to adapt existing tools or develop new production processes to take advantage of the features and benefits of our blue laser technology or if they perceive us to be an actual or potential competitor, then the opportunities to increase our revenues and profitability may be severely limited or delayed.
Furthermore, if our OEM customers or third-party system integrators experience financial or other difficulties that adversely affect their operations, our financial condition or results of operations may also be adversely affected.
Risks Relating to Litigation and Regulation
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business and results of operations.
We are subject to laws and regulations enacted by national, regional, and local governments. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming, and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments, and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business.
Litigation, regulatory actions, and compliance issues could subject us to significant fines, penalties, judgments, remediation costs, negative publicity, and requirements resulting in increased expenses.
We may from time to time be involved in legal proceedings, administrative proceedings, claims and other litigation, with governmental agencies and entities as well as private parties, which arise in the ordinary course of business. In addition, since our laser systems are a new type of product in a nascent market, we may in the future need to seek the amendment of existing regulations or, in some cases, the creation of new regulations, in order to operate our business or sell our products in some jurisdictions. Such regulatory processes may require public hearings concerning our business, which could expose us to subsequent litigation.
Litigation can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against us, or legal actions that we may initiate, can be expensive and time-consuming. Unfavorable outcomes or developments relating to proceedings to which we are a party or transactions involving our products, such as judgments for monetary damages, injunctions, or denial or revocation of permits, could have a material adverse effect on our business, financial condition, and results of operations. To the extent such proceedings also generate negative publicity, our reputation and business could also be adversely affected. In addition, handling compliance issues and the settlement of claims could adversely affect our financial condition and results of operations.
Furthermore, our predecessor, Tailwind, was a special purpose acquisition company (“SPAC”). SPACs have been subject to increased regulatory oversight and scrutiny, including from the SEC. Any governmental or regulatory investigation or inquiry related to the Business Combination or otherwise could have a material adverse effect on our business and negatively affect our reputation.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.
Our manufacturing facilities are subject to various compliance requirements, including Occupational Safety and Health Administration (“OSHA”), and compliance costs could increase as we plan to scale our operations.
Our manufacturing facilities are subject to numerous federal and state laws and regulations, including those of OSHA, a regulatory agency of the United States Department of Labor. In particular, our facilities are subject to oversight and regulation under local ordinances, building, zoning and fire codes, environmental protection regulation, and other rules and regulations. Though we believe that obtaining and renewing any certificates or licenses required for the operation of our business in compliance with such laws and regulations will be routine, we cannot assure you that we will obtain or renew them in a timely manner. Our failure to hold a given license or certificate, whether by expiration, nonrenewal or modification or termination, may impair our ability to perform our obligations under our customer contracts. Such licenses or certificates may require us to operate in ways that incur substantial compliance costs, particularly as we seek to scale our operations.
The number of laws affecting our business continues to grow and we can give no assurances that we will properly and timely comply with all laws and regulations that may affect us. If we fail to comply with these laws and regulations, we may be subject to legal penalties, which would adversely affect our business, prospects, and results of operations.
Laws, regulations, and rules relating to privacy, information security, and data protection could increase our costs and adversely affect our business opportunities. In addition, the ongoing costs of complying with such laws, regulations, and rules could be significant.
We are subject to various laws regarding privacy, information security and data protection. In particular, our handling of data relating to individuals is subject to a variety of laws and regulations relating to privacy, data protection, and information security, and it may become subject to additional obligations, including contractual obligations, relating to our maintenance and other processing of this data. For example, the European Union’s General Data Protection Regulation, or GDPR, and similar legislation adopted in the U.K., impose stringent data protection requirements and provides for significant penalties for noncompliance. In the United States, California has enacted legislation, the California Consumer Privacy Act, or CCPA, that, among other things, requires covered companies to provide disclosures to California consumers, and afford such consumers abilities to opt-out of certain sales of personal information.
Additionally, the California Privacy Rights Act, or CPRA, was approved by California voters in the November 2020 election. The CPRA significantly modifies the CCPA, creating obligations relating to consumer data which began on January 1, 2022, with enforcement anticipated to commence July 1, 2023. Additionally, other U.S. states continue to propose, and in certain cases adopt, privacy-focused legislation that maintains similarities to the CCPA and CPRA. The U.S. federal government also is contemplating privacy legislation. Laws, regulations, and other actual and potential obligations relating to privacy, data protection, and data security are evolving rapidly, and the regulatory landscape regarding privacy, data protection, and data security is likely to remain uncertain for the foreseeable future. We expect to be subject to new laws and regulations, or new interpretations of laws and regulations, in the future in various jurisdictions. Additionally, we may be bound by contractual requirements applicable to our collection, use, processing, and disclosure of various types of data, and may be bound by, or voluntarily comply with, self-regulatory or other industry standards relating to these matters. These laws, regulations, and other obligations, and changes in their interpretation, could require us to modify our operations and practices, restrict our activities, and increase our costs in the future, and it is possible that these laws, regulations, and other obligations may be inconsistent with one another or be interpreted or asserted to be inconsistent with our business or practices. Any actual or perceived inability to adequately address privacy and security concerns or to comply with applicable laws, rules, regulations, and other actual or asserted obligations relating to privacy, data protection, and information security could result in claims, demands, and litigation by private parties, investigations and other proceedings by regulatory authorities, fines, penalties, and other liabilities, and have an adverse effect on our business, prospects, results of operations, financial position, and reputation.
Our business may depend on the continued availability of rebates, tax credits, and accelerated depreciation schedules, and other financial incentives. The reduction, modification, or elimination of government economic incentives, particularly in the defense and research sectors, and tax policies could cause our revenue to decline and harm our financial results.
The U.S. federal government and some foreign, state, and local governments provide incentives to end users in the form of rebates, tax credits and accelerated depreciation schedules, and other financial incentives. Our business may rely on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of our laser systems to our customers. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. Changes in the availability of rebates, tax credits, and other financial programs and incentives could reduce demand for our laser systems, impair sales financing, and adversely impact our business results.
Unanticipated changes in tax laws may affect future financial results.
Nuburu is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide operations. Our principal operations and certain potential customers are located in the United States, and as a result, the Company is subject to various U.S. federal, state, and local taxes. New U.S. laws and policy relating to taxes may have an adverse effect on the Company’s business and future profitability. Further, existing U.S. tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified or applied adversely to the Company.
In recent years, the federal government has made significant changes to U.S. tax laws, including through the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income, effective for tax years beginning after December 31, 2022, and a 1% excise tax on share repurchases occurring after December 31, 2022. The Company may be subject to the new excise tax with respect to any redemptions of our Preferred Stock. Further, the Biden administration had previously set forth several tax proposals that would, if enacted, make further significant changes to U.S. tax laws. It is unclear whether any taxchanges will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of tax proposals and other similar changes in U.S. federal income tax laws could adversely affect our business and future profitability. Investors are urged to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of holding our securities.
Significant judgment is required in determining our provision and our valuation allowance for income taxes and other tax liabilities. Although we believe that our tax provisions are reasonable, there can be no assurance that the final determination of any tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals. To the extent we are required to pay amounts in excess of our reserves, such differences could have a material adverse effect on our consolidated statement of income for a particular future period. In addition, an unfavorable tax settlement could require use of our cash and result in an increase in our effective tax rate in the period in which such resolution occurs.
Additionally, although we currently primarily operate in the United States, we will seek to expand our business operations internationally to other markets including, but not limited to, Europe and Asia. Any international expansion of our business could subject our business to tax risks associated with international operations. For example, tax compliance in various jurisdictions, some of which may have potentially conflicting tax laws, and all of which are subject to change, potentially with retroactive effect, could result in materially higher cash tax liabilities for our business. The tax laws in jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations may not act together in a coordinated fashion, which could also result in material incremental taxes for our business. Moreover, an expansion of our business internationally also creates risks that our business could have a taxable presence in jurisdictions where we are not filing tax returns. Taxing authorities, both domestically and internationally, have become increasingly aggressive regarding asserting that companies have a taxable presence in jurisdictions, and our business could face these risks in connection with the internal expansion of our business.
We must comply with and could be impacted by various export controls and trade and economic sanctions laws and regulations that could negatively affect our business and may change due to diplomatic and political considerations outside of our control.
We expect to ship our products to countries throughout the world. Doing business on a global basis requires us to comply with anti-corruption laws and regulations imposed by governments around the world with jurisdiction over our operations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, as well as the laws of the countries where we do business. We are also subject to various trade restrictions, including trade and economic sanctions and export controls, imposed by governments around the world with jurisdiction over our operations. For example, in accordance with trade sanctions administered by the Office of Foreign Assets Control and the U.S. Department of Commerce, we are subject to limitations on or are prohibited from engaging in transactions involving certain persons and certain designated countries or territories, including Belarus, Cuba, Iran, Syria, North Korea, Russia, and certain occupied territories in Ukraine. In addition, our products are subject to export regulations that can involve significant compliance time and may add additional overhead cost to our products. In recent years the U.S. government has had a renewed focus on export matters. For example, the Export Control Reform Act of 2018 and regulatory guidance have imposed additional controls, and may result in the imposition of further additional controls, on the export of certain “emerging and foundational technologies.” Our current and future products may be subject to these heightened regulations, which could increase our compliance costs.
We are committed to doing business in accordance with applicable anti-corruption laws and regulations and with applicable trade restrictions. If we engage independent sales representatives or distributors for our products or enter into strategic partnerships, we face the risk that such persons or entities and their respective officers, directors, employees, and agents may take action determined to be in violation of such laws and regulations. Any violation by any of these persons could result in substantial fines, sanctions, civil or criminal penalties, or curtailment of operations in certain jurisdictions, and might adversely affect our operating results, even where we had no control over such persons or our control was limited. In addition, actual or alleged violations could damage our reputation and ability to do business.
We could be liable for environmental damages resulting from our operations, which could impact our reputation, our business, and our operating results.
We are subject to federal, state, and local environmental laws and regulations and may become subject to environmental laws in foreign jurisdictions in which we may operate or into which we ship our products. Environmental laws and regulations can be complex and may often change. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines, and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties or third-party damages. In addition, environmental laws and regulations such as the Comprehensive Environmental Response, Compensation and Liability Act in the United States impose liability on several grounds including for the investigation and cleanup of contaminated soil and ground water, for building contamination, for impacts to human health and for damages to natural resources. If contamination is discovered in the future at properties formerly owned or operated by us or currently owned or operated by us, or properties to which hazardous substances were sent by us, it could result in our liability under environmental laws and regulations. Many of our current and future customers have high sustainability standards, and any environmental noncompliance by us could harm our reputation and impact a customer’s buying decision. The costs of complying with environmental laws, regulations, and customer requirements, and any claims concerning noncompliance or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or our operating results.
The Public Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with us.
The Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Tailwind, dated September 9, 2020, pursuant to which the Public Warrants were issued (as it may be amended, supplemented or otherwise modified from time to time, the “Warrant Agreement”) provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the Warrant Agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. Under the Warrant Agreement, we also agree that we will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the Warrant Agreement do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Additionally, this provision does not apply to claims under the Securities Act, over which the federal and state courts have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants will be deemed to have notice of and to have consented to the forum provisions in the Warrant Agreement.
If any action, the subject matter of which is within the scope of the forum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder will be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.
Risk Relating to Intellectual Property
We may be unable to protect, defend, maintain, or enforce our intellectual property rights for the intellectual property on which our business depends, including against existing or future competitors. Failure to protect defend, maintain and enforce that intellectual property could result in our competitors offering similar products, potentially adversely affecting our growth and success.
Our commercial success will depend in part on our success in obtaining and maintaining issued patents, trademarks and other intellectual property rights in the United States and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
Our intellectual property is critical to our business and although we have taken many protective measures to protect our trade secrets, including agreements, limited access, segregation of knowledge, password protections, and other measures, policing unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets, or determine the validity and scope of the proprietary rights of others. Such litigation may result in our intellectual property rights being challenged, limited in scope, or declared invalid or unenforceable. We cannot be certain that the outcome of any litigation will be in our favor, and an adverse determination in any such litigation could impair our intellectual property rights and may harm our business, prospects and reputation.
We have already and expect to continue to incur substantial expense and costs in protecting, enforcing and defending our intellectual property rights against third parties. Future litigation relating to protecting our rights could be time consuming and expensive. We rely primarily on patent, copyright, trade secret, and trademark laws, and non-disclosure, confidentiality, and other types of contractual restrictions to establish, maintain, and enforce our intellectual property and proprietary rights. However, our rights under these laws and agreements afford us only limited protection and the actions we take to establish, maintain, and enforce our intellectual property rights may not be adequate. For example, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed, or misappropriated or our intellectual property rights may not be sufficient to provide us with a competitive advantage, any of which could have a material adverse effect on our business, financial condition, or operating results. In addition, the laws of some countries do not protect proprietary rights as fully as do the laws of the United States or may even formally or tacitly encourage the piracy of foreign intellectual property. As a result, we may not be able to protect our proprietary rights adequately abroad.
We rely, in part, on our ability to obtain, maintain, expand, enforce, and defend the scope of our intellectual property portfolio or other proprietary rights, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense, and enforcement of any patents or other intellectual property rights. The process of applying for and obtaining a patent is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions where protection may be commercially advantageous, or we may not be able to protect our proprietary rights at all. We may not be successful in protecting our proprietary rights, and unauthorized parties may be able to obtain and use information that we regard as proprietary.
Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented. Proceedings challenging our patents could result in either loss of the patent, or denial or the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own may not provide any protection against competitors. Furthermore, an adverse decision may result in a third party receiving a patent right sought by us, which in turn could affect our ability to commercialize our products.
Competitors could purchase our products and attempt to replicate or reverse engineer some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our patents, or develop and obtain patent protection for more effective technologies, designs or methods. We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.
Further, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States.
In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered one or more of our products, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
•any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products;
•any of our pending patent applications will issue as patents;
•we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire;
•we were the first to make the inventions covered by each of our patents and pending patent applications;
•we were the first to file patent applications for these inventions;
•others will not develop similar or alternative technologies that do not infringe our patents;
•others will not assert an ownership interest in our patents;
•any of our patents will be found to ultimately be valid and enforceable;
•any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;
•we will develop additional proprietary technologies or products that are separately patentable; or
•our commercial activities or products will not infringe upon the patents of others.
Even if we are able to obtain patent protection, such patent protection may be of insufficient scope to achieve our business objectives. Issued patents may be challenged, narrowed, invalidated or circumvented. Decisions by courts and governmental patent agencies may introduce uncertainty in the enforceability or scope of patents owned by or licensed to us. Furthermore, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our own products and practicing our own technology. Alternatively, third parties may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or agency with jurisdiction may find our patents invalid, unenforceable or not infringed; competitors may then be able to market products and use manufacturing and analytical processes that are substantially similar to ours. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.
We may be subject to third-party claims of infringement, misappropriation or other violations of intellectual property rights, or other claims challenging our agreements related to intellectual property, which may be time consuming and costly to defend, and could result in substantial liability.
Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks, or other proprietary rights that they may in the future allege are infringed by our products or services. These companies holding patents or other intellectual property rights allegedly relating to our technologies could, in the future, make claims or bring suits alleging infringement, misappropriation, or other violations of such rights, or otherwise assert their rights and by seeking royalties, lost profits, treble damages, attorney fees and injunctions. If a claim is successfully brought in the future and we or our products are determined to have infringed, misappropriated, or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following:
•cease selling or using our products that incorporate the challenged intellectual property;
•pay substantial damages, including lost profits of the holder of the intellectual property rights (as well as, increased damages up to treble damages and attorneys’ fees if our infringement is determined to be willful);
•obtain a license from the holder of the intellectual property right, which may not be available on reasonable terms or at all; or
•redesign our products or means of production, which may not be possible or cost-effective.
Any of the foregoing could adversely affect our business, prospects, operating results, and financial condition. In addition, any litigation, whether to protect our intellectual property to defend against the claims of others, whether or not valid, could harm our reputation, result in substantial costs and can be disruptive to our business operations by diverting attention and energies of management and key technical personnel and by increasing our costs of doing business.
We may also license technology from third parties and incorporate components supplied by third parties into our products, which could result in our having to incur significant costs. If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if the licensors fail to abide by the terms of the licenses or fail to prevent infringement by third parties, or if the licensed patents or other rights are found to be invalid or unenforceable, our business may suffer. We may in the future face claims
that our use of such technology or components infringes or otherwise violates the rights of others, which would subject us to the risks described above. We may in some cases seek indemnification from our licensors or suppliers under our contracts with them, but our rights to indemnification or our suppliers’ resources may be unavailable or insufficient to cover our costs and losses.
In addition, we generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties. However, third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed or settle, we may be forced to pay damages or settlement payments on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.
Our patents and, patent applications if issued, may not provide adequate protection to create a barrier to entry. The provisional and non-provisional patent applications that we own may not issue as patents or provide adequate protection to create a barrier to entry, which may hinder our ability to prevent competitors from selling products similar to ours.
We continue to have several patent applications pending and we cannot be certain that our pending patent applications will result in issued patents or that any of our already issued patents will afford protection against a competitor. The status of patents involves complex legal and factual questions, and the breadth of claims allowed is uncertain and can vary from country to country. As a result, we cannot be certain that the patent applications that we intend to file will result in patents being issued or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology. In addition, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued in other regions. Furthermore, even if these patent applications are accepted and the associated patents issued, some foreign countries provide significantly less effective patent enforcement than in the United States.
The U.S. Patent and Trademark Office (the "USPTO") and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent. While an unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Even if a lapse is cured, reviving the patent or application, there is a risk that the revival can be challenged by third parties in proceeding and litigation, and that the revival can be overruled. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our products, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would have a material adverse effect on our business.
In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, our prospects, and our operating results.
In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our patents, patent applications or other intellectual property, as a result of the work they performed on our behalf. Our general requirement that our employees and consultants and any other partners or collaborators who have access to our proprietary know-how, information or technology assign or grant similar rights to their inventions to us may not fully protect us from intellectual property claims.
Additionally, we cannot be certain that we have executed such agreements with all parties who may have contributed to our intellectual property, nor can we be certain that our agreements with such parties will be upheld in the face of a potential challenge, that such agreements will adequately protect us, or that they will not be breached, for which we may not have an adequate remedy.
We may also become involved in other proceedings, such as reexamination, inter parties review, post grant review, derivation or opposition proceedings before the USPTO or other jurisdictional body relating to our intellectual property rights or the intellectual property rights of others. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing our products or using product names, which would have a significant adverse impact on our business, financial condition and results of operations.
We may not be able to protect our intellectual property rights throughout the world.
A company may attempt to commercialize competing products utilizing our proprietary design, trademarks or trade names in foreign countries where we do not have any patents or patent applications and where legal recourse may be limited. This may have a significant commercial impact on our foreign business operations.
Filing, prosecuting and defending patents or trademarks on our current and future products in all countries throughout the world would be prohibitively expensive. The requirements for patentability and trademarking may differ in certain countries, particularly developing countries. The laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the United States.
Consequently, we may not be able to prevent third parties from utilizing our inventions and trademarks in all countries outside the United States. Competitors may use our technologies or trademarks in jurisdictions where we have not obtained patent or trademark protection to develop or market their own products and further, may export otherwise infringing products to territories where we have patent and trademark protection, but enforcement on infringing activities is inadequate. These products or trademarks may compete with our products or trademarks, and our patents, trademarks or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trademarks and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents and trademarks or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent and trademarks rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents and trademarks in those jurisdictions, as well as elsewhere at risk of being invalidated or interpreted narrowly and our patent or trademark applications at risk, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Certain countries in Europe and certain developing countries, including India and China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license. Finally, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our intellectual property rights.
Changes in either the patent laws or in interpretations of patent laws in the United States may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents. In addition, a third party that files a patent application before us could be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either file any patent application related to our products or services or invent any of the inventions claimed in our or our licensor’s patents or patent applications.
Third parties may also submit prior art to the USPTO during patent prosecution, which could adversely affect our ability to obtain a patent and it is also possible for third parties to challenge granted patents through Patent Office proceedings such as post-grant review, inter partes review and derivation proceedings. A lower evidentiary standard is imposed in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim. As such, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents could have a material adverse effect on our business.
Recent U.S. Supreme Court rulings have also narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
We may be subject to claims that we or our employees have misappropriated the intellectual property of a third party, including trade secrets or know-how, or are in breach of non-competition or non-solicitation agreements with our competitors.
Many of our employees and consultants were previously employed at or engaged by other laser companies, including our competitors or potential competitors. Some of these employees, consultants and contractors, may have executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Our efforts to ensure that our employees and consultants do not use the intellectual property, proprietary information, know how or trade secrets of others in their work for us may not be successful, and we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors.
Additionally, we may be subject to claims from third parties challenging our ownership interest in intellectual property we regard as our own, based on claims that our employees or consultants have breached an obligation to assign inventions to another employer, to a former employer, or to another person or entity. Litigation may be necessary to defend against any other claims, and it may be necessary or we may desire to enter into a license to settle any such claim; however, there can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all. If our defense to those claims fails, in addition to paying monetary damages, a court could prohibit us from using technologies or features that are essential to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to incorporate technologies or features that are important or essential to our products could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could have an adverse effect on our business, financial condition and results of operations.
If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed.
In addition to patent protection, we also rely on protection of trade secrets, know-how and other proprietary information that is not patentable or that we elect not to patent. However, trade secrets can be difficult to protect and some courts are less willing or unwilling to protect trade secrets. To maintain the confidentiality of our trade secrets and proprietary information, we rely heavily on confidentiality provisions that we have in contracts with our employees, consultants, collaborators and others upon the commencement of their relationship with us. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such third parties, despite the existence generally of these confidentiality restrictions. These contracts may not provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event the unwanted use is outside the scope of the provisions of the contracts or in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. There can be no assurance that such third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors. The protections we place on our intellectual property or other proprietary rights may not be sufficient. Monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate. In addition, the laws of many foreign countries will not protect our intellectual property or other proprietary rights to the same extent as the laws of the United States. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition. A third party could, without authorization, copy or otherwise obtain and use our products or technology, or develop similar technology. Our competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts or design around our protected technology. Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our products, brand and business. The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products and harm our business, the value of our investment in development or business acquisitions could be reduced and third parties might make claims against us related to losses of their confidential or proprietary information. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.
Further, it is possible that others will independently develop the same or similar technology or products or otherwise obtain access to our unpatented technology, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions. If we fail to obtain or maintain trade secret protection, or if our competitors obtain our trade secrets or independently develop technology or products similar to ours or competing technologies or products, our competitive market position could be materially and adversely affected.
We also seek to preserve the integrity and confidentiality of our data and other confidential information by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and detecting the disclosure or misappropriation of confidential information and enforcing a claim that a party illegally disclosed or misappropriated confidential information is difficult, expensive and time-consuming, and the outcome is unpredictable. Further, we may not be able to obtain adequate remedies for any breach.
Other Risks
Cyber-attacks and other disruptions, security breaches, and incidents could have an adverse effect on our business, harm our reputation, and expose us to liability.
Computer malware, viruses, physical or electronic break-ins, and similar disruptions and security breaches or incidents could lead to interruption and delays in our services and operations and loss, misuse or theft of data, financial information, and Company funds. Computer malware, viruses, ransomware and other malicious code, and hacking and phishing attacks have become more prevalent and may occur on our systems in the future. Threats to and vulnerabilities in our systems and infrastructure and those of our third party service providers may result from human error, fraud, or malice on the part of our employees or third-party service providers or by malicious third parties, including state-sponsored organizations with significant financial and technological resources, or from accidental technological failure. Attempts by cyber attackers or others to disrupt our services or systems or those of our third-party service providers, as well as employee or service provider error or malfeasance, technical failures, or other causes of security breaches and incidents could harm our business, result in a loss of intellectual property, result in claims, demands, and litigation by private parties, investigations and other proceedings by regulatory authorities, fines, penalties, and other liabilities, introduce liability to data subjects, result in the misappropriation of funds, be expensive to remedy and damage our reputation or brand. Efforts to prevent cyber attackers from entering and disrupting computer systems are expensive to implement, and we may not be able to cause the implementation or enforcement of such preventions with respect to our third-party service providers. Despite the security measures that we and our service providers utilize, our infrastructure and that of our service providers may be vulnerable to physical break-ins, ransomware, computer viruses, other malicious code attacks by hackers, phishing attacks, social engineering, or similar disruptive problems. Though it is difficult to determine what, if any, harm may directly result from any specific interruption, attack or other security breach or incident, any failure to maintain performance, reliability, security and availability of systems and technical infrastructure may, in addition to other losses and liabilities, harm our reputation, brand and ability to attract customers.
As our business and the number of employees grows, the possibility of human error leading to information technology incidents will also increase. Our information technology systems may also not be adequate to support our operations and may introduce opportunities for security breaches and incidents that may interrupt business operations and permit bad actors to obtain unauthorized access to systems, to misappropriate funds, and result in unauthorized access to, or unauthorized use, acquisition, disclosure, loss, corruption, or other processing of personal, confidential, or other sensitive information. Increases in remote work have increased cybersecurity risks, and acts by Russia and associated actors in connection with the conflict between Russia and Ukraine could include cyber-attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly. We and our third-party service providers also may face difficulties or delays in identifying, responding to, and otherwise mitigating security breaches and incidents, and we could be forced to expend significant financial and operational resources in response to any actual or perceived security breach or security incident, including in repairing system damage, increasing cybersecurity protection costs by deploying additional personnel and modifying or enhancing our protection technologies, investigating and remediating any information security vulnerabilities, notifying affected individuals and otherwise remediating or responding to any such breach or incident, and litigating and resolving regulatory investigations and other proceedings and legal claims and litigation, all of which could divert resources and the attention of our management and key personnel.
Costs, expenses, and other liabilities relating to any actual or perceived disruption or security breach or incident may not be covered adequately by insurance, and may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms, or at all. Insurers may also deny us coverage as to any future claim. Any of these results could harm our financial condition, business and reputation.
Natural disasters, unusual weather conditions, epidemic outbreaks, terrorist acts, and political events could disrupt our business. Interruption or failure of our infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.
We are vulnerable to natural disasters and significant disruptions including floods, earthquakes, fires, hail storms, snow storms, water shortages, other extreme or unusual weather conditions, epidemics or pandemics, acts of terrorism, war or disruptive political events where our facility is located, or where our third-party suppliers’ facilities are located, power shortages, and blackouts and aging infrastructures. Furthermore, climate change appears to have increased, and may continue to increase, the rate, size, and scope of these natural disasters. In the event of such a natural disaster or other disruption, we could experience disruptions to our operations or the operations of suppliers, subcontractors, distributors or customers, which could affect our ability to fulfill our customer contracts or damage our reputation, which would have a material adverse effect on our business, financial condition, and results of operations.
We may engage in a wide array of potential strategic transactions, which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.
As part of our business strategy, we may engage in a wide array of potential strategic transactions, including acquisitions of businesses, new technologies, services, and other assets, and strategic investments that complement our business, such as to accelerate our presence in the 3D printing metal systems market. Any such transactions may involve numerous risks, which could harm our business and negatively affect our financial condition and results of operations. There is no assurance that any transaction undertaken will result in a completed transaction, despite the time and resources expended. Furthermore, if we do complete such transactions, they may not translate into successful business opportunities and we may not realize the benefits or synergies we had anticipated. Additionally, we may have to pay cash, incur debt, or issue equity securities to pay for any such transactions, each of which could affect our financial condition or the value of our capital stock, result in dilution to our equity holders, increase our fixed obligations, or require us to comply with covenants or other restrictions that would impede our ability to manage our operations. The direct costs of these transactions, as well as the resources required to evaluate, negotiate, integrate, and promote these acquisitions, may divert significant time and resources from the general operation of our business and require significant attention from management, all of which could disrupt the ordinary functioning of our business and adversely affect our operating results.
In addition, we may issue up to $100,000,000 of Common Stock from time to time over a 48-month period under the Lincoln Park Purchase Agreement. Holders of Common Stock will experience dilution in connection with any issuances of Common Stock under the Lincoln Park Purchase Agreement. Pursuant to the Lincoln Park Purchase Agreement, the Company issued to Lincoln Park in connection with the Closing 200,000 shares of Common Stock in consideration for entering into the Lincoln Park Purchase Agreement and an additional 400,000 shares of Common Stock on March 2, 2023, representing the number of shares equal to $2,000,000 divided by the lesser of (x) $10.00 per share or (y) the average closing price of the Common Stock for the 10 consecutive business days prior to the date that is 30 days after the Closing, provided that if such average closing price is below $5.00 per share, then the average closing price shall be deemed to be $5.00 per share (the price was deemed to be $5.00 per share). Holders of Common Stock experienced dilution in connection with the issuances of such commitment shares to Lincoln Park and will experience further dilution upon conversion of shares of Preferred Stock (including those already issued at Closing), shares issued upon conversion of the Convertible Senior Notes, or shares issued upon the exercise of the warrants issued in connection with with the Senior Convertible Notes or the Junior Notes. Such dilution or any decline in the prevailing market price of our Common Stock, whether due to the foregoing or due to sales by holders of Common Stock, may limit our ability to use our securities in connection with a potential strategic transaction or may require increased dilution in the event that we pursue a potential strategic transaction using our securities to pay for such transaction.
Negative publicity could result in a decline in our growth and have a material adverse effect on our business, our brand, and our results of operations.
We have invested and will continue to invest in our brand. We believe that maintaining and enhancing our brand identity is critical to our relationships with existing partners and customers, and to our ability to attract new partners and customers. Our ability to compete for and maintain partnerships relies to a large extent on our partners and customers’ trust in our business and the value of our brand. The failure or perceived failure to maintain our brand could adversely affect our brand value, financial condition and results of operations. Negative publicity can adversely affect our reputation and damage our brand, and may arise from many sources, including actual or alleged misconduct, errors or improper business practices by employees, employee claims of discrimination or harassment, product failures, existing or future litigation or regulatory actions, inadequate protection of customer information, data breaches, matters affecting our financial reporting or compliance with SEC and exchange listing requirements, and media coverage, whether accurate or not. Negative publicity or allegations of unfavorable business practices, poor governance, or workplace misconduct can be rapidly and widely shared over social or traditional media or other means, and could reduce demand for our products, undermine the loyalty of our customers and impact our partnerships, reduce our ability to recruit and retain employees, or lead to greater regulatory scrutiny of our operations. In addition, we and our officers, directors, and employees may be, named or otherwise involved in litigation or claims, including employment-related claims such as workplace discrimination or harassment, which could result in negative publicity or adversely impact our business, even if we are ultimately successful in defending against such claims.
Risks Relating to Being a Public Company
Our quarterly results and key metrics are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations and key metrics may vary significantly in the future, given our long sales cycles, and period-to-period comparisons of our results of operations and key metrics may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly results of operations and key metrics may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our securities. Factors that may cause fluctuations in our quarterly results of operations and key metrics include, without limitation, those listed elsewhere herein and:
•our ability to generate revenue from new product launches;
•our ability to expand our number of customers and sales;
•our ability to hire and retain employees;
•the timing of expenses and recognition of revenue;
•the amount and timing of operating expenses related to the maintenance and expansion of our business and operations, as well as international expansion;
•changes in our pricing or those of our competitors;
•changes in the competitive dynamics of our industry, including consolidation among competitors;
•changes in laws and regulations that impact our business;
•the timing of expenses related to any future acquisitions, including our ability to successfully integrate, and fully realize the expected benefits of, any completed acquisitions;
•health epidemics or pandemics;
•civil unrest and geopolitical instability; and
•general political, economic, and market conditions.
We will incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
We will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect will increase further after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of NYSE American and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will be required to devote a substantial amount of time to compliance with these requirements. A number of those requirements will require us to carry out activities we have not done previously. For example, we may need to create new board committees and adopt new internal controls and disclosure controls and procedures. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations, including our reporting requirements under the Exchange Act, will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
In addition, failure to comply with any laws or regulations applicable to us as a public company may result in legal proceedings or regulatory investigations, and may cause reputational damage. The occurrence of any of the foregoing could harm our business, financial condition, and results of operations.
We are an “emerging growth company,” and our election to comply with the reduced disclosure requirements as a public company may make our Common Stock less attractive to investors.
For so long as we remain an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies,” including not being required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, being required to provide fewer years of audited financial statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We may lose our emerging growth company status and become subject to the SEC’s internal control over financial reporting management and auditor attestation requirements. If our internal controls continue to have material weaknesses, we could be subject to regulatory scrutiny and a loss of confidence by stockholders, which could harm our business and adversely affect the market price of our Common Stock. We will cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; (ii) the date we qualify as a large accelerated filer, with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have, in any three year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) December 31, 2025 (the last day of the fiscal year following the fifth anniversary of our IPO).
As an emerging growth company, we may choose to take advantage of some but not all of these reduced reporting burdens. Accordingly, the information we provide to our stockholders may be different than the information you receive from other public companies in which you hold stock. In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period under the JOBS Act. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. It is possible that some investors will find our Common Stock less attractive as a result, which may result in a less active trading market for our Common Stock and higher volatility in our stock price.
Changes in accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such changes may impact our ability to meet our financial reporting obligations.
We prepare our financial statements in accordance with generally accepted accounting principles ("GAAP") in the United States, which are subject to interpretation or changes by the Financial Accounting Standards Board, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results. Furthermore, any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly traded company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to revenue producing activities and the management and growth of our business, adversely affecting our ability to attract or take advantage of business opportunities. Our management team may not be successful or effective in managing a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices, or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
The redemption of our Preferred Stock may require a significant amount of cash and may result in adverse tax consequences.
Pursuant to the Certificate of Designations, on January 31, 2025, which is the two-year anniversary of the Preferred Stock Issuance, (i) if the Conversion Price (as defined in the Certificate of Designations) is equal to or less than the volume-weighted average price (“VWAP”) of Common Stock, then we will convert all outstanding shares of our Preferred Stock into shares of Common Stock at the Conversion Price and (ii) if the Conversion Price exceeds the VWAP of Common Stock, then we will be obligated to redeem all outstanding shares of Preferred Stock for $10.00 in cash. In connection with any such redemption, we may also be required, pursuant to the IRA, to pay an excise tax of 1% on the fair market value of any Preferred Stock redeemed. The redemption of the Preferred Stock and the payment of any excise tax could adversely affect the Company’s business, financial position and results of operations. In the event our assets are not sufficient to meet our redemption obligations, this could have a significant adverse effect on our reputation, business, financial condition, growth and ability to accomplish our strategic objectives.
Risks Relating to Ownership of our Securities
Our Common Stock is subordinated to our Preferred Stock.
In connection with the Closing, the Company declared an issuance of shares of Preferred Stock to our holders of record of Common Stock as of the close of business on the Closing Date (other than (a) stockholders of Legacy Nuburu who waived such stockholders’ entire right, title and interest in, to or under, any participation in the Preferred Stock Issuance (provided that such waiver did not apply with respect to shares of Common Stock received as a result of the conversion of any Company Note) and (b) the Sponsor, which waived, for no consideration, its right, title and interest in, to or under, a portion of the Preferred Stock Issuance, as further described in the Sponsor Support Agreement), with one share of Preferred Stock being issued in respect of each such share of Common Stock (the "Preferred Stock Issuance"). Such Preferred Stock is convertible into shares of Common Stock at any time at the holder’s option, and in certain circumstances at the Company’s option, subject to the conversion procedures and at the conversion price described in the Certificate of Designations. As described in the Certificate of Designations, shares of Preferred Stock rank senior to shares of Common Stock, with respect to rights on the distribution of assets in any voluntary or involuntary liquidation, dissolutions or winding up of the affairs of the Company.
Shares of our Preferred Stock may be subordinate to any senior preferred stock we may issue and to any future indebtedness.
We may, subject to approval by the majority of the holders of the shares of our Preferred Stock, issue equity or debt securities that rank senior or pari passu to the rights of our Preferred Stock. If we were to issue any such equity or debt securities, the shares of our Preferred Stock may rank junior to such securities with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the company, as well as to all creditor claims and other non-equity claims against us and our assets available to satisfy claims on it, including claims in a bankruptcy or similar proceeding.
At the two-year anniversary of the Preferred Stock Issuance, we will be obligated to redeem shares of our Preferred Stock for cash. There can be no guarantee that we will have funds available to make this redemption.
Pursuant to the Certificate of Designations, on January 31, 2025, the two-year anniversary of the Preferred Stock Issuance, (i) if the Conversion Price (as defined in the Certificate of Designations) is equal to or less than the volume-weighted average price (“VWAP”) of our Common Stock, then we will convert all outstanding shares of our Preferred stock into shares of Common Stock at the Conversion Price and (ii) if the Conversion Price exceeds the VWAP of Common Stock, then we will be obligated to redeem all outstanding shares of Preferred Stock for $10.00 in cash. In addition, upon any conversion at any time that would result in the holders beneficially owning greater than 9.99% of our voting stock outstanding as of the conversion date or any individual holder beneficially owning Common Stock in excess of the maximum number of shares of Common Stock that could be issued to the holder without triggering a change of control under the applicable stock exchange listing rules, the excess, if any, of the conversion consideration otherwise payable upon such conversion shall also be paid in cash, based on an amount per share of Common Stock equal to the last reported price per share of the Common Stock on the trading day immediately preceding the conversion date. We intend to satisfy these obligations through legally available funds, through proceeds from the potential issuance of shares to Lincoln Park, pursuant to the Lincoln Park Purchase Agreement, or otherwise available for use following consummation of the Business Combination. However, there can be no guarantee that we will have sufficient funds available to meet these obligations. In addition to being required to pay such amounts as owing pursuant to these obligations, we may also be required, pursuant to the IRA, to pay an excise tax of 1% on the fair market value of any Preferred Stock redeemed. The redemption of the Preferred Stock and the payment of any excise tax could adversely affect our business, financial position, and results of operations, and in the event our assets are not sufficient to meet our redemption obligations, the amounts distributed to such holders would be paid out on a pro rata basis.
NYSE American may delist the Company’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject the Company to additional trading restrictions.
The Company’s Common Stock is publicly traded on the NYSE American under the symbol “BURU”. On December 28, 2023, the Company received notice (the "Notice") from the NYSE American indicating that the Company is not in compliance with the continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide (the “Company Guide”) because the shares of the Company’s Common Stock have been selling for a low price per share for a substantial period of time. The Notice had no immediate effect on the listing or trading of the Company’s securities and the Company’s Common Stock will continue to trade on the NYSE American under the symbol “BURU” with the designation of “.BC” to indicate that the Company is not in compliance with the NYSE American’s continued listing standards. Additionally, the Notice does not result in the immediate delisting of the Company’s securities from the NYSE American.
Pursuant to Section 1003(f)(v) of the Company Guide, the Company’s continued listing is predicated on it demonstrating sustained price improvement by no later than June 28, 2024. The Notice further stated that, as a result of the foregoing, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide, which could, among other things, result in the initiation of delisting proceedings, unless the Company cures the deficiency in a timely manner. The Company intends to monitor the stock price and consider available options to regain compliance by June 28, 2024. On February 22, 2024, the Company's stockholders approved a proposal authorizing the Company's Board of Directors to effect a reverse stock split within a range of 1 to 30 to 1 to 75. On July 23, 2024, the Company effected a reverse stock split of its Common Stock at a ratio of 1-for-40 (the “Reverse Stock Split”).
Additionally, on December 12, 2023, the NYSE American notified the Company, and publicly announced, that the NYSE American had determined to (a) commence proceedings to delist the Company's Public Warrants, each whole Public Warrant exercisable to purchase one share of the Company's Common Stock at a price of $11.50 per share, and listed to trade on the NYSE under the symbol "BURU WS", and (b) immediately suspend trading in the Warrants due to "abnormally low" trading price levels.
In order to continue listing its securities on the NYSE American, the Company is required to maintain certain financial, distribution and stock price levels. We cannot assure you that the Company will be able to continue to meet those listing requirements or come back into compliance with those listing requirements.
If the NYSE American delists the Company’s Common Stock from trading on its exchange and the Company is not able to list its securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
•a limited availability of market quotations for our securities;
•reduced liquidity for our securities;
•a determination that the Common Stock is a “penny stock” which will require brokers trading in Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since the Company’s Common Stock is listed on NYSE American, it is a covered security. Although the states are preempted from regulating the sale of its securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if the Company was no longer listed on a securities exchange, its securities would not be covered securities and it would be subject to regulation in each state in which it offers its securities.
If our Common Stock is delisted from trading, the ability of holders of Preferred Stock to transfer or sell their shares of our Preferred Stock may be limited and the market value of our Preferred Stock will likely be materially adversely affected.
The Preferred Stock does not contain provisions that are intended to protect the holders of our Preferred Stock if our Common Stock is delisted from trading on the NYSE American. Accordingly, if our Common Stock is delisted from trading on NYSE American and we are unable to have our Common Stock listed on another securities exchange, the ability of holders of our Preferred Stock to transfer or sell their shares may be limited and the market value of our Preferred Stock will likely be materially adversely affected.
The Company’s stock price may change significantly and you could lose all or part of your investment as a result.
The trading price of the Common Stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors such as those listed above and the following, to the extent not already stated:
•results of operations that vary from the expectations of securities analysts and investors;
•results of operations that vary from those of the Company’s competitors;
•changes in expectations as to the Company’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors;
•declines in the market prices of stocks generally;
•strategic actions by the Company or its competitors;
•announcements by the Company or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments;
•any significant change in the Company’s management;
•changes in general economic or market conditions, including rising interest rates, instability in the banking sector and the financial markets, or trends in the Company’s industry or markets;
•changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to the Company’s business;
•future sales of Common Stock or other securities;
•investor perceptions or the investment opportunity associated with Common Stock relative to other investment alternatives;
•the public’s response to press releases or other public announcements by the Company or third parties, including the Company’s filings with the SEC;
•litigation involving the Company, the Company’s industry, or both, or investigations by regulators into the Company’s operations or those of the Company’s competitors;
•guidance, if any, that the Company provides to the public, any changes in this guidance or the Company’s failure to meet this guidance;
•the development and sustainability of an active trading market for the Company’s stock;
•actions by institutional or activist stockholders;
•changes in accounting standards, policies, guidelines, interpretations or principles; and
•other events or factors, including those resulting from natural disasters, pandemics, hostilities or the perception that hostilities may be imminent, military conflict and war, acts of terrorism, sanctions, or responses to these events.
These broad market and industry fluctuations may adversely affect the market price of Common Stock, regardless of the Company’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of Common Stock is low.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If the Company was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from the Company’s business regardless of the outcome of such litigation.
There is no public market for our Preferred Stock.
There is no established public trading market for our Preferred Stock, and we do not expect a market to develop. In addition, we do not intend to apply to list our Preferred Stock on any securities exchange or nationally recognized trading system, including the NYSE American, NYSE or Nasdaq. Without an active market, the liquidity of our Preferred Stock will be limited.
Because there are no current plans to pay cash dividends on our Common Stock or Preferred Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares for a price greater than that which you originally paid.
We intend to retain future earnings, if any, for future operations, expansion and debt repayment (if any) and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount, and payment of any future dividends on shares of our Common Stock or our Preferred Stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition, and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders and us, and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any future indebtedness we may incur. As a result, you may not receive any return on an investment in our Common Stock unless you sell shares for a price greater than that which you originally paid.
If securities analysts do not publish research or reports about the Company’s business or if they downgrade the Company’s stock or the Company’s industry, the Company’s stock price and trading volume could decline.
The trading market for Common Stock will rely in part on the research and reports that industry or financial analysts publish about the Company or its business. The Company will not control these analysts. In addition, some financial analysts may have limited expertise with Nuburu’s model and operations. Furthermore, if one or more of the analysts who do cover the Company downgrade its stock or industry, or the stock of any of its competitors, or publish inaccurate or unfavorable research about its business, the price of the Company’s stock could decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on it regularly, the Company could lose visibility in the market, which in turn could cause its stock price or trading volume to decline.
Future sales of substantial amounts of our Common Stock in the public markets, or the perception that such sales could occur, could cause the market price of our Common Stock to drop significantly, even if our business is doing well, and certain selling securityholders still may receive significant proceeds.
The sale of shares of our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate.
On February 7, 2023, we filed a registration statement on Form S-1 (File No. 333-269610) (the “Resale S-1”), pursuant to which the selling securityholders named therein can sell up to 36,629,724 shares of Common Stock and up to 2,235,279 shares of Preferred Stock. Certain of these shares of Common Stock were purchased at prices that were significantly below the current trading price of our Common Stock and the sale of such shares could result in the selling securityholder realizing a significant gain.
Sales of our Common Stock following the expiration of applicable lock-up restrictions or pursuant to the exercise of registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales could also cause the market price of our Common Stock to decline if such equity holders sell or are perceived by the market as intending to sell any such securities, and make it more difficult for you to sell your shares of Common Stock at a time and price that you deem appropriate.
In addition, we have reserved a total of up to 8,327,424 shares of our Common Stock for future issuance under the Nuburu, Inc. 2022 Equity Incentive Plan (the "Equity Incentive Plan") and the Nuburu, Inc. 2022 Employee Stock Purchase (the "ESPP"), which will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. The Company filed a registration statement on Form S-8 under the Securities Act on April 7, 2023 to register certain shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity plans. Such registration statement on Form S-8 was automatically effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market, subject to the provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
On March 31, 2023, we filed a registration statement on Form S-1 (File No. 333-271046) (the “Lincoln Park S-1”), pursuant to which permits the offer and resale of up to 15,600,000 shares of the Company's Common Stock to Lincoln Park. If and when the Company does issue Common Stock to Lincoln Park, Lincoln Park may resell all, some or none of such shares at any time or from time to time in its discretion, subject to compliance with applicable securities laws and the Lincoln Park Purchase Agreement. Therefore, issuances to Lincoln Park by the Company could result in substantial dilution to the interests of other holders of Common Stock. Additionally, the issuance of a substantial number of Common Stock to Lincoln Park, or the anticipation of such issuances, could make it more difficult for the Company to sell equity or equity-related securities in the future at a time and at prices that it might otherwise wish to effect such sales.
In the future, the Company may also issue its securities in connection with investments or acquisitions. The amount of shares of Common Stock issued in connection with an investment or acquisition could constitute a material portion of the Company’s then-outstanding shares of Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to the Company’s stockholders.
Anti-takeover provisions in our Governing Documents could delay or prevent a change of control.
Certain provisions of our Governing Documents may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by the Company’s stockholders.
These provisions, among other things:
•provide for a staggered board of directors divided into three classes serving staggered three-year terms, such that not all members of the Company’s board of directors are elected at one time;
•authorize the Company’s board of directors to issue new series of preferred stock without stockholder approval and create, subject to applicable law, a series of preferred stock with preferential rights to dividends or our assets upon liquidation, or with superior voting rights to our existing Common Stock;
•do not permit stockholders to call special meetings of stockholders;
•do not permit stockholders to fill vacancies on the Company’s board of directors;
•provide for advance notice requirements for nominations for election to the Company’s board of directors or for proposing matters that can be acted upon by stockholders at our annual stockholder meetings;
•permit the Company’s board of directors to establish the number of directors;
•provide that the Company’s board of directors is expressly authorized to make, alter or repeal the Bylaws;
•provide that stockholders can remove directors only for cause and only upon the approval of not less than a majority of all outstanding shares of the Company’s voting stock;
•require the approval of not less than two-thirds of all outstanding shares of voting stock to amend specific provisions of the Bylaws and the Certificate of Incorporation; and
•limit the jurisdictions in which certain stockholder litigation may be brought.
As a Delaware corporation, the Company will be subject to the anti-takeover provisions of Section 203 of the DGCL, which prohibits a Delaware corporation from engaging in a business combination specified in the statute with an interested stockholder (as defined in the statute) for a period of three (3) years after the date of the transaction in which the person first becomes an interested stockholder, unless the business combination is approved in advance by a majority of the independent directors or by the holders of at least two-thirds of the outstanding disinterested shares. The application of Section 203 of the DGCL could also have the effect of delaying or preventing a change of control of the Company.
These anti-takeover provisions could make it more difficult for a third-party to acquire the Company, even if the third party’s offer may be considered beneficial by many of the Company’s stockholders. As a result, the Company’s stockholders may be limited in their ability to obtain a premium for their shares.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause the Company to take other corporate actions you desire.
Holders of our Preferred Stock have extremely limited voting rights.
Except for certain consent rights, the holders of our Preferred Stock will not be entitled to vote at or receive notice of any meeting of stockholders.
The Company’s stockholders will experience dilution as a result of the issuance of Common Stock (i) to Lincoln Park pursuant to the Lincoln Park Purchase Agreement, (ii) under the Equity Incentive Plan, (iii) under the ESPP, (iv) pursuant to the exercise of outstanding options, (v) to holders of Preferred Stock upon the conversion of their shares of Preferred Stock, (vi) pursuant to the future exercise of Public Warrants or private warrants issued in 2023, or (vii) upon the conversion of the Senior Convertible Notes issued in 2023. Having a minority share position may reduce the influence that our current stockholders have on the management of the Company.
Upon satisfaction of certain conditions, the Company may also direct Lincoln Park to purchase up to an aggregate of $100,000,000 of Common Stock. Holders of Common Stock will experience dilution in connection with any issuances of Common Stock under the Lincoln Park Purchase Agreement.
In addition, certain of Nuburu’s current and former employees, directors, and consultants hold outstanding options, and certain of Nuburu’s current and future employees, directors and consultants are expected to be granted equity awards and purchase rights under the Equity Incentive Plan and the ESPP, as applicable. Holders of Common Stock will experience additional dilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of Common Stock. The Preferred Stock may be converted into shares of Common Stock at the election of the stockholder or the Company, subject to certain conditions set forth in the Certificate of Designations. If shares of Preferred Stock are converted into shares of Common Stock, holders of Common Stock will incur immediate dilution.
Common Stock ownership may also be substantially diluted by the exercise of Public Warrants or private warrants issued with the Senior Convertible Notes or the Junior Notes, or the conversion of the Senior Convertible Notes (refer to Note 8 in the consolidated financial statements included herein).
The issuance of additional Common Stock will significantly dilute the equity interests of existing holders of the Company securities and may adversely affect prevailing market prices for our Common Stock or Public Warrants. Such dilution may also reduce the influence that you may have on the management of the Company through the matters that are presented for voting to the Company’s stockholders.
The Company may amend the terms of the Public Warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 65% of the then outstanding Public Warrants. As a result, the exercise price of the Public Warrants could be increased, the exercise period could be shortened and the number of shares of Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without your approval.
The Public Warrants were issued in registered form under the Public Warrant Agreement. The Public Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of the Public Warrants. Accordingly, the Company may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Although the Company’s ability to amend the terms of the Public Warrants with the consent of at least 65% of the then outstanding warrants is broad, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise of a warrant.
The Company may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.
The Company has the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30) trading-day period commencing once the Public Warrants become exercisable and ending on the third trading day prior to the date on which the Company gives proper notice of such redemption and provided certain other conditions are met. Shares of the Common Stock have never traded above $18.00 per share. If and when the Public Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the Public Warrants is not exempt from registration or qualification under applicable state blue sky laws or it is unable to effect such registration or qualification.
The Company will use its best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the Public Warrants were offered. Redemption of the outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants.
In addition, the Company may redeem outstanding Public Warrants after they become exercisable for $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Public Warrants prior to redemption for a number of Common Stock determined based on the redemption date and the fair market value of the Common Stock. The value received upon exercise of the Public Warrants (i) may be less than the value the holders would have received if they had exercised their Public Warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Public Warrants, including because the number of shares of common stock received is capped at 0.361 shares of Common Stock per warrant (subject to adjustment) irrespective of the remaining life of the Public Warrants.
We have no obligation to notify holders of the Public Warrants that they have become eligible for redemption. However, pursuant to the Public Warrant Agreement, in the event we decide to redeem the warrants, we are required to mail notice of such redemption to the registered Public Warrant holders not less than 30 days prior to the redemption date.
Warrants will become exercisable for our Common Stock and our Preferred Stock will be convertible into Common Stock, each of which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
Outstanding warrants to purchase an aggregate of 35,408,430 shares of our Common Stock are exercisable with thirty (30) days after December 31, 2023. Additionally, our Preferred Stock is convertible into shares of our Common Stock at any time at the holder’s option, and in certain circumstances at our option, subject to the conversion procedures and at the conversion price described in the Certificate of Designations.
To the extent such warrants are exercised or such shares of our Preferred Stock are converted, additional shares of Common Stock will be issued, which will result in dilution to our then current holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.
The future exercise of registration rights may adversely affect the market price of Common Stock.
Certain of our stockholders have registration rights for restricted securities which provide for customary “demand” and “piggyback” registration rights for certain stockholders. In addition, shares of Common Stock acquired by Lincoln Park pursuant to the Lincoln Park Purchase Agreement will be afforded certain registration rights pursuant to the Lincoln Park Registration Rights Agreement. Sales of a substantial number of shares of Common Stock pursuant to these resale registration statements in the public market could occur at any time the registration statements remain effective. In addition, certain registration rights holders can request underwritten offerings to sell their securities. These sales, or the perception in the market that the holders of a large number of shares of Common Stock intend to sell shares of Common Stock, could reduce the market price of Common Stock.
There is no guarantee that our Warrants will be in the money at the time they become exercisable, and they may expire worthless.
The exercise prices for our warrants vary from $0.25 to $11.50 per share of Common Stock which exceeds $0.16, the closing price of our Common Stock on the NYSE American on April 9, 2024. The likelihood that warrant holders will exercise the warrants and any cash proceeds that we would receive is dependent upon the market price of our Common Stock. There is no guarantee that the Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless. If the holders of our warrants do not exercise our warrants prior to their expiration, we will not receive any proceeds from the warrants.
USE OF PROCEEDS
We will receive no proceeds from the sale of shares of Common Stock by the Selling Stockholders.
PRIVATE PLACEMENTS OF SECURITIES
Subordinated Convertible Notes
On August 6, 2024, the Company entered into a Securities Purchase Agreement with Esousa pursuant to which, in exchange for a capital infusion of $500,000, the Company issued an unsecured, subordinated convertible note for the same amount, with 5% OID, 15% interest, and a 6-month maturity date, and which is convertible into common stock at the lower of a 20% discount to: (a) a 10% premium to the price as of the date of execution, or (b) the lowest daily VWAP during the 10 days prior to conversion. Issuances of common stock on conversion are (i) subject to approval by NYSE American of a supplemental listing application, and (ii) limited to an amount equal to 19.9% of the outstanding common stock as of the date of execution, until such time as the transaction is approved by stockholders. On August 19, 2024, the Company entered into an identical transaction with Esousa, except that the capital provided was $148,000, for an aggregate of $648,000 provided by Esousa pursuant to both transactions. The notes issued in the August 6, 2024 and August 19, 2024 transactions are referred to herein as the “Subordinated Convertible Notes” and the Common Stock issuable upon conversion of the such notes are referred to herein as the “Underlying Common Shares.”
Esousa also holds senior convertible notes of the Company, $648,000 of which it agreed to extinguish in exchange for an unsecured, subordinated convertible note that bears no interest for so long as it is not in default, and has a 6-month maturity date and a conversion price equal to 25% of the closing price the day prior to the conversion date.
The notes issued to Esousa are unsecured and subordinated to the Company’s outstanding senior convertible notes and junior bridge notes in right of payment, whether in respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.
The transaction documents relating to the Subordinated Convertible Notes contain customary representations, warranties, and covenants, and the notes include customary events of default including, but not limited to, failure to pay amounts due when required, default in covenants, bankruptcy events, failure to obtain stockholder approval, and suspension or delisting from trading of the common stock on an eligible exchange.
The Company must reserve out of authorized and unissued shares a number of shares of Common Stock equal to 150% of the maximum number of shares of Common Stock that are issuable upon conversion of the Subordinated Convertible Notes. The exercise price and number of shares issuable upon conversion will further be adjusted upon the occurrence of certain events and holders will be allowed to participate in certain issuances and distributions (subject to certain limitations and restrictions), including certain stock dividends and splits, dilutive
issuances of additional Common Stock, and dilutive issuances of, or changes in option price or rate of conversion of, options or convertible securities, as well as the issuance of purchase rights or distributions of assets.
In connection with the transactions, the Company entered into a registration rights agreement with Esousa, agreeing to register the Underlying Common Shares for resale. The registration statement of which this prospectus is a part is intended to fulfill that obligation.
Advisory Services
On June 10, 2024, the Company engaged J.H. Darbie & Co. Inc. (“J.H. Darbie”) to provide certain financial advisory services to the Company. In consideration for such engagement, the Company agreed to issue 442,478 shares of Common Stock to J.H. Darbie or its principals and to register such shares for resale. The registration statement of which this prospectus is a part is intended to fulfill the obligation to register such shares for resale.
The above transactions were conducted as private placements exempt from registration requirements pursuant to Section 4(a)(2).
MARKET FOR COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on NYSE American under the symbol “BURU.” The last reported sale price of our common stock on January 17, 2025 on NYSE American was $0.44 per share. As of December 31, 2024 there were 42 holders of record of our common stock. The actual number of stockholders of our Common Stock is greater than this number of record holders and includes holders who are beneficial owners but whose shares of Common Stock are held in street name by banks, brokers and other nominees.
We have never paid any cash or other dividends on our common stock, and we do not anticipate paying dividends for the foreseeable future. We expect to retain our earnings, if any, for the growth and development of our business. Any future determination to declare dividends will be made at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our Board may consider relevant.
Selling Securityholders
The Selling Securityholders may from time to time offer and sell any or all of the Securities set forth below pursuant to this prospectus and any accompanying prospectus supplement. When we refer to the “Selling Securityholders” in this prospectus, we mean the persons listed in the table below, and the pledgees, donees, transferees, assignees, successors, designees and others who later come to hold any of the Selling Securityholders’ interest in the Securities other than through a public sale.
The following table sets forth, as of December 31, 2024, the names of the Selling Securityholders, the aggregate number of shares of Common Stock and Preferred Stock held by each Selling Securityholder immediately prior to any sale of the Securities, the number of Securities that may be sold by each Selling Securityholder under this prospectus, and the aggregate number of shares of Common Stock and Preferred Stock that each Selling Securityholder will beneficially own after this offering, and is based on information provided to us by the Selling Securityholders. Percentage ownership of outstanding shares of Common Stock and Preferred Stock is based on 20,274,238 shares of Common Stock and 2,388,905 shares of Preferred Stock issued and outstanding as of December 31, 2024.
We cannot advise you as to whether the Selling Securityholders will in fact sell any or all of the Securities. In particular, the Selling Securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their Securities after the date on which they provided us with information regarding their Securities. Any changed or new information given to us by the Selling Securityholders, including regarding the identity of, and the Securities held by, each Selling Securityholder, will be set forth in a prospectus supplement or amendments to the registration statement of which this prospectus is a part, if and when necessary.
Please see the section titled “Plan of Distribution” for further information regarding the Selling Securityholders’ method of distributing the Securities.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares that they beneficially own, subject to applicable community property laws. Under the terms of the Subordinated Convertible Notes, a Selling Stockholder may not convert into Common Stock to the extent such exercise would cause such Selling Stockholder, together with its affiliates, to beneficially own a number of shares of Common Stock which would exceed 9.9% of our then outstanding Common Stock following such exercise. The number of shares in the second column does not reflect this limitation.
| | | | | | | | | | | | | | |
| | Shares Beneficially Owned Prior to the Offering | | Number of Shares Being Offered | | Shares Beneficially Owned After Offering |
Name of Selling
Securityholders(1) | | Number of
Shares of
Common
Stock | | Number of
Shares of
Preferred
Stock | | Number of
Shares of
Common
Stock Being
Offered(1) | | Number of
Shares of
Preferred
Stock Being Offered | | Percentage
of
Outstanding
Shares of
Common
Stock | | Number of
Shares of
Preferred
Stock | | Percentage
of
Outstanding
Shares of
Preferred
Stock |
Esousa Group Holdings LLC(2)(3) | | 654,350 | | — | | 1,463,426 | | — | | 10.4% | | — | | — |
Mackey Alligood(4) | | — | | — | | 185,840 | | — | | * | | — | | — |
Robert Rabinowitz(5) | | — | | — | | 172,544 | | — | | * | | — | | — |
Christian Hiller(6) | | — | | — | | 64,182 | | — | | * | | — | | — |
Brandon Buschman(7) | | — | | — | | 19,912 | | — | | * | | — | | — |
* Represents beneficial ownership of less than one percent of our outstanding shares of Common Stock.
(1)The amounts set forth in this column are the number of shares of Common Stock that may be offered by such Selling Securityholder using this prospectus. These amounts do not represent any other shares of our Common Stock that the Selling Securityholder may own beneficially or otherwise.
(2)Michael Wachs serves as the sole Managing Member of Esousa Group Holdings LLC. The address for Esousa Group Holdings LLC and Michael Wachs is 211 E 43rd St, 4th Fl, New York, NY 10017.
(3)Consists of 1,463,426 shares of Common Stock issuable upon conversion of the Subordinated Convertible Notes. Pursuant to the terms of the Subordinated Convertible Notes, the Company cannot issue shares of Common Stock to Esousa, and Esousa cannot convert the Subordinated Convertible Notes, to the extent that Esousa would beneficially own, after any such issuance or conversion, more than 9.9% of the then issued and outstanding shares of Common Stock.
(4)Consists of shares of Common Stock issued to Darbie in consideration for financial advisory services. The address for Mackey Alligood is 5450 Broad Acres St., Merritt Island, FL 32953.
(5)Consists of shares of Common Stock issued to Darbie in consideration for financial advisory services. The address for Robert Rabinowitz is 21 Mayhew Dr., Livingston, NJ 07039.
(6)Consists of shares of Common Stock issued to Darbie in consideration for financial advisory services. The address for Christin Hiller is 20 N Hardee Circle, Rockledge FL 32955.
(7)Consists of shares of Common Stock issued to Darbie in consideration for financial advisory services. The address for Brandon Buschman is 48-38 41st St. #1F, Sunnyside, NY 11104.
Description of Securities TO BE REGISTERED
The following descriptions of the Common Stock and certain provisions of our amended and restated certificate of incorporation (the “Certificate of Incorporation”), and amended and restated bylaws (“Bylaws”), are summaries and are qualified by reference to such documents (together the “Governing Documents”), copies of which have been filed as exhibits to the Company’s Annual Reports on Form 10-K, as well as to the relevant provisions of the general corporation law of the state of Delaware (the “DGCL”).
Common Stock
Holders of our Common Stock, par value $0.0001 per share, are entitled to one (1) vote for each share held as of the applicable record date on all matters properly submitted to a vote of stockholders, including the election or removal of directors. Unless specified in our Governing Documents, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of the votes cast at any meeting of the Company stockholders at which there is a quorum by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon will be required to approve any such matter voted on by stockholders. The Company’s board of directors is divided into three (3) classes, each of which generally serve for a term of three (3) years with only one (1) class of directors being elected each year. The Company’s stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting power of the outstanding capital stock of the Company will be able to elect all of the directors.
Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of outstanding shares of our Common Stock are entitled to receive ratably any dividends declared by the Company’s Board of Directors out of assets legally available. Upon the liquidation, dissolution or winding up, holders of our Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding shares of preferred stock. Holders of our Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our Common Stock.
Anti-Takeover Effects of the Company’s Certificate of Incorporation, Bylaws and Certain Provisions of Delaware Law
The Certificate of Incorporation, our Bylaws and the DGCL contain provisions as summarized in the following paragraphs that are intended to enhance the likelihood of continuity and stability in the composition of the Company’s board of directors. These provisions are intended to avoid costly takeover battles, reduce the Company’s vulnerability to a hostile change of control and enhance the ability of the Company’s board of directors to maximize stockholder value in connection with any unsolicited offer to acquire the Company. However, these provisions may have an anti-takeover effect and may delay, deter, or prevent a merger or acquisition of the Company by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the prevailing market price for the shares of Common Stock held by stockholders.
•Issuance of undesignated preferred stock: Under the Certificate of Incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to 50,000,000 shares of undesignated preferred stock. When shares of Preferred Stock are converted or otherwise required by the Company, they will be promptly retired and not be reissued as shares of such series, but rather will become authorized but unissued shares of undesignated preferred stock. The existence of authorized but unissued shares of preferred stock would enable the Company’s board of directors to make it more difficult to attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.
•Classified board: The Certificate of Incorporation provides for a classified board of directors consisting of three classes of directors, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. This provision may have the effect of delaying a change in control of the Company’s board of directors.
•Election and removal of directors and board vacancies: The Bylaws provide that directors will be elected by a plurality vote. The Certificate of Incorporation provides that, subject to the rights of holders of preferred stock of the Company, unless otherwise provided by resolution of the Company’s board of directors approved by at least a majority of the total authorized directorships, only the Company’s board of directors may fill vacancies and newly created directorships on the board. Directors may be removed only for cause by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding capital stock of the Company entitled to vote in the election of directors. In addition, the number of directors constituting the Company’s board of directors may be set only by resolution adopted by a majority vote of the total authorized directorships. These provisions prevent stockholders from increasing the size of the Company’s board of directors and gaining control of the Company’s board of directors by filling the resulting directorships with their own nominees.
•Requirements for advance notification of stockholder nominations and proposals: The Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors that specify certain requirements as to the timing, form and content of a stockholder’s notice. Business that may be conducted at an annual meeting of stockholders will be limited to those matters properly brought before the meeting. These provisions may make it more difficult for our stockholders to bring matters before our annual meeting of stockholders or to nominate directors at annual meetings of stockholders.
•No written consent of stockholders: The Certificate of Incorporation provides that, subject to the rights of holders of preferred stock of the Company, all stockholder actions be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our Bylaws or removal of directors by our stockholders without holding a meeting of stockholders.
•No stockholder ability to call special meetings: The Certificate of Incorporation provides that, subject to the rights of holders of preferred stock of the Company, only the chairperson of the Company’s board of directors, the chief executive officer, the president or the Company’s board of directors, acting pursuant to a resolution adopted by a majority of the total authorized directorships on the Company’s board of directors, may be able to call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders.
•Amendments to certificate of incorporation and bylaws: Any amendment to the Certificate of Incorporation is required to be approved by the Company’s board of directors, acting pursuant to a resolution adopted by a majority of the total authorized directorships on the Company’s board of directors, as well as, if required by law or the Certificate of Incorporation, a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of Section 3 of Article IV, Section 2 of Article V, Section 1 of Article VI, Section 2 of Article VI, Section 5 of Article VII, Section 1 of Article VIII, Section 2 of Article VIII, Section 3 of Article VIII or Article XI of the Certificate of Incorporation must be approved by not less than 66 2/3% of the voting power of the outstanding shares entitled to vote on the amendment, voting together as a single class. Any amendment to our Bylaws will be required to be approved by either the Company’s board of directors, acting pursuant to a resolution adopted by a majority of the total authorized directorships on the Company’s board of directors, or a majority of the outstanding shares entitled to vote on the amendment, voting together as a single class, except that the amendment of Article VIII of the Bylaws must be approved by not less than 66.7% of the outstanding shares entitled to vote on the amendment.
These provisions are designed to enhance the likelihood of continued stability in the composition of the Company’s board of directors and its policies, to discourage certain types of transactions that may involve an actual or threatened acquisition of our Company and to reduce our vulnerability to an unsolicited acquisition proposal. We also designed these provisions to discourage certain tactics that may be used in proxy fights. However, these provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they may also reduce fluctuations in the market price of our shares that could result from actual or rumored takeover attempts.
Delaware General Corporation Law Section 203
As a Delaware corporation, we are also subject to the anti-takeover provisions of Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in a “business combination” (as defined in the statute) with an “interested stockholder” (as defined in the statute) for a period of three (3) years after the date of the transaction in which the person first becomes an interested stockholder, unless the business combination or the transaction by which the applicable stockholder became an interested stockholder is approved in advance by a majority of the independent directors or by the holders of at least two-thirds of the voting power of the outstanding disinterested shares. The application of Section 203 of the DGCL could also have the effect of delaying or preventing a change of control of us.
Dissenters’ Rights of Appraisal and Payment
Under the DGCL, with certain exceptions, the Company’s stockholders have appraisal rights in connection with certain mergers, consolidations or conversions of the Company. Pursuant to the DGCL, stockholders who properly request and perfect appraisal rights in connection with such merger, consolidation or conversion will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.
Stockholders’ Derivative Actions
Under the DGCL, any of the Company’s stockholders may bring an action in the Company’s name to procure a judgment in the Company’s favor, also known as a derivative action, if certain conditions are met, provided that the stockholder bringing the action is a holder of the Company’s shares at the time of the transaction to which the action relates or such stockholder’s stock thereafter devolved by operation of law.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors and certain officers to corporations and their stockholders for monetary damages for breaches of directors’ and officers’ fiduciary duties, subject to certain exceptions. The Governing Documents include certain provisions that eliminate the personal liability of directors and officers for monetary damages for any breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions is to eliminate the rights of the Company and its stockholders, through stockholders’ derivative suits on the Company’s behalf, to recover monetary damages from a director or officer for breach of fiduciary duty as a director or officer in certain circumstances, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director and does not apply to officers if the officer has acted in bad faith, knowingly or intentionally violated the law or derived an improper benefit from his or her actions as a director or in the context of an action by or in the right of the Company.
The Certificate of Incorporation provides that the Company must indemnify the Company’s directors, and our Bylaws provide that the Company must indemnify and advance expenses to the Company’s directors and officers, to the fullest extent authorized by the DGCL. The Company also is expressly authorized to carry directors’ and officers’ liability insurance providing indemnification for the Company’s directors, officers, employees and agents for some liabilities. The Company believes that these indemnification and advancement provisions and the authority to carry insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability, advancement and indemnification provisions in the Governing Documents may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty.
These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
OUR BUSINESS
Corporate History and Background
We were originally incorporated in Delaware on July 21, 2020 under the name “Tailwind Acquisition Corp.” as a special purpose acquisition company, formed for the purpose of effecting an initial business combination with one or more target businesses. On September 9, 2020 (the “IPO Closing Date”), we consummated our initial public offering (the “IPO”). On January 31, 2023, we consummated a business combination with Nuburu Subsidiary, Inc. f/k/a Nuburu, Inc. (“Legacy Nuburu”), a privately held operating company which merged into our subsidiary Compass Merger Sub, Inc. (the “Business Combination”) and changed our name to “Nuburu, Inc.,” and we became the owner, directly or indirectly, of all of the equity interests of Nuburu Subsidiary, Inc. and its subsidiaries. In light of the fact that the Business Combination has closed and our ongoing business will be the business formerly operated by Legacy Nuburu, this business section primarily includes information regarding Legacy Nuburu’s business.
Overview
Nuburu is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to multiple markets, including e-mobility, healthcare, and consumer electronics via a broad range of high value applications that include welding and 3D printing. By delivering increased speed and quality we hope to enhance productivity and cost efficiency for manufacturers in the e-mobility, consumer electronics, aerospace and defense, and 3D printing markets as well as to find additional applications currently not yet serviced by existing laser technologies.
We have invented, patented, and developed what we believe to be the next pivotal point for manufacturing technology, with the potential to revolutionize the manufacturing industry by changing how products are made. Our technology is also aligned with the need to reduce carbon generation in manufacturing. Most manufacturing processes require heat to shape, manipulate, and form basic materials into a product. The Nuburu laser system outperforms currently available alternatives by more efficiently coupling heat into the material being processed, thereby helping to promote a more sustainable future by using less energy and, in turn, generating less carbon in the manufacturing process.
A fundamental physical characteristic is that metals absorb blue laser light better than infrared (“IR”) laser light. In the case of materials such as gold, copper, silver, and aluminum the advantage of blue laser light is substantial. The better absorption results in substantial improvements in the quality of the part produced, the yield of parts during production and the speed at which the part can be produced. We believe that these advantages enable efficiencies in the overall productivity of the manufacturing line and can extend the life of the products produced. We also believe that these characteristics will be advantageous to our customers, whether in upgrading existing manufacturing processes or enabling entirely new approaches to manufacturing through the use of Nuburu’s laser systems in either industrial welding or 3D printing technology applications.
Nuburu is currently shipping blue laser systems for applications such as EV batteries, large screen displays, and cell phone components. We have performed thousands of welds in hundreds of application tests to date and we believe we have a strong and substantial customer pipeline for our laser light engines.
Nuburu has developed a thorough understanding of the market need for its laser light engines across a broad array of applications including battery, e-mobility, consumer electronics, and 3D printing metal systems. We estimate that our serviceable addressable market (“SAM”) will grow from approximately $4 billion today to approximately $34 billion by 2032 (see “— Market Opportunity”).
Nuburu’s co-founders identified these market opportunities at an early stage and began working in 2013 to protect their early mover advantage with a strong patent portfolio. Nuburu has approximately 220 granted and pending patents and patent applications globally, which include: blue laser applications such as welding, blue laser technologies, single mode blue laser technology, blue Raman laser technologies, addressable array technologies, and 3D printing using blue lasers. Notably, Nuburu has been awarded patent protection for the use of high-power blue lasers. At the time Nuburu was started, industrial quality, high-power blue lasers did not exist and Nuburu was the first to successfully apply blue lasers to the practice of welding and 3D printing.
Industry Background
Industrial markets have been a major focus for laser applications ever since the invention of the laser. In the early 1970s, lasers emerged as a useful source for cutting and welding. However, the material systems were limited to steel and other materials with low reflectivity given the long wavelengths of the Infrared Carbon Dioxide (IR CO2) lasers that were the mainstay of that era.
The first era was followed by the introduction of lamp-pump yttrium aluminum garnet (YAG) lasers in the late 1970s with a shorter wavelength and more compact size, which resulted in an expansion of applications into cutting, welding, and drilling. The lamp pumped lasers were superseded in the 1980s by the invention of diode pumped solid state lasers which offered higher efficiency and superior reliability.
However, the lamp pump lasers still had poor absorption in materials such as aluminum and copper given the IR wavelength of these lasers.
In the early 2000s, the fiber laser was introduced into the industrial laser market and offered superior efficiency, reliability, and scalability than the diode pumped solid state lasers and was rapidly adopted because of its compact size. The fiber laser with its improved performance displaced the CO2 lasers in welding and ushered in a new era for additive manufacturing (3D printing). Currently, fiber lasers account for approximately 50% of the total materials processing laser market according to Laser Focus World, in part because of their compact size and ease of operation. The fiber laser, however, still operates at the IR wavelength with low absorption in materials such as copper and aluminum.
Market Opportunity
We estimate the total addressable market (“TAM”) for industrial lasers that could be replaced by blue lasers (i.e., our total revenue opportunity at 100% market share, assuming no competition), to be $15 billion today and to grow to over $65 billion in the next ten years. Our estimated TAM was constructed by our management team using three primary elements: (i) the 3D metal printing system market analysis published in the AMPOWER 2022 market report, (ii) the blue addressable laser market published in the Laser Focus World 2022 market report, and (iii) the non-laser technology replacement market which was estimated by Nuburu based on its discussions with existing and potential customers about their expected production needs and anticipated demand.
Included in our estimated TAM is the 3D printing metal system market, which is a $2.7 billion market today, including machines, service, and materials, and is projected to grow to over $8.4 billion by 2026 based on projections by AMPOWER and to $32.8 billion by 2032 based on our own estimates. The TAM for industrial lasers that could be replaced by blue lasers is $10.5 billion today and, assuming a greater than 10% compounded annual growth rate ("CAGR"), based on projections by Laser Focus World’s 2022 market summary and our own estimates, could reach approximately $35 billion by 2032. In addition, we have included a non-laser conversion TAM, which we estimate to be $0.75 billion today and which we project to grow to $5.6 billion by 2032, assuming the conversion of ultrasonic and contact welding methods to blue laser welding methods. This data is shown in the following chart and results in an estimated TAM of over $65 billion.
Total Addressable Market
(1)Source: AMPOWER 2022 and Nuburu estimates based on customer feedback.
(2)Source: Laser Focus World Industrial Forecast 2021 and Nuburu estimates based on customer feedback.
(3)Source: Nuburu estimates based on customer feedback.
(4)Includes non-welding technologies such as ultrasonic, resistance, TIG, selected soldering and others.
We have also estimated Nuburu’s serviceable addressable market (“SAM”), which is depicted in the chart below and represents the portion of our estimated TAM that can be served by our existing and planned products, again assuming no competition. Our management team constructed this estimate by conducting a bottom-up analysis that factored in discussions with customers and analyzed how the blue laser systems we manufacture today can address the laser welding and 3D printing markets. The calculation of SAM for our blue laser systems includes the conversion of non-laser machine tools to laser-based systems, and the battery, EV, consumer electronics and display manufacturing market segments.
The 3D printing portion is included in our calculation of SAM given our intent to penetrate this market with blue-laser based 3D printers. We estimate our SAM to be $4 billion today and expect it to grow to over $33 billion in the next ten years.
The estimated SAM shown below is a bottom-up calculation driven by feedback provided by a survey of certain of our current and potential customers in each of the sub segments indicated. The volume estimates consider:
•the number of existing production lines to be retrofitted over time;
•the number of planned new production lines;
•an average estimated laser replacement of about four years; and
•do not account for the use of blue lasers in new applications currently not utilizing lasers other than for very limited recently identified segments.
Based on the foregoing, we estimate the light engine industrial laser segment to grow from $2.7 billion in 2022 to over $9.5 billion in 2032, driven by the electrification of key market segments including batteries, e-mobility, consumer electronics and metal 3D printing systems. This projected market growth is a combination of new market opportunities and replacing fiber lasers and solid-state lasers in existing applications. The 3D printing metal systems market is expected to grow from over $2 billion in 2022 at a CAGR of approximately 26% to over $32 billion in 2032, according to the AMPOWER 2022 report and Nuburu estimates.
Serviceable Addressable Market
(1)Source: AMPOWER 2022 and Nuburu estimates based on customer feedback.
(2)Source: Nuburu estimates based on customer feedback.
(3)Includes bio-instrumentation, display and others.
We believe Nuburu’s existing and planned products are well positioned to address our SAM, and as we continue to develop products based on new technology, we hope to be well positioned to compete in the larger TAM in the future.
Key Growth Trends
Over time, manufacturing operations have begun to integrate lasers into material processing applications. We believe that areas that have seen and continue to experience rapid growth, such as 3D printing, energy storage, e-mobility, and consumer electronics, have been more concerned with how, where and when they can integrate lasers into their operations, rather than if they should adopt them.
In addition to such long-standing trends of manufacturing ecosystems in converting to superior production technologies, there are two global macro trends that we believe will serve as powerful “tailwinds” driving growth in the market for laser systems, including (i) energy de-carbonization and electrification and (ii) supply chain improvements and manufacturing reshoring. Nuburu believes both of these trends will serve as drivers to the attractiveness and adoption of its products.
With respect to the trend of energy de-carbonization and electrification, many nations with large economies have announced and begun implementing, in varying degrees, energy policies directed at decreasing carbon emissions. The paths to executing these policies include increasing the electrification of certain modes of transportation. We expect to benefit from this trend, as batteries, which Nuburu’s blue laser technology is able to weld more efficiently, are a key element of these policies.
There is also a global trend towards making supply chain improvements and reshoring manufacturing to domestic production. The COVID-19 pandemic, and the related widespread lockdowns, combined with the Russian invasion of Ukraine, exposed vulnerabilities and weaknesses in global supply chains across an array of products. This has led companies and governments to reconsider their existing supply chains and has led to an uptick in business planning and policy-making that aims to relocate the manufacturing of key components and sub-assembly lines within domestic markets, closer to downstream assembly and manufacturing plants. One potential means to reshore and reduce supply chain vulnerability is to increase the use of 3D printing to allow manufacturers to “print on demand” the many components needed to fabricate products, or to completely print products in one step. We also believe that our products offer meaningful solutions to this trend, as Nuburu’s blue laser technology can help provide the means to cost effectively produce parts on demand.
Our Technology
Although IR lasers are the incumbent technology used in many systems today, we believe that they are not the optimum choice for processing aluminum, copper, gold, and other reflective metals. Nuburu believes its technology is well positioned to usher in a new era of manufacturing, extending laser technology to far broader applications and markets.
Nuburu is currently targeting two major markets: (i) laser welding or material processing and (ii) metal 3D printing. Both markets have grown substantially in recent years, already resulting in multi-billion-dollar TAMs and SAMs, and we believe both are poised to experience further substantial growth.
Welding
Nuburu’s initial focus is on the materials processing market. The blue industrial laser offers improved quality and speed to welding and joining applications driven by superior absorption of the blue laser relative to an IR laser. For example, in copper, which is an important material in the electrification wave of manufacturing, absorption of IR lasers is only 5%, while blue lasers achieve absorption of 65%.
Traditional IR welding and joining is effectively a violent process that vaporizes the target metal, ejecting particulates and leaving holes behind. To minimize these problems, IR lasers have employed multiple methods to minimize the defects when welding high reflectivity materials, the two most common of which are (i) the use of a scanner to create a swirl pattern on the metal and (ii) the use of a dual beam or ring beam.
The first method, the use of a scanner-based swirl pattern, does work, but it results in a more complex welding pattern which in turn results in a slower speed for a given laser power. By contrast, the blue laser of the same equivalent power can directly weld the copper material substantially faster (up to 8x faster) with minimal to no defects in the weld and minimal to no spatter generation during the welding process.
The second method, the ring laser beam, uses a lower power laser beam surrounding a high intensity laser beam. The lower power laser beam preheats the metal to the point that the high intensity laser beam can couple its energy into the part. In the case of copper, this preheating technique increases the absorption from about 5% to 15%, which is sufficient for the IR laser to be able to initiate the weld. By contrast a blue laser with the same power level will weld copper substantially faster (up to 8x faster) than the ring laser and with greater energy efficiency because of the much higher absorption of the blue laser beam (65%) compared to the IR ring laser. While the ring laser must use excess energy to even initiate the weld, the blue laser simply welds the parts. This is very evident when welding copper foils, where the ring laser is only capable of a spot weld, while the blue laser is capable of continuous welding of the foils, a feature highly desired in battery manufacturing.
Nuburu’s blue laser therefore offers valuable capabilities for improving the means to manufacture at a lower cost than what is currently possible with IR lasers. We also expect that these capabilities will lead to the wider adoption of laser welding as it will allow manufacturers that until now have used lasers primarily for welding steel and stainless-steel components to also use lasers on more reflective materials such as copper and aluminum (which are used in great quantities in electric vehicles).
Metal 3D Printing
Nuburu’s second focus is metal 3D printing. 3D printing is performed with many different methods; however, the most common laser-based methods fall into one of three categories: (i) laser powder bed fusion, (ii) direct energy deposition and (iii) laser-based wire feed. Each of these methods has its advantages, the powder bed fusion method currently offers the highest resolution and finest feature printing capabilities, but also the slowest printing rates. The direct metal deposition method has a poorer surface finish and cannot print as fine of features as the powder bed fusion, but it does achieve very high build speeds. The laser-based wire feed printing method produces a relatively rough surface finish, but it can print much larger parts at very high speeds which is its key advantage.
Powder Bed Fusion
Powder bed fusion is a method for 3D printing where a thin layer of powdered feedstock is laid down, and then an energy source melts particles together at specific locations on that plane. A subsequent particle layer is deposited and again selectively melted, joining powder on the top layer to the previously melted layer beneath. This process is repeated with a different pattern for each layer until the part is completed. Once completed, the part is removed from the build plate and the unmelted powder is recovered and recycled to be used again in the process. The part is cleaned, inspected and the final machining steps are performed to achieve the desired part features and dimensions.
When a laser is the energy source for powder bed fusion, the technique is called selective laser melting. Lasers are the preferable option for the energy source because alternative methods, such as an electron beam, require the build volume to be in a vacuum. However, traditional IR lasers suffer from the same limitations in 3D printers that also limit their effectiveness in welding applications. A high intensity laser beam is rapidly scanned across the powder bed melting and vaporizing the metal particles. While the smallest particles are readily vaporized, some portions of the larger particles are also vaporized. This is problematic in several ways. First, the metal plume that comes off the powder as the metal vaporizes requires complex fume filtering and management. Second, metal vaporization being trapped in the part during printing may create a void or defect in the part that could be a weakness in the final part produced. This weakness may be a mechanical weakness, or in the case of copper, the thermal and electrical characteristics may be degraded due to the presence of these voids. A third issue that arises when trying to scale the physical part size and the printing volume is the management of the plume of metal as it can easily redeposit on an adjacent area of the part or an adjacent part. This condensation of the metal vapor can also cause voids and defects in the parts, making scaling up laser powder bed fusion systems using IR lasers challenging for machine designers because of these limitations in the fundamental process of rapidly melting the metal.
When used in a powder bed fusion application, the blue laser can be incorporated in one of two ways. The first, is simply a drop-in replacement for the IR laser, which already represents a significant improvement as blue laser has the advantage of increased absorption and consequently increased printing speed. This printing speed advantage has been demonstrated by Nuburu in both copper and stainless steel, with consistently faster printing speeds than achieved with an IR laser.
However, the blue laser, because of its high absorption rate, can also be used in a different mode of printing, one that does not lead to vaporization of the metal and consequently a dramatic reduction in the voids or defects created in the part during the printing process. This process is the conduction mode printing process where a large spot size with a low laser power density is used to take advantage of the enhanced absorption of the laser beam. The use of this large spot size is best described as area printing, where the spot is an image to be printed rather than just a spot. This results in a very calm melting of the powder with little to no vaporization, thereby substantially eliminating the need for fume management and successfully avoiding many pitfalls of the current 3D printing methods. The result is a substantial increase in print speed and the ability to easily scale up the printing method to large areas or to a large part count in a single printing run.
Direct Energy Deposition
Direct Energy Deposition ("DED") is the method where the powder is delivered by a nozzle into the laser beam as the beam traverses the part being produced. The advantages of this method include the very efficient use of powder and the ability to deposit metal at a very high build rate. The powder use is more efficient than a powder bed system, because only the powder to be deposited is used in the process, unlike a powder bed, where the entire area of the part is covered with powder as it is being produced. This method has been in use for many years for remanufacturing old parts as well as producing new parts. A very precise motion control system is required to maintain surface quality as well as build quality. However, the surface quality and the minimum wall thickness is a direct function of the large spot size used in this method and consequently this method cannot achieve the same part resolution or surface finish as a powder bed based system.
We believe that the blue laser is an ideal source for this method because of its ability to couple the laser power efficiently into the powder as it is rapidly approaching the build surface. The powder must be completely melted before reaching the surface to be properly incorporated into the build. The high absorption characteristics of the blue laser light enables the rapid heating of all metal materials that would be used with this method, resulting in Nuburu’s blue laser achieving an increase in build speed of up to 7x in copper and 3x in stainless steel compared to an equivalent IR laser.
Laser-based Wire Feed
Wire feed deposition is the method of 3D printing where a wire is fed into the laser beam as the beam traverses the part. This method has also been used for many years for remanufacturing old parts as well as producing new parts. A very high precision motion control system is likewise required to maintain surface quality as well as build quality. The overall surface quality and minimum wall thickness is limited by the wire thickness used in this method. Consequently, this method cannot achieve the same part resolution or surface finish as a powder bed system, but it can achieve very high metal deposition rates.
We believe that the blue laser is an ideal source for this method because of its ability to couple the laser power efficiently into the wire as it is rapidly approaching the build surface. The wire must be completely melted just as it reaches the build surface. This approach requires a wire feed head that can operate in any direction coupled to the blue laser and a very fine control of the wire as it is fed into the laser beam. The approach can deposit material very fast and uses a gantry style system to trace out and build the part. Some companies have used 6-axis robots to accomplish the same type of build, allowing very large parts to be fabricated out of materials such as titanium and other alloys. Nuburu is working with other companies that are developing systems using a very fine wire feed method which should greatly improve the surface finish and allow the manufacturing of very large parts (~1m3).
Blue Laser in 3D Printing
Nuburu believes its blue laser technology has the potential to be a novel solution for 3D printing by opening an entirely new path to lowering 3D printing costs. We expect the blue laser light engine will be a “plug and play” replacement for today’s IR lasers, enabling both new systems to be built as well as old systems to be upgraded. Once upgraded, we expect that these light engines will provide a wider material processing capability, higher printing speeds, better resolution and stronger as printer parts. Nuburu has demonstrated this capability by integrating its blue laser into a commercial 3D printed and quantifying the speed and performance advantages. In addition, the blue laser has demonstrated the ability to print “hard to print” materials such as copper and gold. These results can be attributed to the enhanced absorption characteristics of the blue laser light which enabled the blue laser to print these materials when the IR lasers could not melt the base material in either a powder bed printer or wire feed printer. These results highlight that Nuburu’s blue laser provides increased flexibility with respect to the material used in blue laser-based 3D printer. We believe this flexibility in material processing makes the blue laser a superior choice for customers when designing their production lines and making their purchasing choices.
A challenge with 3D printing is to print parts that are competitive in cost with more conventional metal manufacturing methods such as casting and injection molding. Nuburu has demonstrated and applied for patents on a new area printing technology (“APT”). Nuburu is currently designing and testing this new technology which we believe has the potential to greatly increase the printing speed of a more conventional 3D printer. The projected printing rates for this technology would make the per part cost competitive with more conventional means of manufacturing such as sand casting and injection molding. We believe that the APT approach to printing challenges the paradigm of today’s 3D printers and consequently has the potential to become a breakthrough technology that could propel 3D printing into major manufacturing markets by meeting the cost per part required by these industries and permitting the printing of much larger parts.
Nuburu has already demonstrated this printing technique in the laboratory and is now being funded through a U.S. Air Force contract from AFWERX to develop a full-scale version of such a printer (see “— Research and Development — Research”).
Benefits of Our Technology
We believe Nuburu’s blue lasers are an ideal manufacturing tool for a number of reasons.
Wavelength Characteristics
Fundamental physics states that the color of the light directly represents the energy carried by light. As the energy of the light increases so does the ability of materials to absorb this energy. Metal absorption is one manifestation of this inherent property of blue. In other words, no amount of manipulation can change the way that metals absorb other wavelengths of light, meaning that blue has an inherent superiority for processing steel, gold, titanium, aluminum, copper, nickel, and many other metals. This applies to metal surfaces that are machined, polished, sandblasted or etched which has no effect on the ability of the laser to melt or weld the material.
Superiority to IR Lasers
The blue laser is adept at welding parts that are difficult for an IR laser to weld, particularly reflective metals such as copper, gold and aluminum. The IR wavelength is poorly absorbed by these materials, so IR lasers struggle to create and sustain melting. The ways that IR lasers can overcome the absorptivity issues are either by preheating the metal or by increasing the laser intensity until the material vaporizes and creates what is termed a keyhole. While this allows absorption, the process is violent and creates spatter and debris on the component and voids in the weld. Spatter creates loose debris in assemblies which may cause electrical short circuits and failure. Pores in the weld zone reduce strength and electrical performance.
A substantial number of products requires some level of welding, for example, batteries in an electric vehicle, cell phones, cell phone components and large screen displays. These products contain significant amounts of copper, gold, aluminum and stainless steel which must be joined together at some point during the assembly of the product. Nuburu’s light engines are able to deliver the necessary heat required to weld the precision parts together quickly and with high manufacturing yields.
Permits Welding of Smaller Features
Nuburu uses patented technology to spatially and spectrally combine the outputs of blue wavelength diodes. The diodes are individually aligned to produce smaller spot size and higher intensity. This high intensity, or brightness, creates a smaller laser focus and therefore allows welding or melting of smaller features. In addition, the high brightness allows greater distances from the focus lens to the workpiece allowing scan head beam delivery or access into remote positions. In summary, Nuburu blue lasers offer flexible output for use in an automated machine.
(1)Speed across materials on a per watt basis.
3D Printing Compatibility
Nuburu provides manufacturers with blue lasers for welding, cutting, stripping coatings and 3D printing. These lasers, when combined with external optical components, make up a light engine. Our customers are able to integrate our blue light engines into their manufacturing processes in a variety of ways, including by directly attaching the laser to a scanner to allow for rapidly redirecting of the laser beams across a part or, in the case of 3D printing, the powder bed. We believe that this compatibility enables our blue laser-based light engines to be a plug and play replacement for today’s IR lasers.
Alternatively, a Nuburu laser fiber could be attached to a welding or cutting head and then mounted on a motion system to allow the laser beam to be moved and repositioned. Finally, a Nuburu light engine could consist of a Nuburu laser and a light modulation system that enables a new generation of 3D printers based on APT rather than single spot printing, which is currently the industry standard. We believe this approach to 3D printing, which we are currently working to develop, has the potential to revolutionize the industry by delivering increased speed and quality in printing metal parts.
Modular Design
Nuburu’s laser systems are based on a modular design where the lowest power module is the building block for higher power systems. This homogenizes the supply chain, streamlines production and allows for rapid new product development. By using a common module approach, we aim to achieve lower costs, consistent performance, good reliability and simplified serviceability.
Simple Design
The Nuburu laser designs are straight forward and designed for automated assembly. The light from the individual laser diodes is combined with no additional steps to create the beam. This is referred to as a direct diode laser source and is more efficient than other technologies, requiring less electrical power to run the machine. To achieve high power, high brightness from its laser systems, Nuburu’s automated manufacturing methods align all of the optical components of the system. Each laser diode operates at a different wavelength or color and they are each superimposed on each other to achieve a laser beam brightness that is the same as a single emitter. A linear array of sources is
created with this method which represents the highest brightness and power that can be achieved from the combination of so many laser diodes. The high brightness translates into the lowest possible beam divergence for the product. The low beam divergence is essential for integration with industry-standard optical scanning systems, including those integral to both production lines and powder bed fusion 3D printing.
Recognition
The value proposition of the Nuburu commercial product line has led to several industrial and academic partnerships, along with industry recognition, including: Finalist Prism Award — Photonics Media (2018), Innovators Award, Platinum Honoree — Laser Focus World (2018), Innovators Award, Gold Honoree — Laser Focus World (2019), Innovation Award — Laser World of Photonics (2019), Technology Innovation Award, Best Practices Award, Frost & Sullivan (2019), and Innovators Award, Gold Honoree — Laser Focus World (2020). In addition, in 2019, Frost and Sullivan awarded Nuburu its Technology Innovation Award recognizing Nuburu as a company employing best practices.
Key Advantages
For welding applications, Nuburu’s blue industrial laser provides the following key advantages when compared to conventional welding methods:
•High energy process efficiency due to the high absorption of the blue laser light;
•Higher speed because there is no need for pre-heating;
•Greater part strength due to minimal voids;
•Lower electrical resistance due to minimal voids; and
•Superior part quality due to lack of ejected material during the welding process.
For additive manufacturing, Nuburu’s blue laser light engines provide the following advantages:
•High energy process efficiency due to the high absorption of the blue laser light;
•Higher speed because of the higher absorption on the parts;
•Greater part strength due to minimal voids;
•Lower electrical resistance due to minimal voids;
•Higher part yield due to the reduced spatter not causing defects in adjacent parts; and
•Smaller part size as the blue laser can be focused on a tighter spot size.
Our Products
In 2017, Nuburu launched the world’s first commercially available high-power blue industrial laser, the Nuburu AO-150. This laser demonstrated the ability to weld the thin foils used in lithium-ion batteries.
These batteries are the predominant rechargeable power source for portable devices and tools, and are built using layers of thin copper and aluminum foils separated by electrolytes that hold and release the electrical charges. The foils must be joined along one edge, but traditional manufacturing methods of achieving this have been unsatisfactory: Soldering is time consuming; ultrasonic welding creates poor quality welds and requires tool contact and thus entails associated repair and replacement costs; and the IR can only spot weld these foils, both of which prevent batteries from achieving high performance. By contrast the Nuburu AO-150 welds these foils rapidly with essentially no particle ejection or voids left behind.
In 2018, Nuburu launched the higher power AO-500 and additional supporting hardware, extending the range of applications for the blue industrial laser. For example, the lithium-ion batteries described above are built around thin foils, but the foils are welded to tabs, the tabs to the case, and then the case to busbars that connect individual modules together for high-capacity batteries. Each of those joints might connect different materials and different thicknesses of materials. A single blue industrial laser can perform all these welds with straightforward adjustments of laser power and other parameters. This provides the direct advantage of high-quality connections produced at high speeds, and the indirect advantages associated with reduced production line footprint, and decreased maintenance and training costs.
Nuburu has continued to improve the performance of the blue industrial laser. In 2019, Nuburu was able to integrate the next generation of laser diodes into the AO-150 and AO-500 products producing 200 Watt and 650 Watts respectively, which enabled us to introduce the AO-200 and the AO-650. Nuburu continues to improve the performance of its AO-650 laser with the latest lasers with greater lifetime and power margin. Nuburu has combined two AO-650 lasers to study applications requiring up to 1,400 Watts of laser power. Numerous tests were performed at power levels up to 1,400 Watts providing a guideline for the products that will be needed to address the major copper welding markets indicating that higher power and smaller spot sizes will be needed.
Nuburu based its long-term roadmap, on these early test results. Following these results, an entirely new product design approach was adopted that we expect will provide higher brightness and rapid scalability to multi-kilowatt (“kW”) power levels. This is the BLTM series laser, where the beam quality has been improved by a factor of 3x and the output power of the base model has been upgraded to 250 Watts.
Nuburu announced the commercial launch of the first laser in the NUBURU BLTM Series, the BL-250, in January 2023. We anticipate that the BL-250 will serve as the base building block for additional products. By combining multiple modules into a single laser system, Nuburu expects to develop a product with increased continuous power. For example, combining four BL-250 modules into a single laser system would allow for a product with over 1,000 Watts of continuous power. Furthermore, by combining the 1,000-Watt subsystems, Nuburu expects to be able to extend the output power to 2kW and 4kW. Nuburu anticipates that the output power of the blue laser diodes in these systems will continue to improve and expects upgrades to these systems will be straightforward resulting in an upgrade of these systems to 1.5kW, 2.5kW and 4.5kW. With this modular design approach, we expect to rapidly achieve scale in our automated production line, homogenize our supply chain, streamline our production, and increase the speed of product development. We expect this modular approach to enable us to deliver consistent performance, good reliability, and simplified customer serviceability at competitive prices.
For this line of products, Nuburu expects the final products to be in the form of a light engine, encompassing both the laser and the beam delivery system. Our beam delivery system can be one of two types: (i) an optical scanner-based system or (ii) a welding head with sensors. We are developing the BLTM product line to be compatible with existing scanners, which works by rapidly scanning the beam across the processing surface with a pair of orthogonal mirrors.
Both our AO and BLTM product lines have been designed to be compatible with standard welding heads which may include a variety of sensors, such as a seam tracker and a weld quality monitor. These beam delivery systems are an add-on to the sale of laser systems because Nuburu is committed to providing a complete welding solution to its customers.
We are also currently working to develop the next generation of blue lasers to be released in our product roadmap, involving a single mode blue fiber laser (NUBURU SMTM Series) which we anticipate being unmatched in performance and brightness in the industry. We have designed and are currently testing the first alpha prototype. We are designing this line of single mode blue lasers to be compatible with both types of beam delivery systems; however, the optical scanner will be the preferred beam delivery system. Today every powder bed 3D printer uses an IR laser and a scanner. We are designing the Nuburu single mode laser to be a direct drop-in replacement for the incumbent IR lasers. 3D printing with the blue single mode laser benefits from the high absorption of the blue light creating solid parts with good surface quality at near net shape independent of the material being processed. For steel, titanium, pure copper, and copper alloys, our initial testing results demonstrate significant improvements in build rate and part quality, and reduction in post-processing time.
Our Competitive Strengths
Disruptive Technology: We believe our technology will disrupt and enable fast growing markets such as e-mobility, consumer electronics, aerospace and defense and 3D printing, while also helping to promote a sustainable future.
Proprietary Technology: We have an extensive IP portfolio, with approximately 220 granted and pending patents and applications worldwide.
Customer Engagement: We have engaged with blue chip companies in large, global industries as current and target customers. Over time, we also anticipate follow-on revenue streams from supplying replacement lasers and light engines and from conducting any required servicing.
Experienced, Leadership: We have a pioneering and visionary management team with a track record of innovation and execution in the laser industry.
Growing Market Adoption: We have already shipped over 50 systems to over 30 customers, and have partnerships with NASA and AFWERX.
Our Growth Strategy
Nuburu aims to become the pre-eminent global supplier of lasers for welding and 3D printing for a significant range of industrially important metals in both established and emerging manufacturing applications. Our growth strategy is driven by two global industrial trends:
•The growing importance of quality and speed for large scale volume manufacturing in energy storage, consumer electronics, e-mobility, aerospace, and other industries, and
•Burgeoning 3D printing applications, particularly for high-value aerospace, automotive, and medical metal parts.
Some key aspects of our growth strategy include:
Maintain and develop products for welding
Nuburu expects to make the blue laser the technology of choice for welding applications such as batteries, consumer electronics (such as cell phones, tablets, and large screen displays), electric vehicles, and renewable energy. The speed, quality, and yield that can be achieved with the blue laser is the key driver in its adoption into these markets. Nuburu’s AO product line has already made inroads into manufacturing components for cell phones, displays, and wire-feed 3D printing. We expect that Nuburu’s BLTM product line will expand the range of applications that can be addressed by combining the blue laser with a scanner to enable remote welding of batteries, consumer electronics and electric vehicle components. The scanner capability opens market opportunities for the blue laser because of its ability to rapidly move the beam from weld seam to weld seam. This light engine provides the production speed and quality sought by manufacturers for welding batteries, consumer electronics and electrical vehicle components.
Integrate Blue lasers into Directed Energy Deposition 3D Printing
Nuburu has integrated its AO-650 into a DED machine capable of printing parts using blown powder. In a direct comparison, the Nuburu blue laser outperformed an IR laser by a wide margin resulting in a substantial improvement in printing energy efficiency which translates directly to speed, a superior surface finish, and near forged metal densities. While this is a small portion of the additive market, it is an important one that enables our light engines to print large scale parts from a variety of materials such as titanium and copper alloys. The blue laser-based DED machine provided manufacturers with the speed, surface finish and densification required by markets such as aerospace.
Integrate single mode blue laser into additive machines
Nuburu is developing a single mode blue laser ("SM") that we expect to be a drop-in replacement for the IR fiber lasers used in 3D powder bed printers today. This technology is at the center of the Nuburu research and development efforts where the initial demonstration of a single mode blue fiber laser was successful. Nuburu is now working to scale the output power of the laser to its initial offering of 100 Watts CW. This laser is expected to expand the additive space, allowing the fabrication of parts that are 10x the size of parts fabricated with an IR laser, at speeds up to 7x faster for a given power level and to print metals that are reflective in the near IR. This technology is compatible with existing systems, allowing customers the flexibility to upgrade their existing systems to blue as an alternative to ordering an entirely new 3D printing system. The improvement in process speed and part quality is expected to enable the mass adoption of 3D printing in aerospace, healthcare, dentistry, jewelry and other general manufacturing applications.
Next Generation Blue Laser Additive Systems
Nuburu has demonstrated the ability to print metal parts with its APT. We expect that this system will flash print over 2 million spots simultaneously in an area over 1,000x greater than the single spot used in today’s printers. The laser light engines are modular in their design which allows a powder bed printer system to be outfitted with a single light engine or multiple light engines. Multiple light engines provide a path to very high printing speeds, and lower operating costs. This method of printing relies on the conduction mode printing referred to earlier in this document and will not have the complicated fume management systems required in today’s large area printers. A system based on several light engines has the potential to achieve 10-20kg/hr printing speeds while maintaining a 0.050mm minimum part resolution. We expect that a breakthrough in speed while maintaining resolution and part quality will enable adoption in cost sensitive markets such as automotive and consumer products.
With respect to all of the 3D printing applications, Nuburu anticipates growing its capabilities organically or through partnerships or acquisitions.
Extend Blue Laser Capabilities
Nuburu believes it has only started to uncover the many potential applications of this technology beyond the two major markets explored to date: vehicle electrification and 3D printing. With expanded resources we expect to be able to uncover additional applications in defense, healthcare, solar energy and semiconductor processing markets. In addition, we believe that as Nuburu introduces new products they will find applications in the growing market-place.
Please see "Risk Factors" above for additional discussion of the potential risks related to our product development and growth strategy.
Manufacturing and Supply
Manufacturing
Nuburu is located in Centennial, Colorado with an approximately 30,000 square foot facility. The facility primarily supports applications testing, manufacturing, engineering, and research and development of lasers and laser systems. Approximately 2,400 square feet of our facility is a clean room facility in which the laser light engine modules are manufactured, assembled, and tested. Other areas of the facility facilitate the integration of the laser light engine modules with control and power electronics into a chassis to form laser systems. Completed laser systems undergo testing and quality control within the facility.
We anticipate that our current facility can support the manufacturing volumes forecasted through mid-2025. Needed capacity increases can be accomplished by improvements to the manufacturing line, adding equipment to bottleneck manufacturing steps, as well as expansion of key areas. We expect to be able to improve production flow through modest infrastructure leasehold improvements, such as removal of divisive walls and inclusion of doors and passthroughs in strategic locations. These improvements would allow the product assembly to flow in a continuous uninterrupted line, increasing efficiencies.
Nuburu’s lasers are designed to be compatible with automated manufacturing methods. Nuburu continually improves the design of its lasers as well as the automation equipment required to manufacture these systems. Our strategy for scaling up our existing manufacturing line is based on two key elements: (i) optimizing the automated production flow and (ii) minimizing the touch labor. The automated assembly provides both the needed precision as well as the reproducibility of the assembly to manufacture the high precision blue laser modules. Since the key steps are performed with automated machines, we can minimize both the touch labor as well as the skill set needed for manufacturing. These elements combine to provide Nuburu with a cost effective and scalable manufacturing strategy. However, once the base production line design is finalized, the entire production line may be replicated as many times as is needed to increase capacity, limited only by space constraints and infrastructure limitations.
Throughout the manufacturing process, Nuburu uses multiple screening steps to check the quality of its products beginning with an initial automated screening test that identifies laser diodes that are below performance standards. For this initial test, six laser diodes are integrated into an assembly and undergo a visual inspection. The diodes are also turned on to quantify their performance and verify that they meet specifications. Those units are then integrated into a screening station and operated for a predetermined period to eliminate early failures, which are referred to as infant mortalities. Once they have passed this first step, they are integrated into a module, which is then tested for performance before integration into a system. After integration into a system, Nuburu uses a week-long test procedure to confirm that the electronics and laser are performing according to specifications.
We expect to work to reduce waste and limit costs while developing robust manufacturing processes with the aim of enhancing our competitive advantage in the marketplace. To do this, we expect to incorporate the Six Sigma Lean methodologies as well as ISO quality standards to ensure we meet customer expectations. With Six Sigma, we expect to further improve the quality of our products and decrease the variations that cause rework or defects. By incorporating the 5S pillars of the Six Sigma process into our day-to-day work life, we expect to develop a
streamlined productive work environment ensuring organized and improved cycle times, with the aim of reducing the cost of goods sold. Through these tools we aim to create an environment that demands quality and performance, while reducing downtime and defects that are generated from undefined processes and underutilized talent.
We anticipate that as we ramp up our manufacturing, we will require additional engineers and production personnel to build out and then operate our manufacturing capabilities.
Supply
We purchase raw materials used to manufacture our products and other components, such as laser diodes, micro-optics, optics, optical filters, bulk optics, cooling components, electronic components, and other materials, from various suppliers. We purchase materials and components through purchase orders or agreed-upon terms and conditions with our key suppliers. To mitigate raw material and component supply chain issues and risks, we aim to take a variety of actions such as second source qualification, accumulation of safety stock and vendor surveillance. We may also consolidate our supply base and move supplier locations. If we transition locations, we may increase our inventory of such products as a “safety stock” during the transition, which would cause the amount of inventory reflected on our balance sheet to increase.
Partnerships
Over the past five years, Nuburu has developed a number of partnerships in cell phone component welding systems, display welding systems, and 3D printing.
Key research institutes
Nuburu has established various partnerships, past or current, with prominent welding and 3D printing institutes including Edison Welding Institute in North America, two Fraunhofer institutes and Munich Technical University in Germany, Warwick University (WMG — Energy Innovation Center) in the United Kingdom, Osaka Welding Institute in Japan and Shanghai Jai tung University in China. The purpose of these partnerships has been to validate our own testing and benchmark our metal processing application results against incumbent technologies used in manufacturing, including for example against IR lasers, ultrasonic welding, resistance welding and tungsten inert gas welding.
Key customers & partnerships
Nuburu has also developed key partnerships with selective customers. We have performed hundreds of applications and thousands of test welds for customers and target customers around the world. These applications serve as a validation of customer specific application over a wide range of welding applications including batteries, consumer electronic components, heat sinks for cell phones (vapor chambers), 3C applications such as connectors, PC board interfaces, flex circuits and 3D printing.
The first-generation AO-650 has been qualified by and is already operating in the production of vapor chambers by a key integrator in Asia. Our AO-150 is in the manufacturing qualification stage with two large systems for mask welding by an organic light-emitting diode ("OLED") manufacturer in Asia. We recently also finalized a multi-year supply and license agreement for a 3D printing application with Essentium, a manufacturer of 3D printing platforms. We have delivered our AO blue laser systems to over ten large brands worldwide which have been installed on-site at our customers’ manufacturing facilities and are currently undergoing engineering and manufacturing qualification testing. In 2023, we began delivering our new BLTM product line to both existing and new customers.
Research and Development
We conduct research and development efforts on our laser technology for new products at our headquarters in Colorado and we conduct research on applications at both our headquarters and partner facilities.
Research
We are currently conducting research that aims to continuously improve our blue laser systems. Our laser research is concentrated in two areas: (i) creating the highest possible brightness laser from blue laser diodes and (ii) developing a single mode blue laser source.
Nuburu has been studying numerous methods for increasing the brightness and power levels of its product line. These studies are focused on maximizing the brightness of our direct diode laser technology and include wavelength multiplexing, spectral beam combining and coherent beam combining. Nuburu is also testing numerous methods to build a single mode blue laser system with the aim of maximizing laser performance.
Nuburu is also developing APT that uses millions of laser beams to simultaneously print a portion of a metal part in a single shot. This approach to 3D printing would allow breakthrough speeds and resolution for the parts being printed. This is because current 3D printers work by scanning a laser beam across the powder bed to fuse a very small spot of metal onto the printed part. The printing speed is limited by two factors, the amount of laser energy that can be absorbed by the metal and the speed at which the scanner can move the laser beam. These factors ultimately limit the amount of laser power that can be used and the speed at which any single scanner-based 3D printer can print. This is not the case with Nuburu’s APT, where the millions of laser beams illuminate an area that is approximately 1,000x the size of the spot typically used in a 3D printer ultimately resulting in a radically new approach to 3D printing that greatly reduces spatter and fumes that can cause defects in the parts being produced. We believe that multiple parts can be produced simultaneously on a single build plate without the issue of defects and further, that very large parts can be printed without concerns over part integrity. Nuburu completed a project funded by the Air Force Research Labs through the AFWERX program to develop this large-scale, high-speed 3D printer and is in the process of bidding for another project to further this research.
Nuburu’s APT uses Texas Instruments Digital Light Projector ("DLP") to create a blue laser image on the powder bed with millions of pixel resolution. These devices were designed for large movie theaters and as a result they can handle high blue laser power levels. This provides the ability to create an image on a powder bed that is over 1,000x the size of the spots used today but with sufficient power density to fuse the
powder layer by layer into a 3D printed part. The result is higher printing speeds with 0.050mm of resolution in the image from each laser print engine. Multiple laser print engines can be used within a single printer to further increase the printing speed providing a path to 10-20kg/hr printing rates or higher depending on the size of the system. The laser light engine for this type of printer consists of an AO 650H laser, a collimating and homogenizing system, the DLP spatial light modulator and a reimaging system. The AO-650H provides 650 Watts of laser power through a 400µm core optical fiber and a narrow laser bandwidth. The performance of this system can be increased by the incorporation of Nuburu's newly released BLTM product line which has 10x the brightness of the AO-650H.
Product Development
Nuburu’s current product development activities are focused on the BLTM product line, which we have started to bring to the industrial laser marketplace in 2023. This product consists of a high brightness 250-Watt laser system. This product along with its manufacturing method have been under development since 2017 at Nuburu. The development of this system encompasses the design of the laser, its electronics, and an automated manufacturing capability. Since Nuburu is focused on developing laser modules with individual laser sources, the only economical method to manufacture these systems is to fully automate the production process. Nuburu has invested in all of the equipment to accomplish this goal resulting in a pilot production line that is intended to be scalable. This module forms the basis for the multi-mode product line extending from 250 Watts to multi-kWs of laser power. This modularity means that the system output power can be rapidly scaled from today’s single module system to a system that would encompass 16 modules and produce over 4-5kW of laser power. Nuburu has designed all of the mechanical components and electronic components with system scalability in mind. This modular design approach means that the next generation of higher power products that are needed to address a broad market need can be rapidly and efficiently developed.
Intellectual Property
Nuburu currently has approximately 220 granted and pending patents (of which more than 30 are in the United States and the remainder are foreign), including patents and applications directed to blue laser applications such as welding, blue laser technologies, single mode blue laser technologies, blue Raman laser technologies, addressable array technologies, and 3D printing using blue lasers. A number of its patent applications also relate to APT, electronic manufacturing, battery manufacturing, and other blue laser applications. These patents are at various stages of review. Our currently issued patents are expected to expire at various times between 2034 and 2039.
Nuburu’s practice is to apply for patent protection in key countries worldwide and to date we have been successful at securing patents in the United States and other countries. Our foreign rights include protections in Finland, France, Germany, Ireland, Switzerland, Spain, Italy, the United Kingdom, Japan, South Korea, China, and Russia. Our patent portfolio is regularly updated with new provisional applications, regular utility applications, and international and foreign applications, as well as with continuing patent applications being filed as patents are granted to keep the patent families active and to extend our portfolio coverage.
We currently do not license any patents.
Proprietary active alignment
The Nuburu design approach requires extremely precise alignment. The need to maintain precision alignment typically represents a challenge for optical systems intended for use in production environments, but we have developed proprietary active and automated alignment technology that solves this challenge and streamlines laser assembly and leads to robust and reliable performance in the field. That built-in robustness leads to long-term laser output power stability over thousands of hours of operation. Proprietary alignment technology also allows for a modular design approach, which enables both scalable product designs and straightforward production line maintenance. We believe that the active alignment that we have achieved would be very difficult to replicate.
Proprietary single mode technology
In conjunction with the proprietary design of the AO- and BL-series lasers, we hold patents and patent applications for an additional and further breakthrough in technology key to the next generation blue lasers. This technology enables a high-power single mode blue laser. Single mode laser performance provides the ultimate laser beam with the lowest angular divergence and the highest possible power density. This laser can be focused to a smaller spot size than an infrared laser and is the basis for Nuburu’s next generation single laser 3D printer design. In addition, when the single mode laser is combined with an optical scanner, it becomes possible to rapidly weld parts at a considerable distance. Since a blue laser has a substantially lower beam divergence than an IR laser, the standoff distance can be increased, or the spot size can be decreased to increase the precision of the welding process. We expect this ongoing development to position Nuburu as a leader in next-generation blue industrial lasers for the foreseeable future.
Competition
The laser system industry in which we operate has significant price and technological competition. We compete directly with mature competitors such as Coherent, Inc., nLight, Inc., IPG Photonics Corporation, Laserline GmbH, Lumentum Holdings Inc., Raycus Fiber Laser Technologies Co., Ltd. and Trumpf SE + Co. KG, which are well established and have longer operating histories, significantly greater financial and operational resources, and name recognition, which we do not have. However, we also compete with development-stage companies such as TeraDiode Inc. and others. A number of these competitors are seeking to improve conventional IR lasers or to develop new laser technologies, including blue laser technology. We also compete not only with companies providing conventional lasers, but also with companies offering non-laser solutions for the applications we target. Examples of current technologies used or expected to be used in welding and 3D printing applications include:
Infrared Fiber and Disc Lasers: Infrared lasers are the current predominant incumbent technology. However, when used on reflective material, the laser intensity must be increased to a level where the metal vaporizes, which creates spatter on the surface and pores in the weld itself. A higher intensity also results in a smaller spot size and smaller melt area. In order to increase the melt area a scan head is used to “wobble” the
beam in a pattern on the workpiece. This technique still creates a weld with excessive porosity and spatter. In addition, the need for a scan head for wobbling increases weld time by up to 10x compared with blue and the capital cost of the scan head and driving software is substantial.
Infrared Fiber Ring Lasers: Another way to improve the absorption of infrared wavelength into reflective material is to increase the temperature of the material prior to welding. A specially developed custom fiber laser or processing head is used to produce a ring of laser light around the main processing beam. This enables pre-heating of the metal before the processing beam. This is still a keyhole process but with some reduction in the heat input. However, this method also produces spatter in the melt area and voids in the weld. This approach also increases the cost of the equipment, as additional power is required. In some cases, two lasers are used, which further increases costs. The resulting process relies on a very precise balance of power in the ring and core and can be difficult to maintain in a production environment. Whilst the ring output approach can show acceptable results in thicker sections it still struggles in foil welding and fine feature applications.
Green Lasers: A more recent introduction in the laser market is the green laser, which can be generated from both a fiber laser and a solid-state laser by using a method called frequency doubling. A non-linear crystal is used to change the color of the laser from the IR to the green. These high-power green lasers are relatively new to the market and are still under evaluation by customers for 3D printing and welding applications. However, green lasers have significant drawbacks. While the wavelength is closer to blue and improvement in absorption is seen compared with IR lasers in typically reflective materials, the improvement is not as large as with blue. Typically, a 20% improvement in absorption is seen in blue compared with green. But the most significant drawback of green lasers is their complexity and poor electrical conversion efficiency. An optical technique known as “frequency doubling” is used to take the output of an IR laser and convert the output to green (i.e., a 2kW IR laser is used to make a 1kW green laser). This requires an additional process of putting the IR beam through a crystal. This is complicated, inefficient and the conversion crystal is considered a consumable, which requires frequent maintenance or replacement due to the deterioration of the non-linear crystals. These characteristics increase the capital and running costs for the manufacturer and also compromise the reliability of the green lasers.
Other Blue Lasers: In general, blue lasers based on an array of diodes in a bar produce lower brightness compared to individual devices because of the limitations of the spacing of the diodes on the bar array. In general, bar arrays thus result in a larger spot size or shorter standoff distance than could easily be achieved with individual devices such as our single chip approach used in our BLTM line of products. There is one company we are aware of that is developing blue laser diode bar technology that overcomes this limitation, but we believe this company’s beam quality is still limited to the multi-mode brightness of the individual laser diode source which would compete with our single mode BL line of products. We believe that our single mode laser greatly exceeds the performance of any of the direct diode laser beam combination methods that we are aware of.
While there are various competing laser technologies all seeking to disrupt the IR laser’s current foothold in various applications, we believe Nuburu’s blue-laser technology is the superior approach. The cost of our blue laser technology is currently greater than that of most conventional IR laser systems and that some potential customers may prioritize purchase price in making their investment decisions. However, we believe that our blue laser technology has the potential to offer our customers a greater return on investment. Nuburu’s blue laser fundamentally improves absorption rates and allows a melting process with no vaporization, which generally results in improved stable, high-quality welds and printed products, with minimal voids and spatter, all achieved using less energy and at increased speeds. We believe that Nuburu blue laser technology offers a superior solution to improving a variety of aspects of welding and 3D printing, providing customers with a broader range of applications than currently possible.
In addition to the technical aspects outlined above, we believe principal competitive factors include technology capabilities, materials, process and application know-how, cost of operation, product reliability, and the ability to provide a full range of products to meet customer needs. We believe that our future success depends on our ability to provide high-quality products, introduce new products to meet evolving customer needs and market opportunities, and extend our technologies to new applications.
Government Regulation and Compliance
We are subject to regulations governing the safe operation of our blue laser products. The lasers we produce are listed as Class IV lasers according to the U.S. Food and Drug Administration’s Center for Disease and Radiological Health (“CDRH”) and must meet all government guidelines for safe operation. Each laser system design must be registered with the CDRH prior to its release to the marketplace. Nuburu lasers also receive the CE mark (signaling that we have checked that our products meet applicable EU safety, health and environmental requirements) once they pass all of the CE certification testing on safety and radiofrequency emissions. This mark is required by most foreign countries to allow them to import our products.
Nuburu is also subject to the export regulations of the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”). We have worked with BIS to classify our current suite of products, and we intend to classify each of our new products prior to releasing them. Nuburu also has established an export manual that clearly articulates our policies and procedures used to confirm that we are in compliance with applicable U.S. export regulations. All of our employees and distributors worldwide are required to confirm that they will adhere to these policies. Nuburu expects to update its policy and export manual from time to time to reflect any changes required by new export controls or developments in best practices. Currently, neither our AO nor our BL lasers require an export license to export to the list of countries that U.S. companies are permitted to export to. As part of our export process, we check the government’s consolidated screen list before we accept orders or ship lasers to ensure that none of the parties involved are prohibited parties.
Sales and Marketing
Given the size, complexity and value of our blue laser technology, our sales to date have come from long-term discussions between our management team and our current customers. Based on our experiences so far, we expect the approximate adoption timelines of our customers from first contact to first purchase order to range up to 22-24 months. Going forward, we intend to expand our marketing efforts and as we pursue a more widespread adoption of our blue laser technology.
We have developed and trained and expect to continue to develop and train third-party distributors that provide sales and customer support functions in their specific territory, including business development and sales, application and service support and local marketing. Our distributors are and are expected to be an integral part of our sales and marketing strategy. The Americas region is managed from our headquarters, but we have distributor partners located in key countries worldwide to help target current and prospective customers in Asia (particularly in China, Japan, Singapore, South Korea, India and Taiwan) and in Europe.
Our applications lab is key to our sales effort because it allows our customers to test our full range of products to explore various application capabilities and better understand how our lasers might help them address their most challenging manufacturing problems. Our technical team provides on-site support through installation and offers technical support and training to our customers.
Employees and Human Capital
As of February 29, 2024, Nuburu had 46 full-time employees. A significant number of our employees have a technical background and hold advanced engineering or scientific degrees. We are committed to being an employer of choice through increasing diversity in the workforce and building and maintaining a positive and inclusive culture. We view our human capital investments as crucial for our success.
Our work environment is highly collaborative and one that is based on trust and mutual respect. Our team is comprised of highly skilled engineers who take substantial pride and ownership in their work. We take pride in our transparent approach to communicating, whether internally with employees or externally with our partners and customers. We have developed company-wide safety policies based on guidelines from health officials as well as input from our employees to establish and maintain a safe and healthy workplace. The safety of our employees and other key stakeholders is our top priority.
To date, we have not experienced any work stoppages and we consider our relationship with our employees to be good. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.
We anticipate that in order to reach our strategic objectives, we will be required to recruit and retain additional management, human resources, accounting, finance, technical, engineering and sales personnel.
Available Information
Our internet address is https://nuburu.net. We will file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K (and amendments to those reports), proxy and information statements and other information filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act with the SEC. The SEC maintains a website that contains reports, proxy and information statement, and other information regarding issuers that file electronically, which may be accessed through the SEC at http://www.sec.gov. Our reports, amendments thereto, proxy statements and other information are also made available, free of charge, on our investor relations website at https://ir.nuburu.net as soon as reasonably practicable after we electronically file or furnish such information with the SEC. The information contained on the websites referenced in this prospectus is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
PROPERTIES
Our corporate headquarters are located in Centennial, Colorado where we lease approximately 30,000 square feet of space pursuant to a lease that expires in 2025. The facility is used for applications testing, semi-automated manufacturing, research and development, and quality control. Due to the compact size of our products and production lines, we believe this office space is sufficient to meet our near-term capacity needs; however, when the lease expires, we may seek alternate facilities for our operations. We believe that suitable alternative space would be available if required in the future on commercially reasonable terms.
LEGAL PROCEEDINGS
Nuburu has been and expects to continue to become involved in litigation or other legal proceedings from time to time, including the matters described below. Nuburu is not currently a party to any litigation or legal proceedings that, in the opinion of Nuburu’s management, are likely to have a material adverse effect on Nuburu’s business. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on Nuburu because of defense and settlement costs, diversion of management resources, possible restrictions on our business as a result of settlement or adverse outcomes, and other factors.
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Price and Ticker Symbol
Our Common Stock has traded on the NYSE American under the symbol “BURU” since January 31, 2023. The Public Warrants were traded on the NYSE American under the symbol "BURU WS." On December 12, 2023, the NYSE notified the Company, and publicly announced, that the NYSE had determined to (a) commence proceedings to delist the Company’s Public Warrants, and (b) immediately suspend trading in the Public Warrants due to “abnormally low” trading price levels. As such, the Public Warrants are no longer trading on a public exchange.
Prior to January 31, 2023, Tailwind's Class A Common Stock and Public Warrants were listed on the NYSE American under the symbols "TWND" and "TWND WS" respectively.
Holders
As of April 9, 2024, there were 39 holders of record of our Common Stock. The actual number of stockholders of our Common Stock is greater than this number of record holders and includes holders who are beneficial owners but whose shares of Common Stock are held in street name by banks, brokers and other nominees.
Dividends
We do not intend to declare or pay any cash dividends in the foreseeable future.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included herein. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere herein.
A comparison of the results for the years ended December 31, 2023 and 2022 is provided below. Our Annual Report on Form 10-K for the year ended December 31, 2022 includes discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021 in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Company Overview
Nuburu, Inc. is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high-value applications, including welding and 3D printing. By delivering increased speed and quality we hope to enhance productivity and cost efficiency for manufacturers in the e-mobility, consumer electronics, aerospace and defense, and 3D printing markets, as well as to find additional applications currently not yet serviced by existing laser technologies.
We have invented, patented, and developed what we believe to be the next pivotal point for manufacturing technology, with the potential to revolutionize the manufacturing industry by changing how products are made. Our technology is also aligned with the need to reduce carbon generation in manufacturing. The Nuburu laser system outperforms currently available alternatives by more efficiently coupling heat into the material being processed, thereby helping to promote a more sustainable future by using less energy and, in turn, generating less carbon in the manufacturing process.
A fundamental physical characteristic is that metals absorb blue laser light better than infrared laser light. In the case of materials such as gold, copper, silver and aluminum, the advantage of blue laser light is substantial. The better absorption results in substantial improvements in the quality of the part produced, the yield of parts during production and the speed at which the part can be produced. We believe that these advantages enable efficiencies in the overall productivity of the manufacturing line and can extend the life of the products produced. We also believe that these characteristics will be advantageous to our customers, whether in upgrading existing manufacturing processes or enabling entirely new approaches to manufacturing through the use of Nuburu’s laser systems in either industrial welding or 3D printing technology applications.
Nuburu provides blue laser systems for welding applications such as batteries, large screen displays, and cell phone components. Nuburu has over 220 granted and pending patents and patent applications globally, which include: blue laser applications such as welding, blue laser technologies, single mode blue laser technology, blue Raman laser technologies, addressable array technologies, and 3D printing using blue lasers. Notably, Nuburu has been awarded patent protection for the use of high-power blue lasers.
Given the size, complexity and value of our blue laser technology, our sales to date have come from long-term discussions between our management team and our current customers. Based on our experiences so far, we expect the approximate adoption timelines of our customers from first contact to first purchase order to range up to 22-24 months. Going forward, we intend to expand our marketing efforts, as we pursue a more widespread adoption of our blue laser technology.
We have developed and trained and expect to continue to develop and train third-party distributors that provide sales and customer support functions in their specific territory, including business development and sales, application and service support and local marketing. Our distributors are, and are expected to be, an integral part of our sales and marketing strategy. The Americas region is managed from our headquarters, but we have distributor partners located in key countries worldwide to help target current and prospective customers in Asia (particularly in China, Japan, Singapore, South Korea, India, and Taiwan) and in Europe.
As we have disclosed previously, we have not yet achieved commercialization and expect continued losses until we can do so. We must rely on capital from investors to support our operations. During 2024, management negotiated several funding agreements with multiple investors. Certain of these investors have not fully performed their obligations under such agreements and the Company has been unable to obtain stockholder approval necessary to consummate certain transactions because it was unable to achieve quorum for the special meeting of stockholders called for such purpose. As a result, the Company has not received the funding necessary to maintain operations, fill orders or implement its sales and marketing program. Given the lack of funding, management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations, particularly in the third quarter of 2024. In response to the furloughs and financing challenges, several key employees have resigned entirely.
On January 13, 2025, we entered into a letter agreement with SFE EI, pursuant to which SFE EI agreed to engage in efforts and commit capital, together with its partners, to repay, settle, or acquire, certain outstanding promissory notes issued by us (which are currently in default as publicly reported by us on December 16, 2024) and finance our operations for the next twelve months pursuant to a Transformation Plan focused on building a stable foundation for the future business to be agreed by the parties. In the event that SFE EI and its partners are able to acquire the outstanding notes that are currently in default, the parties also agreed to amend such notes, with the objective of having such notes ultimately converted and extinguished.
On January 14, 2025, we entered into a settlement and mutual release agreement with Liqueous pursuant to which the parties provided an immediate mutual release of claims and obligations and Liqueous agreed to provide to us (i) payments for an aggregate of $1,000,000 in three installments, and (ii) a payment of $500,000 at such time as the parties are able to negotiate the amendment of the terms of outstanding pre-funded warrants held by Liqueous to reflect current market price. Such payments are conditioned on our continued performance under funding arrangements executed by us with Liqueous before July 31, 2024. The settlement with Liqueous rendered the previously disclosed Master Agreement (and agreements contemplated by the Master Agreement) no longer effective.
If the Transformation Plan is unsuccessful, we will not be able to sustain operations and will need to consider alternatives, which could include a sale, liquidation, or dissolution of the business.
We generated total revenue of nil and $186,743 and had net losses of $4,377,522 and $5,085,301 during the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, we generated total revenue of $142,827 and $1,710,794 and had net losses $22,765,563 and $15,959,530, respectively.
We expect to incur significant expenses and operating losses for the foreseeable future, as we:
•continue our research and development efforts;
•seek to commercialize our products; and
•operate as a public company.
Accordingly, we will continue to seek to fund our operations through public or private equity financings, debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all, or counter parties to such agreements may not perform. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition.
The Business Combination
On January 31, 2023, we consummated the Business Combination.
Being an SEC-registered and publicly traded company has required us to hire additional personnel and to implement procedures and processes to address public company regulatory requirements and customary practices. Compared to the operations of Legacy Nuburu, we have incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.
Recent Developments
Reverse Stock Split
On February 22, 2024, we held a special meeting of stockholders where stockholders approved proposals to authorize the Company to effect a reverse stock split of the Company's issued and outstanding Common Stock within a range from 1-for 30 to 1-for-75, with the exact ratio of the reverse stock split to be determined by the Company's board of directors. On July 23, 2024, the Company effected a 1-for-40 reverse stock split (the "Reverse Stock Split").
April 2024 SPA Agreement
On April 3, 2024, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors named therein pursuant to which the investors agreed to purchase from the Company $3,000,000 of newly issued shares (the “Shares”) of the Company’s Common Stock, at a per Share purchase price of $5.00 per Share. Only a portion of the purchase price ($644,936) has been advanced. In October 2024, a notification of default was sent to the investors for failure to provide the remainder of the purchase price.
Warrant Issuances and Note Extinguishments
Pre-Funded Warrants
On May 1, 2024, we entered into a Pre-Funded Warrant Purchase Program (the “Program”) with strategic investors, pursuant to which from time-to-time the Company may sell and the investors may acquire pre-funded warrants, up to a total purchase price to the Company equal to $15 million. The exercise price for the pre-funded warrants is substantially paid by the purchaser at closing and, as a result, such warrants may be exercised in the future with a nominal exercise price payment. Investors will also receive a warrant to acquire the same number of shares covered by the pre-funded warrant for a purchase price equal to 150% of the relevant pre-funded warrant purchase price exercisable for a period of 5 years. Each specific transaction will be entered into on terms agreed by the parties; provided however, that in no case will the purchase price per share be less than 110% of the closing price per share of the Company’s common stock on the trading day immediately preceding the date of purchase. Contemporaneously with the acquisition of pre-funded warrants, the investors may also voluntarily convert
outstanding notes previously issued by the Company; provided that such transactions, as a whole, may not result in an effective direct or indirect discount to market price to the investors of greater than 30%.
During the three and nine months ended September 30, 2024, the Company issued 665,410 and 837,116 pre-funded warrants, respectively, for total cash proceeds of $600,000 and $2,139,866, respectively, in pre-funded warrants pursuant to the Program. Each pre-funded warrant entitles the holder to purchase one share of common stock at an exercise price ranging from 125% to 140% of the relevant pre-funded warrant purchase price. The pre-funded warrant is exercisable any time after issuance through five years. No pre-funded warrants were exercised during the periods presented. The proceeds from the issuance of the pre-funded warrants were recorded to additional paid-in capital in the condensed consolidated balance sheets.
Additional Warrant Issuances
Further, during the nine months ended September 30, 2024, the Company issued certain additional warrants. For additional information, see notes 8 and 10 to the condensed consolidated financial statements.
Note Extinguishments
During the three and nine months ended September 30, 2024, the Company issued 2,399,850 and 4,648,162 shares, respectively, to noteholders to extinguish an aggregate $0.7 million and $4.8 million, respectively, of principal and accrued interest under the Senior Notes and Junior Notes.
August 2024 Convertible Notes
On August 6, 2024 and August 19, 2024, the Company entered into the August 2024 Convertible Note Agreement with Esousa for the sale of the August 2024 Convertible Notes in the aggregate principal amount of $673,000, issued at a discount of $25,000. The August 2024 Convertible Notes bear interest at 15% per annum, with principal and accrued interest due at maturity on February 6, 2025, unless earlier paid or converted into common stock. The notes are prepayable at any time prior to the maturity date without penalty. Upon the occurrence and continuance of an event of default or spin-off of a subsidiary, a default interest rate of an additional 5% per annum may be applied to any outstanding borrowings and the investor may declare all outstanding principal plus accrued interest immediately due. As of September 30, 2024, the effective interest rate of the August 2024 Convertible Notes was 180.2%. Additionally, at any point after issuance, the investor has the option to convert the August 2024 Convertible Notes into common stock at the lower of (i) a fixed price of $2.03 or (ii) 80% of the lowest daily volume weighted-average price in the 10 trading days prior to such conversion date, subject to certain adjustments. Issuances of common stock on conversion are (i) subject to approval by NYSE American of a supplemental listing application, (ii) limited to an amount equal to 19.9% of the outstanding common stock as of the date of execution, until such time as the transaction is approved by stockholders, which occurred at an annual stockholders’ meeting on December 27, 2024, and (iii) required to be registered with the SEC for resale.
Esousa also purchased $687,315 of outstanding principal and accrued interest under the Senior Convertible Notes from an existing investor and subsequently exchanged such notes for the Additional August 2024 Convertible Notes. The Additional August 2024 Convertible Notes may be prepaid at any time without penalty, do not accrue interest, mature on February 6, 2025 and may be converted at any time on or after the issuance date into common stock at a conversion price of 25% of the closing price of the common stock on the trading day prior to such conversion date, subject to certain adjustments.
The August 2024 Convertible Notes and Additional August 2024 Convertible Notes are unsecured and subordinated to the Company’s outstanding senior convertible notes and junior bridge notes in right of payment, whether in respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.
Letter Agreement with SFE EI
On January 13, 2025, the Company entered into a letter agreement with S.F.E. Equity Investments SARL (“SFE EI”), pursuant to which SFE EI agreed to engage in efforts and commit capital, together with its partners, to repay, settle, or acquire, certain outstanding promissory notes issued by the Company (which are currently in default as publicly reported by the Company on December 16, 2024) and finance the operations of the Company for the next twelve months pursuant to a Transformation Plan focused on building a stable foundation for the future business to be agreed by the parties.
In exchange, the Company agreed to certain governance changes, including accepting Ron Nicol’s resignation from the board of directors, the appointment of Alessandro Zamboni as Executive Chairperson, and the reinstatement of Matteo Ricchebuono as a director. In the event that SFE EI and its partners are able to acquire the outstanding notes that are currently in default, the parties also agreed to amend such notes, with the objective of having such notes ultimately converted and extinguished.
Liqueous Settlement
On January 14, 2025, the Company entered into a settlement and mutual release agreement with Liqueous pursuant to which the parties provided an immediate mutual release of claims and obligations and Liqueous agreed to provide to the Company (i) payments for an aggregate of $1,000,000 in three installments, and (ii) a payment of $500,000 at such time as the parties are able to negotiate the amendment of the terms of outstanding pre-funded warrants held by Liqueous to reflect current market price. Such payments are conditioned on the Company’s continued performance under funding arrangements executed by the Company with Liqueous before July 31, 2024. The settlement with Liqueous rendered the previously disclosed Master Agreement (and agreements contemplated by the Master Agreement) no longer effective.
NYSE American Delisting and Reinstatement
On June 13, 2024, NYSE American LLC announced that it had determined to commence proceedings to delist our Common Stock. Trading of our stock on NYSE American was immediately suspended and we commenced trading on the over-the-counter market.
On July 29, 2024, we received a notification from NYSE American informing us that we had resolved the continued listing deficiency with respect to low selling price as described in Section 1003(f)(v) of the NYSE American Company Guide. As a result, the staff of NYSE Regulation withdrew its delisting determination and lifted the trading suspension on Nuburu’s Common Stock. The Common Stock re-commenced trading on NYSE American on Friday, August 2, 2024 under the symbol “BURU.”
Key Factors Affecting Our Performance
Commercial Launch of Products
In 2022 and early 2023, we began the production and shipment of our AO-650 laser. We announced the commercial launch of the first laser in the NUBURU BLTM series, the BL-250, in January 2023. We announced the commercial launch of the BL-1Kw in June 2023 and in the early second quarter of 2024, we expanded our BL product line to include the BL-300. We have shifted our future focus to manufacturing and shipping the BL series.
Adoption of our Blue Laser Technology
We believe that Nuburu blue laser technology offers a superior solution to improving a variety of aspects of welding and 3D printing, particularly in the manufacturing of batteries, consumer electronics, electric vehicles, renewable energy products and displays. However, our financial results will depend on the degree to which potential and current customers recognize the benefits of our blue laser technology and invest in our products. The selection process for our products is lengthy, typically up to 22-24 months, and may require us to incur costs in pursuing opportunities with no assurance that our products will be selected.
Capital Equipment
Our business is expected to depend substantially on capital expenditures by end users, particularly by manufacturers using our products for materials processing, which includes general manufacturing, automotive (particularly electric vehicles), other transportation, aerospace, heavy industry, consumer, semiconductor, and electronics. Although applications within materials processing are broad, the capital equipment market in general is cyclical and historically has experienced sudden and severe downturns. For the foreseeable future, our operations will continue to depend upon capital expenditures by end users of materials processing equipment and will be subject to the broader fluctuations of capital equipment spending.
Recent inflationary pressures are resulting in global central banks adopting less accommodating monetary policies and increasing interest rates. Higher interest rates could impact global growth and could lead to a recession that may reduce the investment in capital equipment. In addition, higher interest rates would increase the cost of equipment financed with leases or debt.
Establishing Manufacturing Capacity
Nuburu’s lasers are designed to be compatible with automated manufacturing methods. Nuburu continually improves the design of its lasers as well as the automation equipment required to manufacture these systems. We expect to work to reduce waste and limit costs while developing robust manufacturing processes with the aim of enhancing our competitive advantage in the marketplace. To do this, we are incorporating the Six Sigma Lean methodologies as well as ISO quality standards to ensure we meet customer expectations. With Six Sigma, we expect to further improve the quality of our products and decrease the variations that cause rework or defects. By incorporating the 5S pillars of the Six Sigma process into our day-to-day work life, we expect to develop a streamlined productive work environment ensuring organized and improved cycle times, with the aim of reducing the cost of goods sold. Through these tools we aim to create an environment that demands quality and performance, while reducing downtime and defects that are generated from undefined processes and underutilized talent.
As described above, during 2024 management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations, particularly in the third quarter of 2024. If we are able to obtain sufficient funding for operations, we anticipate that as we ramp up our manufacturing, we will require additional engineers and production personnel to build out and then operate our manufacturing capabilities.
Research and Development Expenses
We plan to continue to invest in research and development to improve our existing components and products and develop new components, products, systems and applications technology. We believe that these investments will sustain our position as a leader in the blue laser industry and will support the development of new products that can address new markets and growth opportunities. The amount of research and development expense we incur may vary from period to period.
Inflationary Pressure
The U.S. economy has experienced increased inflation recently, including as a result of expansive monetary policy. Our cost to manufacture our systems is heavily influenced by the cost of the key components and materials used in each system, cost of labor, as well as cost of equipment.
Components of Statements of Operations
Revenue
Revenue consists of revenue recognized from sales and installation services of high-powered lasers. We have customers in the United States, Europe and Asia. In all sales arrangements, revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
Cost of Revenue
Cost of revenue primarily consists of the cost of materials, overhead and employee compensation associated with the manufacturing of our high-powered lasers. Product cost also includes lower of cost or net realizable value inventory (“LCNRV”) adjustments if the carrying value of the inventory is greater than its net realizable value.
Operating Expenses
Research and Development
Research and development expenses consist primarily of compensation and related costs for personnel, including stock-based compensation, employee benefits, training, travel, third-party consulting services and laboratory supplies incurred to further our commercialization development efforts. We expense research and development costs as incurred. We anticipate research and development expenses to increase significantly as we expand our product portfolio.
As described above, during 2024, management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations, particularly in the third quarter of 2024.
Selling and Marketing
Selling and marketing expenses consist primarily of compensation and related costs for our direct sales force, sales management and marketing, and include stock-based compensation, employee benefits and travel expenses. Selling and marketing expenses also include costs related to trade shows and marketing programs. We expense selling and marketing costs as incurred. We expect selling and marketing expenses to increase in future periods as we expand our sales force, marketing, and customer support organizations and increase our participation in trade shows and marketing programs.
As described above, during 2024, management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations, particularly in the third quarter of 2024.
General and Administrative
Our general and administrative expenses consist primarily of compensation and related costs for our finance, human resources and other administrative personnel, and include stock-based compensation, employee benefits and travel expenses. In addition, general and administrative expenses include our third-party consulting and advisory services, legal, audit, accounting services and facilities costs. We expect our general and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
As described above, during 2024, management initiated measures designed to reduce costs, which included implementing a furlough of employees. This significantly impacted commercialization and operations, particularly in the third quarter of 2024.
Interest Income
Interest income consists primarily of interest income received on our cash and cash equivalents.
Interest Expense
Interest expense consists primarily of interest owed on our outstanding debt, as further described in Note 8 in the condensed consolidated financial statements included herein.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of gains or losses recognized based on the change in the fair value of our liability-classified warrants, which are re-measured to fair value at each balance sheet date with the corresponding gain or loss from the adjustment. Refer to Note 10 in the condensed consolidated financial statements included herein for more information.
Change in Fair Value of Derivative Liability
Change in fair value of derivative liability consists of gains or losses recognized based on the change in the fair value of the embedded derivatives under the August 2024 Convertible Notes that were required to be bifurcated from the host instrument and accounted for at fair value at issuance, as well as each subsequent balance sheet date. Refer to Note 10 in the condensed consolidated financial statements included herein for more information.
Loss on Debt Extinguishment
Loss on debt extinguishment consists of losses incurred to extinguish debt during the periods presented due to the reacquisition value of the debt exceeding its carrying amount. Refer to Note 8 in the condensed consolidated financial statements included herein for more information.
Other Income (Expense), Net
Other income (expense), net consists primarily of a gain recorded related to a federal tax credit.
Results of Operations
Comparison of the year ended December 31, 2023 and 2022
The following table sets forth our operations for the periods presented:
| | | | | | | | | | | | |
| | Year Ended
December 31, | | | | |
| | 2023 | | | 2022 | | | $ Change | |
| | | | | (As Restated) | | | | |
Revenue | | $ | 2,085,532 | | | $ | 1,440,428 | | | $ | 645,104 | |
Cost of revenue | | | 5,695,433 | | | | 4,859,599 | | | | 835,834 | |
Gross margin | | | (3,609,901 | ) | | | (3,419,171 | ) | | | (190,730 | ) |
Operating expenses: | | | | | | | | | |
Research and development | | | 5,462,680 | | | | 4,546,057 | | | | 916,623 | |
Selling and marketing | | | 1,539,690 | | | | 708,144 | | | | 831,546 | |
General and administrative | | | 11,223,449 | | | | 5,324,417 | | | | 5,899,032 | |
Total operating expenses | | | 18,225,819 | | | | 10,578,618 | | | | 7,647,201 | |
Loss from operations | | | (21,835,720 | ) | | | (13,997,789 | ) | | | (7,837,931 | ) |
Change in fair value of convertible notes payable | | | — | | | | (15,388,097 | ) | | | 15,388,097 | |
Interest income | | | 117,372 | | | | 43,976 | | | | 73,396 | |
Interest expense | | | (754,549 | ) | | | (175,288 | ) | | | (579,261 | ) |
Other income, net | | | 1,766,513 | | | | — | | | | 1,766,513 | |
Loss before provision for income taxes | | $ | (20,706,384 | ) | | $ | (29,517,198 | ) | | $ | 8,810,814 | |
Provision for income taxes | | | — | | | | — | | | | — | |
Net loss and comprehensive loss | | $ | (20,706,384 | ) | | $ | (29,517,198 | ) | | $ | 8,810,814 | |
Revenue. Revenue increased $645,104 during the year ended December 31, 2023 compared to the same period in 2022. This increase is primarily due to an approximate $346,000 increase in revenue from additional shipments of BLTM-250 lasers and increase in the overall price per laser system sold in 2023 compared to 2022, as well as $296,000 additional revenue from government contracts period over period.
Cost of Revenue. Cost of revenue increased $835,834 during the year ended December 31, 2023 compared to the same period in 2022. This increase is primarily due to one-time charges to increase our AO-650 inventory reserve by approximately $900,000 during 2023 as a result of the Company's transition from producing the NUBURU AO series to producing the BLTM series.
Research and Development. Research and development expenses increased $916,623 during the year ended December 31, 2023 compared to the same period in 2022. This increase is primarily due to approximately $1,600,000 of additional general research and development personnel expenses in 2023 compared to 2022, partially offset by approximately $712,000 of lower spend on the BLTM series as it transitioned to production in 2023.
Selling and Marketing. Selling and marketing expenses increased $831,546 during the year ended December 31, 2023 compared to the same period in 2022. This increase is primarily due to the increase in personnel expenses, including nearly a full year of expenses related to our new Chief Marketing and Sales Officer, who was hired in March 2023, while our former Chief Marketing and Sales Officer had previously departed the Company on March 31, 2022.
General and Administrative. General and administrative expenses increased $5,899,032 during the year ended December 31, 2023 compared to the same period in 2022. This increase is primarily driven by increased professional fees associated with legal, compliance and accounting matters, specifically the costs associated with transitioning to being a public company.
Change in Fair Value of Convertible Notes Payable. The Company recorded a loss related to the change in fair value of its Legacy Nuburu Convertible Notes of $15,388,369 during the year ended December 31, 2022. No such loss was recorded during the year ended December 31, 2023, as the Legacy Nuburu Convertible Notes were cancelled and converted into shares of Legacy Nuburu common stock in connection with the Business Combination. Refer to Notes 3 and 8 in the consolidated financial statements included herein for more information on the Company's Business Combination and notes payable, respectively.
Interest Income. Interest income increased $73,396 during the year ended December 31, 2023 compared to the same period in 2022 due to higher interest rates earned on our cash balances.
Interest Expense. Interest expense increased $579,261 during the year ended December 31, 2023 compared to the same period in 2022 primarily due to higher debt balances between periods. Interest expense in 2023 comprised of interest accrued on the Senior Convertible Notes and the debt discount and issuance cost amortization for the Junior Notes. Interest expense in 2022 comprised of interest accrued on the Legacy Nuburu Convertible Notes. Refer to Note 8 in the consolidated financial statements included herein for more information on the Company's notes payable.
Other income, net. Other income, net increased $1,766,513 during the year ended December 31, 2023 compared to the same period in 2022 due to the decrease in the fair value of the Public Warrants as of December 31, 2023, as well as the decrease in fair value of the Junior Note Warrants as of December 31, 2023. Refer to Note 10 in the consolidated financial statements included herein for more information on these warrants.
Results of Operations
Comparison of the three months ended September 30, 2024 and 2023
The following tables set forth our operations for the three months ended September 30, 2024 and 2023:
| | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | | |
| | 2024 | | | 2023 | | | $ Change | |
Revenue | | $ | — | | | $ | 186,743 | | | $ | (186,743 | ) |
Cost of revenue | | | 359,950 | | | | 1,115,703 | | | | (755,753 | ) |
Gross margin | | | (359,950 | ) | | | (928,960 | ) | | | 569,010 | |
Operating expenses: | | | | | | | | | |
Research and development | | | 206,474 | | | | 1,348,450 | | | | (1,141,976 | ) |
Selling and marketing | | | 113,445 | | | | 523,627 | | | | (410,182 | ) |
General and administrative | | | 1,941,085 | | | | 2,335,605 | | | | (394,520 | ) |
Total operating expenses | | | 2,261,004 | | | | 4,207,682 | | | | (1,946,678 | ) |
Loss from operations | | | (2,620,954 | ) | | | (5,136,642 | ) | | | 2,515,688 | |
Interest income | | | 721 | | | | 46,998 | | | | (46,277 | ) |
Interest expense | | | (929,046 | ) | | | (162,765 | ) | | | (766,281 | ) |
Change in fair value of warrant liabilities | | | 369,674 | | | | 167,108 | | | | 202,566 | |
Change in fair value of derivative liability | | | 141,100 | | | | — | | | | 141,100 | |
Loss on extinguishment of debt | | | (1,339,017 | ) | | | — | | | | (1,339,017 | ) |
Other income, net | | | — | | | | — | | | | — | |
Loss before provision for income taxes | | $ | (4,377,522 | ) | | $ | (5,085,301 | ) | | $ | 707,779 | |
Provision for income taxes | | | — | | | | — | | | | — | |
Net loss and comprehensive loss | | $ | (4,377,522 | ) | | $ | (5,085,301 | ) | | $ | 707,779 | |
Revenue. Revenue decreased $186,743 during the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily to the measures implemented by management during 2024 designed to reduce costs, which included implementing a furlough of employees that significantly impacted commercialization and operations, particularly in the third quarter of 2024, as described above.
Cost of Revenue. Cost of revenue decreased $755,753 during the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to a period-over-period decrease of (i) direct labor of approximately $383,000 due to the cost reduction measures instituted by management in the third quarter of 2024, as further discussed above, and (ii) direct job costs and materials of approximately $326,000 due to decreased production of the laser systems related to the measures implemented by management during 2024 designed to reduce costs, which included implementing a furlough of employees that significantly impacted commercialization and operations, particularly in the third quarter of 2024, as described above.
Research and Development. Research and development expenses decreased $1,141,976 during the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to (i) approximately $1,010,000 of lower personnel costs due to the cost reduction measures instituted by management in the third quarter of 2024, as further discussed above, (ii) approximately $117,000 of lower spend on the BLTM series as it transitioned to production in 2023 and (iii) approximately $115,000 lower software, consulting, and other costs.
Selling and Marketing. Selling and marketing expenses decreased $410,182 during the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to lower personnel costs due to the cost reduction measures instituted by management in the third quarter of 2024, as further discussed above, as well as lower consulting expenses.
General and Administrative. General and administrative expenses decreased $394,520 during the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily driven by a decrease in compliance costs, which were heightened during the 2023 period due to the Business Combination, and a decrease in personnel costs due to the cost reduction measures instituted by management in the third quarter of 2024, as further discussed above, partially offset by an increase in professional service costs.
Interest Income. Interest income decreased $46,277 during the three months ended September 30, 2024 compared to the same period in 2023 due to lower cash balances between periods.
Interest Expense. Interest expense increased $766,281 during the three months ended September 30, 2024 compared to the same period in 2023 primarily due to higher debt balances between periods. Interest expense in the third quarter of 2024 was comprised of interest accrued on the Senior Convertible Notes and Junior Notes and the debt discount amortization for the Junior Notes. Refer to Note 8 in the condensed consolidated financial statements included herein for more information on our debt obligations.
Change in Fair Value of Warrant Liabilities. We recorded a gain of $369,674 in the third quarter of 2024, which resulted from the decrease in the fair value of the Company's liability-classified warrants between June 30, 2024 and September 30, 2024. During the third quarter of 2023, we recorded a gain of $167,108 due to the decrease in the fair value of the Public Warrants between June 30, 2023 and September 30, 2023. As of December 31, 2023, the Public Warrants have a zero value due to being delisted from the NYSE American, as further discussed in Note 10 to the condensed consolidated financial statements included herein.
Change in Fair Value of Derivative Liability. We recorded a gain of $141,100 in the third quarter of 2024, which resulted from the decrease in the fair value of the derivative liability from the time of the issuance of the August 2024 Convertible Notes in August 2024 through September 30, 2024. There was no derivative liability recorded during the third quarter of 2023.
Loss on Extinguishment of Debt. We recorded a loss on the extinguishment of debt of $1,339,017 for the three months ended September 30, 2024, which primarily relates to the issuance of 2,399,850 shares to noteholders of the Senior Notes and Junior Notes to extinguish an aggregate amount of $677,061 of principal and accrued interest under the Senior Notes and Junior Notes. For further information, see note 8 to the condensed consolidated financial statements included herein.
Comparison of the nine months ended September 30, 2024 and 2023
The following tables set forth our operations for the nine months ended September 30, 2024 and 2023:
| | | | | | | | | | | | |
| | Nine Months Ended
September 30, | | | | |
| | 2024 | | | 2023 | | | $ Change | |
Revenue | | $ | 142,827 | | | $ | 1,710,794 | | | $ | (1,567,967 | ) |
Cost of revenue | | | 1,950,632 | | | | 4,813,404 | | | | (2,862,772 | ) |
Gross margin | | | (1,807,805 | ) | | | (3,102,610 | ) | | | 1,294,805 | |
Operating expenses: | | | | | | | | | |
Research and development | | | 1,656,350 | | | | 4,300,166 | | | | (2,643,816 | ) |
Selling and marketing | | | 385,965 | | | | 1,066,289 | | | | (680,324 | ) |
General and administrative | | | 6,941,448 | | | | 8,409,877 | | | | (1,468,429 | ) |
Total operating expenses | | | 8,983,763 | | | | 13,776,332 | | | | (4,792,569 | ) |
Loss from operations | | | (10,791,568 | ) | | | (16,878,942 | ) | | | 6,087,374 | |
Interest income | | | 17,202 | | | | 91,914 | | | | (74,712 | ) |
Interest expense | | | (2,821,527 | ) | | | (175,149 | ) | | | (2,646,378 | ) |
Change in fair value of warrant liabilities | | | 2,156,186 | | | | 1,002,647 | | | | 1,153,539 | |
Change in fair value of derivative liability | | | 141,100 | | | | — | | | | 141,100 | |
Loss on extinguishment of debt | | | (11,685,125 | ) | | | — | | | | (11,685,125 | ) |
Other income, net | | | 218,169 | | | | — | | | | 218,169 | |
Loss before provision for income taxes | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) | | $ | (6,806,033 | ) |
Provision for income taxes | | | — | | | | — | | | | — | |
Net loss and comprehensive loss | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) | | $ | (6,806,033 | ) |
Revenue. Revenue decreased $1,567,967 during the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily to the measures implemented by management during 2024 designed to reduce costs, which included implementing a furlough of employees that significantly impacted commercialization and operations, particularly in the third quarter of 2024, as described above.
Cost of Revenue. Cost of revenue decreased $2,862,772 during the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to a period-over-period decrease of approximately $3,018,000 of direct job costs and materials due to decreased production of the laser systems related to the measures implemented by management during 2024 designed to reduce costs, which included implementing a furlough of employees that significantly impacted commercialization and operations, particularly in the third quarter of 2024, as described above. This decrease was partially offset by increases of approximately $128,000 of other overhead costs period-over-period.
Research and Development. Research and development expenses decreased $2,643,816 during the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to (i) approximately $1,897,000 of lower personnel costs due to the cost reduction measures instituted by management in the first three quarters of 2024, as further discussed above, (ii) approximately $541,000 of lower spend on the BLTM series as it transitioned to production in 2023 and (iii) approximately $206,000 lower software, materials and consulting costs.
Selling and Marketing. Selling and marketing expenses decreased $680,324 during the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily due to lower personnel costs related to the cost reduction measures instituted by management in the first three quarters of 2024, as further discussed above, and the reversal of stock compensation expense due to the departure of our Chief Marketing and Sales Officer in April 2024 and the resultant forfeiture of his unvested awards, and a decrease in consulting costs.
General and Administrative. General and administrative expenses decreased $1,468,429 during the nine months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily driven by a decrease in compliance costs and professional fees, which were heightened during the 2023 period due to the Business Combination, and a decrease in personnel costs due to the cost reduction measures instituted by management in the third quarter of 2024, as further discussed above.
Interest Income. Interest income decreased $74,712 during the nine months ended September 30, 2024 compared to the same period in 2023 due to lower cash balances between periods.
Interest Expense. Interest expense increased $2,646,378 during the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to higher debt balances between periods. Interest expense in the first nine months of 2024 was comprised of interest accrued on the Senior Convertible Notes and Junior Notes and debt discount amortization for the Junior Notes. Interest expense for the nine three
months of 2023 comprised of interest accrued on the Senior Convertible Notes, which were issued in June 2023. Refer to Note 8 in the condensed consolidated financial statements included herein for more information on our debt obligations.
Change in Fair Value of Warrant Liabilities. We recorded a gain of $2,156,186 during the nine months ended September 30, 2024, which resulted from the decrease in the fair value of the Company's liability-classified warrants between December 31, 2023 and September 30, 2024. During the first nine months of 2023, we recorded a gain of $1,002,647 due to the decrease in the fair value of the Public Warrants between the Closing and September 30, 2023. As of December 31, 2023, the Public Warrants have a zero value due to being delisted from the NYSE American, as further discussed in Note 10 to the condensed consolidated financial statements included herein.
Change in Fair Value of Derivative Liability. We recorded a gain of $141,100 during the nine months ended September 30,2 024, which resulted from the decrease in the fair value of the derivative liability from the time of the issuance of the August 2024 Convertible Notes in August 2024 through September 30, 2024. There was no derivative liability recorded during the nine months ended September 30, 2023.
Loss on Extinguishment of Debt. We recorded a loss on the extinguishment of debt of $11,685,125 for the nine months ended September 30, 2024. The majority of this loss is related to (i) the issuance of 2,248,312 shares to noteholders to extinguish $4.0 million of principal of Senior Notes and Junior Notes, as well as $106,050 of interest accrued on the Senior Notes and (ii) the issuance of 2,399,850 shares to noteholders of the Senior Notes and Junior Notes to extinguish an aggregate amount of $677,061 of principal and accrued interest under the Senior Notes and Junior Notes. For further information, see note 8 to the condensed consolidated financial statements included herein.
Other Income (Expense), Net. Other income (expense), net consisted of a $218,169 gain related to an Employee Retention Tax Credit for qualifying 2021 wages received during the first nine months of 2024, which was accounted for when collectability was assured.
Liquidity and Capital Resources
Overview
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations, and other commitments. As of the date hereof, we have yet to generate meaningful revenue from our business operations and have funded capital expenditure and working capital requirements through debt and equity financing.
As of September 30, 2024, we had cash and cash equivalents of $232,075, as compared to $2,148,700 as of December 31, 2023. Our cash flows from operations are not sufficient to fund our current operating model and expansion plans. On the second anniversary of the Closing Date, the Company must also, under certain circumstances, redeem the maximum portion of the Preferred Stock as permitted by law in cash at an amount equal to the Original Issuance Price as of such date. Notwithstanding the foregoing, the Company shall not be required to redeem any shares of Preferred Stock to the extent the Company does not have legally available funds to effect such redemption.
From inception through September 30, 2024, we have incurred operating losses and negative cash flows from operating activities. For the nine months ended September 30, 2024 and 2023, we have incurred operating losses, including net losses of $22,765,563 and $15,959,530, respectively, and we have an accumulated deficit of $120,052,352 as of September 30, 2024. We anticipate that we will incur net losses for the foreseeable future and, even if we increase our revenue, there is no guarantee that it will ever become profitable. All of the aforementioned factors raise substantial doubt about our ability to continue as a going concern. If we are able to obtain sufficient funding, we expect to continue to expand our operations, including by investing in manufacturing, sales and marketing, research and development and infrastructure to support our growth.
Until we can generate sufficient revenue to cover our operating expenses, working capital, and capital expenditures, we will rely on private and public capital raising efforts; however, there is no assurance that plans to obtain additional debt or equity financing will be successfully implemented or implemented on terms favorable to the Company.
The further development of our products, commencement of commercial operations and expansion of our business will require a significant amount of cash for expenditures. Our ability to successfully manage this growth will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
Given the Company’s current liquidity position, the Company will need to raise additional capital. If we raise additional funds by issuing equity securities, this would result in dilution to our stockholders. If we raise additional funds by issuing any additional preferred stock, such securities may also provide for rights, preferences, or privileges senior to those of holders of Common Stock. If we raise additional funds by issuing debt securities, such debt securities would have rights, preferences and privileges senior to those of holders of Common Stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for the periods presented.
| | | | | | | | |
| | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | |
Net cash used in operating activities | | | (5,499,839 | ) | | | (13,259,181 | ) |
Net cash used in investing activities | | | — | | | | (1,142,910 | ) |
Net cash provided by financing activities | | | 3,583,214 | | | | 13,148,567 | |
Cash flows from operating activities
Our cash flows used in operating activities to date have been primarily comprised of costs related to research and development, selling and marketing, and other general and administrative activities. We expect our expenses related to personnel, research and development, selling and marketing, and general and administrative activities to increase as a result of operating as a public company.
Net cash used in operating activities was $5,499,839 and $13,259,181 for the nine months ended September 30, 2024 and 2023, respectively. The decrease in net cash flows used in operating activities is primarily driven by decreased operating expenses and changes in working capital, partially offset by decreases in revenue.
Cash flows from investing activities
Our cash flows from investing activities have been comprised primarily of purchases of equipment and installation of improvements to our leased facilities and headquarters.
Net cash used in investing activities was nil and $1,142,910 for the nine months ended September 30, 2024 and 2023, respectively. The cash used in investing activities for the nine months ended September 30, 2023 primarily related to the purchase of equipment to build out our production line.
Cash flows from financing activities
We have financed our operations primarily through the sale of stock and promissory notes.
Net cash provided by financing activities was $3,583,214 and $13,148,567 for the nine months ended September 30, 2024 and 2023, respectively. Net cash provided by financing in activities in the nine months ended September 30, 2024 is comprised primarily of proceeds from the issuance of pre-funded warrants and Common Stock of $2,139,866 and $200,000, respectively, as well as proceeds from debt borrowings of $743,000 and proceeds from shareholder advances of $645,036, partially offset by payments of accrued debt issuance costs for the Junior Notes totaling $71,500 and tax withholdings for RSU issuances totaling $73,088.
Net cash provided by financing in activities in the nine months ended September 30, 2023 is comprised of proceeds received from the issuance of convertible promissory notes and warrants, proceeds from the issuance of Common Stock from the Lincoln Park Purchase Agreement, and the proceeds received from the Closing of the Business Combination. These combined proceeds were partially offset by payments of transaction costs associated with the Business Combination.
Key Operating and Financial Metrics (Non-GAAP Results)
We regularly review several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We believe that these key business metrics provide meaningful supplemental information for management and investors in assessing our historical and future operating performance. The calculation of the key metrics and other measures discussed below may differ from other similarly-titled metrics used by other companies.
The following tables present our key performance indicators for the three and nine months ended September 30, 2024 and 2023.
| | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | | |
| | 2024 | | | 2023 | | | $ Change | |
Revenue | | $ | — | | | $ | 186,743 | | | $ | (186,743 | ) |
Total gross margin | | | (359,950 | ) | | | (928,960 | ) | | | 569,010 | |
EBITDA(1) | | | (3,242,479 | ) | | | (4,824,579 | ) | | | 1,582,100 | |
Capital expenditures | | | — | | | | (317,038 | ) | | | 317,038 | |
Free cash flow(1) | | | (1,177,612 | ) | | | (4,876,411 | ) | | | 3,698,799 | |
| | | | | | | | | | | | |
| | Nine Months Ended
September 30, | | | | |
| | 2024 | | | 2023 | | | $ Change | |
Revenue | | $ | 142,827 | | | $ | 1,710,794 | | | $ | (1,567,967 | ) |
Total gross margin | | | (1,807,805 | ) | | | (3,102,610 | ) | | | 1,294,805 | |
EBITDA(1) | | | (19,364,982 | ) | | | (15,506,324 | ) | | | (3,858,658 | ) |
Capital expenditures | | | — | | | | (1,142,910 | ) | | | 1,142,910 | |
Free cash flow(1) | | | (5,499,839 | ) | | | (14,402,091 | ) | | | 8,902,252 | |
(1)EBITDA and Free cash flow are non-GAAP financial measures. See “Non-GAAP Information” below for our definitions of, and additional information about, EBITDA and Free cash flow and for a reconciliation to the most directly comparable U.S. GAAP financial measures, which are net loss and net cash used in operating activities, respectively.
Non-GAAP Information
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively and in context, may be helpful to investors in assessing our operating performance and trends and in comparing our financial measures with those of comparable companies that may present similar non-GAAP financial measures.
EBITDA and Free Cash Flow
We define “EBITDA” as income (loss), plus (minus) depreciation and amortization expenses, plus (minus) interest, plus (minus) taxes and define “Free cash flow” as net cash from (used in) operating activities less capital expenditures. EBITDA and Free cash flow are intended as supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP and these measures should not be considered a substitute for net income (loss), and net cash used in operating activities reported in accordance with GAAP. Our computation of EBITDA and Free cash flow may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA or Free cash flow in the same fashion.
Limitations of Non-GAAP Measures
There are a number of limitations related to EBITDA, including the following:
•EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets. While these are non-cash charges, we may need to replace the assets being depreciated and amortized in the future and EBITDA does not reflect cash requirements for these replacements or new capital expenditure requirements.
•EBITDA does not reflect interest expense, net, which may constitute a significant recurring expense in the future.
•Free cash flow does not reflect the impact of equity or debt raises or repayment of debt or dividends paid.
Because of these and other limitations, EBITDA and Free cash flow should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Free cash flow on a supplemental basis. You should review the reconciliation of our net loss to EBITDA and net loss to Free cash flow below and not rely on any single financial measure to evaluate our business.
Our presentation of EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items and our presentation of Free cash flow does not necessarily indicate whether cash flows will be sufficient to fund our cash needs.
Reconciliation
The following table reconciles our net loss (the most directly comparable GAAP measure) to EBITDA for the periods presented:
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Net loss | | $ | (4,377,522 | ) | | $ | (5,085,301 | ) | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) |
Interest (income) expense, net | | | 928,325 | | | | 115,767 | | | | 2,804,325 | | | | 83,235 | |
Income tax expense | | | — | | | | — | | | | — | | | | — | |
Depreciation and amortization | | | 206,718 | | | | 144,955 | | | | 596,256 | | | | 369,971 | |
EBITDA | | $ | (3,242,479 | ) | | $ | (4,824,579 | ) | | $ | (19,364,982 | ) | | $ | (15,506,324 | ) |
The following tables reconcile our net cash used in operating activities (the most directly comparable GAAP measure to Free cash flow) to Free cash flow for the periods presented:
| | | | | | | | |
| | Three Months Ended
September 30, | |
| | 2024 | | | 2023 | |
Net cash used in operating activities | | $ | (1,177,612 | ) | | $ | (4,559,373 | ) |
Capital expenditures | | | - | | | | (317,038 | ) |
Free cash flow | | $ | (1,177,612 | ) | | $ | (4,876,411 | ) |
| | | | | | | | |
| | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | |
Net cash used in operating activities | | $ | (5,499,839 | ) | | $ | (13,259,181 | ) |
Capital expenditures | | | — | | | | (1,142,910 | ) |
Free cash flow | | $ | (5,499,839 | ) | | $ | (14,402,091 | ) |
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
For our contractual obligations that are expected to have an effect on our liquidity and cash flow, see section “Notes to Condensed Consolidated Financial Statements – Note 6 – Commitments and Contingencies” in the condensed consolidated financial statements included herein.
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with GAAP which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are based on historical experience and on various other factors that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis.
In addition to the accounting policies that are more fully described in the Notes to the Consolidated Financial Statements included herein, we have identified the following critical accounting estimates that require us to use judgments, often as a result of the need to make assumptions regarding matters that are inherently uncertain, and actual results could differ from these estimates. Critical accounting estimates are those that involve a significant amount of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used. Therefore, we consider an understanding of the variability and judgment required in making these estimates to be critical in fully understanding and evaluating our reported financial results.
Revenue Recognition
Our primary business activity involves sales and installation services of high-powered lasers. We have customers in the United States, Europe, and Asia. All sales and installation services are settled in U.S. dollars.
We recognize revenue at a point in time when transferring control of lasers and over time when providing installation services. Revenues recognized over time are based on the progress towards completion of the performance obligation. The amount of revenue we record reflects the consideration we expect to be entitled to receive in exchange for these products and services. We consider customer purchaser orders to be contracts with a customer. We allocate the transaction price to each distinct product based on its relative standalone selling price.
Our standard contracts include warranty provisions that provide assurance to customers that the products will comply with agreed-upon specifications, which is standard in the industry. Product warranties accounted for in accordance with the guidelines under the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") 460-10 - Guarantees. Therefore, losses from warranty obligations are accrued when the amount of loss can be reasonably estimated, and the information is available before the financial statements are issued or are available to be issued. Due to the assumptions inherent in the calculation of our product warranty liabilities, actual results could differ significantly from estimates.
Inventory
Inventory is stated at the lower of average cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) and net realizable value. Inventory includes raw materials and components that may be specialized in nature and subject to obsolescence. On a quarterly basis, we review inventory quantities on hand in comparison to our past consumption, recent purchases, and other factors to determine what inventory quantities, if any, may not be sellable. Based on this analysis, we write down the affected inventory value for estimated excess and obsolescence charges. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Due to the assumptions inherent in the calculation of our inventory reserve amounts, actual results could differ significantly from estimates.
Liability-Classified Warrants
We account for the Public Warrants and Junior Note Warrants (as defined in Note 8 of the consolidated financial statements included herein) in accordance with the guidance contained in FASB ASC 815-40 - Contracts on an Entity's Own Equity under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Public Warrants and Junior Note Warrants as liabilities at their fair value and adjust the liabilities to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statements of operations. Further, the Junior Note Warrant liability uses inputs classified as Level 3 in the fair value hierarchy, which are inputs in which little or no market data exists, or are otherwise unobservable. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from estimates.
Equity-Classified Warrants
Warrants that meet the criteria for equity treatment are recorded at their fair value as of the issuance date. If the warrants are issued in conjunction with notes, the fair value is allocated between the notes and the warrants based on their respective relative fair values upon issuance. Fair values of warrants are estimated using the Black-Scholes option-pricing model with the following assumptions:
•Expected Term - We define the expected term as the total term of the warrants pursuant to the respective warrant agreements.
•Expected Volatility - We calculate expected volatility based on the publicly traded shares of selected peer laser companies.
•Expected Dividend Yield - We have not paid dividends in the past and do not anticipate paying dividends in the future; therefore we assume a dividend yield of zero.
•Risk-Free Interest Rate - We use yield rates published by the U.S. Treasury for zero coupon issues with a remaining term equal or similar to the expected term of our option awards.
Stock-Based Compensation
We record stock-based compensation in accordance with FASB ASC Topic 718 - Stock Compensation ("ASC 718"). ASC 718 requires all share-based awards to employees, including grants of employee stock options, to be recognized in the consolidated financial statements based on their fair values. Under the provisions of ASC 718, we determine the appropriate fair value model to be used for valuing share-based issuances and the amortization method for recording compensation cost, which can be impacted by the following assumptions:
•Expected Term - We define the expected term as the vesting period of the option.
•Expected Volatility - We calculate expected volatility based on the publicly traded shares of selected peer laser companies.
•Expected Dividend Yield - We have not paid dividends in the past and do not anticipate paying dividends in the future; therefore we assume a dividend yield of zero.
•Risk-Free Interest Rate - We use yield rates published by the U.S. Treasury for zero coupon issues with a remaining term equal or similar to the expected term of our option awards.
Lease Obligations
We account for leases in accordance with FASB ASC Topic 742 - Leases. In determining the present value of lease payments, we use the rate implicit in the lease or, when such rate is not readily available, we utilize our incremental borrowing rate based on the information available at the lease commencement date. Lease expense is recognized on a straight-line basis over the expected lease term. In determining the expected lease term, we may include options to extend or terminate the lease when it is reasonably certain that we will exercise any such option.
Income Taxes
Income taxes are accounted for in accordance with the provisions of FASB ASC Topic 740 - Taxes ("ASC 740"), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Income taxes are recognized for the current year and for the impact of deferred tax assets and liabilities, which represent the future tax consequences of events that have been recognized differently in the financial statements than for income tax purposes. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and income tax basis of assets and liabilities, as measured by the enacted tax rates which will be in effect when these differences are expected to reverse. Deferred tax expense (credit) is the result of changes in the deferred tax assets and liabilities.
In the event that future consequences of the differences between financial reporting bases and tax bases of assets and liabilities result in a deferred tax asset, we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a net deferred tax asset is recorded when it is more likely than not that some portion or all of the net deferred tax asset will not be realized. We recorded a full valuation allowance as of December 31, 2023 and 2022, as it is more likely than not that we will not be able to utilize our net deferred tax assets in the foreseeable future. We maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. Refer to Note 12 in the consolidated financial statements included herein for more information.
Recently Issued and Adopted Accounting Pronouncements
We review new accounting standards to determine the expected financial impact, if any, that the adoption of each new standard will have. For the recently issued and adopted accounting standards that we believe may have an impact on our consolidated financial statements, refer to Note 2 in the consolidated financial statements included herein.
EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR INDEPENDENCE
Executive Officers
The following is biographical information for our executive officers, including their ages, as of January 13, 2025.
| | | | |
Name | | Age | | Position |
Alessandro Zamboni | | 45 | | Executive Chairman |
Brian Knaley | | 54 | | Chief Executive Officer |
Brian Faircloth | | 51 | | Chief Operating Officer |
Alessandro Zamboni is Chairman of the Board. Mr. Zamboni worked for 11 years as equity partner and managing director of the management consulting company NIKE Group S.p.A., now part of Accenture, which specializes in regulatory and internal controls for banks and insurance firms. In 2014, Mr. Zamboni founded The AvantGarde Group, a venture builder based in Milan, Italy, which launched “Supply@ME,” a working capital (inventory) monetization platform listed on the UK Main Market since 2020, and “RegTech Open Project,” an operational resilience software platform recently listed on the UK Main Market. He is also the founding member of DevoLab, the SDA Bocconi’ think tank group focused on exponential technologies and innovations. Mr. Zamboni is currently the Chief Executive Officer of Supply@ME Capital plc. Mr. Zamboni holds a Bachelor of Arts (BA) degree in Economics from the University of Turin in Turin, Italy.
We believe Mr. Zamboni is qualified to serve on its Board based on his extensive experience with strategic investing, capital raising, and business consulting.
Brian Knaley is the Company’s Chief Executive Officer, Chief Financial Officer, and a member of the Board. Mr. Knaley served as the Company’s Chief Financial Officer beginning February 2022 and became the Chief Executive Officer in November 2023. Mr. Knaley has over 25 years of experience in finance and operations. Prior to joining the Company, Mr. Knaley served as the chief financial officer of CEA Industries Inc. (NASDAQ: CEAD), a provider of controlled environmental solutions, from January 2021 to February 2022, and as chief financial officer of Proximo Medical LLC, a start-up specializing in the commercialization of medical devices, from August 2020 to June 2021. He also served as senior vice president and interim chief financial officer of ViewRay (NASDAQ:VRAY), a global manufacturer of MRI-guided radiation therapy systems, from September 2018 to August 2020. Mr. Knaley holds a BA in Accounting from Thomas More College and is a licensed CPA in the State of Ohio.
We believe Mr. Knaley is qualified to serve on the Board because of his extensive leadership experience and knowledge of our Company.
Brian Faircloth is the Company’s Chief Operating Officer. Mr. Faircloth has served as Legacy Nuburu’s Chief Operating Officer since December 2021. Prior to that he was at Foro Energy, a leader in commercializing high power lasers for the oil, natural gas, geothermal, and mining industries, as vice president of engineering from 2009 until 2016 and as chief technology officer from 2015 until December 2021, and also held various operational and leadership roles in other high power laser and optic companies. Mr. Faircloth holds a Master’s degree in Electrical Engineering and Applied Physics from Washington University in St. Louis, a Master’s in Six Sigma from Villanova University and Master certificates in Business Management and Marketing from the A.B. Freeman School of Business, Tulane University.
Board of Directors
The following sets forth certain information, as of January 13, 2025, about each member of our Board, including a discussion of their specific experience, qualifications, attributes, or skills that led to the conclusion that they should serve as directors.
| | | | | | |
Name | | Age | | Term Expires | | Position |
Alessandro Zamboni | | 45 | | 2027 | | Executive Chairman |
Elizabeth Mora | | 63 | | 2027 | | Director |
Brian Knaley | | 54 | | 2026 | | Chief Executive Officer; Director |
Daniel Hirsch | | 50 | | 2026 | | Director |
Shawn Taylor | | 62 | | 2025 | | Director |
Dario Barisoni | | 57 | | 2025 | | Director |
Matteo Ricchebuono | | 49 | | 2026 | | Director |
Alessandro Zamboni For Mr. Zamboni’s biography, please see above under “Executive Officers.”
Elizabeth Mora is a member of the Board. Ms. Mora served as the chief administrative officer, vice president for finance, administration, and treasurer at the Charles Stark Draper Laboratory, Inc., a $750 million research and development innovation laboratory, from 2008 to 2020. Ms. Mora currently serves as a board member for Limoneira Company (NASDAQ: LMNR), a diversified citrus growing, packing, selling, and marketing company; Inogen, Inc. (NASDAQ: INGN), a medical technology company; MKS Instruments (NASDAQ: MKSI), a global semi-conductor equipment, laser, and laser packaging company; and as a strategic advisor to Belay Associates, a financial technology platform. Ms. Mora holds a BA in Political Science from the University of California, Berkeley, an MBA from Simmons College, and a CPA license in the Commonwealth of Massachusetts.
We believe Ms. Mora is qualified to serve on the Board due to her extensive industry and leadership experience, particularly in technology and manufacturing.
Brian Knaley For Mr. Knaley’s biography, please see above under “Executive Officers.”
Daniel Hirsch is a member of the Board. Mr. Hirsch has been a consultant to and Executive in Residence with Anzu Partners since August 2022. Mr. Hirsch was the Chief Financial Officer and Corporate Secretary and a member of the board of directors of Anzu Special Acquisition Corp I (NASDAQ: ANZU) from October 2022 through September 2023. Mr. Hirsch was a principal of Cascade Acquisition Holdings, LLC, the sponsor of a special purpose acquisition company, Cascade Acquisition Corp. (NYSE: CAS), formed in November 2020, and served as its chief operating officer and chief financial officer through May 2022. Mr. Hirsch served as a consultant to Trinity Real Estate Investments, LLC from January 2019 through November 2019 in connection with Trinity’s sponsorship of a special purpose acquisition company, Trinity Merger Corp, which completed its initial business combination in November 2019 with Broadmark Realty Capital (NYSE: BRMK) (“Broadmark”). From November 2019 through May 2023, Mr. Hirsch served on the board of Broadmark. Broadmark completed a merger with Ready Capital Corporation (NYSE: RC) (“Ready Capital”) in May 2023. Mr. Hirsch served on the board of Ready Capital from May 2023 through July 2024. In addition, Mr. Hirsch has served on the board of The Macerich Company (NYSE: MAC), a real estate investment trust, since 2018 and is currently a member of the Compensation Committee and chair of the Nominating and Governance Committee. In addition, Mr. Hirsch served as a consultant to Farallon Capital Management, L.L.C. (“Farallon”), an investment firm that manages capital on behalf of institutions and individuals, for which he has served as a board designee with respect to Farallon’s investment in Playa Hotels & Resorts N.V. (NASDAQ: PLYA), from January 2017 to March 31, 2020. During his tenure as a director at Playa Hotels & Resorts N.V., Mr. Hirsch served as the chair of the Compensation Committee, and a member of the Nominating and Governance Committee and Capital Allocation Committee. Previously, from November 2003 to December 2016, Mr. Hirsch held several senior positions at Farallon, including Managing Member of the Real Estate Group from 2009 to December 2016, Managing Director from 2007 to 2008 and Legal Counsel from 2003 to 2006. Prior to joining Farallon, Mr. Hirsch worked as an associate in the San Francisco office of the law firm Covington & Burling LLP, from 2001 to 2003. Mr. Hirsch graduated from Yale Law School with a J.D. and earned a Bachelor of Arts degree, summa cum laude, in Law, Jurisprudence and Social Thought from Amherst College.
We believe Mr. Hirsch is qualified to serve on the Board due to his extensive leadership experience, knowledge of the capital markets and substantive public company board experience in advising public companies on transactional and corporate governance matters.
Shawn Taylor is a seasoned fractional Chief Financial Officer with over 20 years of experience in SaaS Technology, Media, and high-value intellectual property sectors. With a track record of success in both start-up and scale-up environments, he has played pivotal roles in venture capital-funded and publicly traded companies. His expertise encompasses corporate finance, initial public offerings, equity and debt financings, strategic restructurings, and merger and acquisition transactions. He has served as Chief Financial Officer for a range of European based entities including Eight Capital Partners plc, an international financial services operating company, since December of 2023. Prior to working with Eight Capital Partners plc, Mr. Taylor served as Chief Financial Officer for the following companies: Bolt Global Media Ltd from August 2022 to December of 2023; Quickmove Ltd. from January of 2021 to February 2022; Gibbs Hybrid Ltd. from August of 2019 to December 2020; and Abal plc (formerly Imaginatik plc) from August 2005 to August 2019. Mr. Taylor’s career highlights include spearheading the initial public offering of Imaginatik on the London Stock Exchange’s AIM market, scaling businesses to significant revenue growth and negotiating high-value trade sales. Mr. Taylor has been a fellow of and is a Chartered Accountant with the Institute of Chartered Accountants in England and Wales since 1990. Mr. Taylor holds a BSc in Geography from Kings College, London University.
We believe Mr. Taylor is qualified to serve on the Board due to his extensive financial expertise, knowledge of the capital markets and substantive experience growing technology companies.
Dario Barisoni brings over two decades of expertise in the technology sector, with a focus on optoelectronics, electronics, and international business. His career spans senior leadership roles across Europe, the Middle East, and Asia, with a strong track record in market expansion, mergers and acquisitions, internationalization, and establishing international joint ventures and partnerships. He has served as the Co-founder and Managing Director of Bionexus, a start-up with a focus on mergers and acquisitions in the healthcare sector, since 2024; Managing Partner of 2Invest, an investment company with focus in the Energy, Technology, IT sectors and financial services, since 2023. Prior to founding Bionexus and 2Invest, from 2012 to 2023, Mr. Barisoni served as CEO Middle East and Asia to SIAE Microelectronica, a global telecom supplier specializing in digital high-tech infrastructures for utility companies and telecom operators. As regional CEO, Mr. Barisoni established and expanded several subsidiaries across Asia and the Middle East, led multi-million-dollar telecom infrastructure projects, spearheaded sales and business development for Aisa and the Middle East, and led legal, financial, operational, sales and human resources departments. Prior to this role, he has held executive positions for a range of European based, technology manufacturing companies including the German Rohde & Schwarz, Marconi plc, Pirelli Cables and Systems (now Prysmian). Mr. Barisoni has also served as a Board Member of the Italian Business Council UAE, a Dubai organization that associates all of the Italian enterprises operating or doing business in the country, since 2021; and as a Board Member of the Italian Chamber of Commerce to South East Asia since 2009Mr. Barisoni holds an Executive MBA from POLIMI Graduate School of Management, Milan, Italy and a Master of Science in Optoelectronic Engineering from Politecnico di Milano, Milan, Italy.
We believe Mr. Barisoni is qualified to serve on the Board due to his extensive leadership experience, corporate transactional and growth expertise, and knowledge of the technology and manufacturing sectors.
Matteo Ricchebuono is currently the President and Chief Executive Officer of SFE Société Financière Européenne SA. Mr. Ricchebuono has also served since May 2014 as a member of the Board Monaco MC of Groupe Financier de Gestion SAM, which is the investment manager of GFG Funds, a Luxembourg SICAV that manages four fixed income-focused funds available for European distribution. Prior to this role, Mr. Ricchebuono was a partner of Global Funds Europe in London, United Kingdom (UK), from March 2014 through February of 2020. Global Funds Europe acts as a distributor of third-party investment funds to Italian institutional investors and is the sole distributor for Lazard Feres Gestion in Italy. Prior to this role, Mr. Ricchebuono was in the Institutional Client Group and in the Debt Capital Market Group with Deutsche Bank in London, UK, from April 2006 through January 2014. Prior to this role, Mr. Ricchebuono was with UBS in London, UK, from July 2005 through March 2006. Mr. Ricchebuono also served at the retail desk of Banca IMI in Milan, Italy, which developed a range of retail financial products. Mr. Ricchebuono holds a Masters degree in Economics from the Bocconi University in Milan, Italy. We believe Mr. Ricchebuono is qualified to serve on its Board based on his extensive experience in the financial services industry and capital raising.
Director Independence
The Board has determined that each of the directors on the Board, other than Alessandro Zamboni (who serves as the Executive Chairman of the Company), Brian Knaley (who serves as the Chief Executive Officer of the Company) and Daniel Hirsch, qualifies as an independent director, as defined under the rules of NYSE American. As of January 13, 2025, the Company’s Board consisted of a majority of “independent directors,” as defined under the rules of the SEC and NYSE American relating to director independence requirements.
EXECUTIVE COMPENSATION
Prior to the closing of the Business Combination in January 2023, none of our officers received any cash compensation for services rendered to us. Accordingly, the compensation in this section for prior to January 2023 relates to the compensation of executive officers of Legacy Nuburu who became our executive officers following the Business Combination.
Due to the timing of the Business Combination, the compensation of our executive officers for 2022 was determined by Legacy Nuburu. Upon consummation of the Business Combination, the board of directors established a Compensation Committee, which is responsible for determining our executive compensation following the Business Combination.
Executive Compensation
The following is a discussion and analysis of compensation arrangements of our named executive officers, or "NEO"s. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.
We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.
Our NEOs as of December 31, 2023 were as follows:
•Ron Nicol, Executive Chairman;
•Brian Knaley, Chief Executive Officer;
•Mark Zediker, the Company's former Chief Executive Officer (whose employment ended with the Company on November 1, 2023); and
•Brian Faircloth, Chief Operating Officer.
Summary Compensation Table
The following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2023, and December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(2) | | | All Other
Compensation ($) | | | Total ($) | |
Ron Nicol (3) | | 2023 | | $ | 100,000 | | | $ | 53,500 | | | $ | 211,315 | | | $ | — | | | $ | 364,815 | |
Executive Chairman | | 2022 | | $ | — | | | $ | — | | | $ | 1,423,515 | | | $ | — | | | $ | 1,423,515 | |
Brian Knaley (4) | | 2023 | | $ | 339,167 | | | $ | — | | | $ | 220,215 | | | $ | 50,000 | | (5) | $ | 609,382 | |
Chief Executive Officer | | 2022 | | $ | 325,000 | | | $ | — | | | $ | 962,275 | | | $ | — | | | $ | 1,287,275 | |
Dr. Mark Zediker | | 2023 | | $ | 400,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 400,000 | |
Former Chief Executive Officer | | 2022 | | $ | 400,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 400,000 | |
Brian Faircloth | | 2023 | | $ | 360,000 | | | $ | — | | | $ | 92,820 | | | $ | — | | | $ | 452,820 | |
Chief Operating Officer | | 2022 | | $ | 325,000 | | | $ | 3,150,000 | | | $ | — | | | $ | — | | | $ | 3,475,000 | |
(1)The amounts in this column represent the aggregate grant-date fair value of awards of restricted stock units granted to the applicable named executive officer for the applicable year, computed in accordance with the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC") Topic 718 ("ASC 718"). For a discussion of the assumptions made by Nuburu in determining the grant-date fair value of Nuburu’s restricted stock unit awards, please see Note 11. Stock-Based Compensation to the audited consolidated financial statements of the Company for the years ended December 31, 2023 and 2022, included herein.
(2)The amounts in this column represent the aggregate grant-date fair value of stock options granted to the applicable named executive officer for the applicable year, computed in accordance with ASC 718. For a discussion of the assumptions made by Nuburu in determining the grant-date fair value of Nuburu’s stock option awards, please see Note 11. Stock-Based Compensation to the audited consolidated financial statements of the Company for the years ended December 31, 2023 and 2022, included herein. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by Nuburu’s named executive officers.
(3)Mr. Nicol became the Company's Executive Chairman on September 25, 2023, and began earning an annual salary of $100,000. Prior to that, Mr. Nicol served as independent Chairman of the Board and was compensated as a non-employee director.
(4)Mr. Knaley has served as Nuburu’s Chief Financial Officer beginning February 21, 2022, through October 31, 2023 earning an annual salary of $325,000. On November 1, 2023, the Company appointed Mr. Knaley as the Company's Chief Executive Officer and increased his annual base salary to $410,000.
(5)Consists of a spot bonus paid to Mr. Knaley upon the completion of the Business Combination.
Outstanding Equity Awards at Fiscal Year End December 31, 2023
The following table lists all outstanding equity awards held by our NEOs as of December 31, 2023.
| | | | | | | | | | | | | | |
| | | | Option Awards | | Stock Awards |
Name | | Grant Date | | Number of Securities Underlying Unexercised Options Exercisable (#) | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | Option Exercise Price ($)(1) | | Option Expiration Date | | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) |
Ron Nicol | | 04/09/2022
04/18/2023
08/31/2023
08/31/2023
09/25/2023 | (3)
(4)
(5)
(6)
(7) | 429,497
93,750
17,187
270,000 | | 85,896
93,750
1,563
1,890,000 | | 6.11
0.39
0.39
0.32 | | 04/08/2032
08/30/2033
08/30/2033
09/25/2033 | | -
15,625 | | -
2,345 |
Brian Knaley | | 03/17/2022
07/18/2023
07/18/2023
11/1/2023 | (8)
(9)
(10)
(11) | 158,274
-
47,916
- | | 187,040
420,000
297,084
500,000 | | 6.11
0.57
0.57
0.29 | | 03/16/2032
07/17/2033
07/17/2033
10/31/2033 | | | | |
Dr. Mark Zediker | | 10/21/2022 | (12) | 998,946 | | | | 4.86 | | 10/20/2030 | | | | |
Brian Faircloth | | 01/07/2022
07/18/2023 | (13)
(14) | - | | 420,000 | | 0.57 | | 07/17/2033 | | 225,484 | | 43,485 |
(1)This column represents the exercise price per share of the stock option on the date of the grant, as adjusted by the Common Stock Exchange Ratio (if granted before the Business Combination).
(2)The market value is based on the fair market value of a share of Nuburu Common Stock on December 31, 2023, of $0.15 per share, multiplied by the number of unvested awards.
(3)2/5ths of the total shares vested on April 9, 2022, and 1/50th vested or will vest each month thereafter on the 13th day of the month, subject to the holder’s continuous service through each vesting date.
(4)1/8th of the total shares vested on April 30, 2023, and 1/8th vested or will vest each quarter thereafter (beginning July 31, 2023), subject to the holder's continuous service through each vesting date.
(5)1/12th of the total shares vested or will vest on the first day of each month beginning on July 1, 2023, subject to the holder’s continuous service through each vesting date.
(6)1/12th of the total shares vested or will vest on the first day of each month beginning on February 1, 2023, subject to the holder’s continuous service through each vesting date.
(7)1/24th of the total shares vested on October 25, 2023, and 1/24th of the total shares vested or will vest each month thereafter on the same day of the month, subject to the holder’s continuous service through each vesting date.
(8)1/4th of the total shares vested on February 1, 2023, and 1/48th of the total shares vested or will vest each month thereafter on the same day of the month, subject to the holder's continuous service through each vesting date.
(9)1/4th of the total shares will vest on July 18, 2024, and 1/36th of the remaining shares will vest each month thereafter on the same day of the month, subject to the holder's continuous service through each vesting date.
(10)1/36th of the total shares vested on July 18, 2023, and 1/36th of the total shares have vested or will vest each month thereafter on the same day of the month, subject to the holder's continuous service through each vesting date.
(11)1/4th of the shares will vest on November 1, 2024, and 1/36th of the remaining shares will vest each month thereafter on the same day of the month, subject to the holder's continuous service through each vesting date.
(12)This amount listed includes options that vested prior to Dr. Zediker's termination with the Company that have not been exercised. Dr. Zediker has no other outstanding equity awards.
(13)The restricted stock units subject to the award vest upon satisfaction of both a service-based requirement and a liquidity event requirement. 1/4th of the total restricted stock units subject to the award satisfied the service-based requirement on the first trading day on or after February 15, 2023, and thereafter, 1/16th of the restricted stock units will satisfy the service-based
requirement on each subsequent quarterly vesting date (consisting of February 15, May 15, August 15, and November 15 of a given year), subject to the holder’s continuous service through such date. 100% of the restricted stock units subject to the award satisfied the liquidity event requirement on the completion of the Business Combination and the holder’s continued service through the date of such completion.
(14)1/4th of the total shares will vest on July 18, 2024, and 1/36th of the remaining shares will vest each month thereafter on the same day of the month, subject to the holder's continuous service through each vesting date.
Executive Officer Employment Agreements
The following provides an overview summary of employment or service agreements with Nuburu’s named executive officers as of December 31, 2023.
Brian Knaley
Nuburu entered into an employment agreement with Brian Knaley, Nuburu’s Chief Executive Officer, effective as of December 2, 2022, which agreement was further amended effective November 1, 2023. Mr. Knaley’s annual rate of base salary is $410,000, and he is eligible for an annual cash incentive bonus of up to 60% of his annual base salary. The bonus for 2023 and 2024 will be payable in restricted stock units. He also earned an incentive bonus of $50,000 upon the completion of the Business Combination and a promotion equity award of 500,000 non-qualified stock options upon his promotion to Chief Executive Officer on November 1, 2023.
The term of employment for Mr. Knaley under his employment agreement is through October 31, 2025. If Nuburu terminates Mr. Knaley’s employment without “cause” or Mr. Knaley terminates his employment for “good reason” (each as defined in Mr. Knaley’s employment agreement), and Mr. Knaley executes a separation agreement and release of claims in a form reasonably satisfactory to Nuburu that becomes effective and irrevocable no later than 60 days following the date of such termination, then Mr. Knaley will be entitled to continuing payments of base salary, payable monthly at the rate then in effect, for 12 months following his termination. If Mr. Knaley’s employment terminates due to his death, Mr. Knaley’s surviving spouse or other beneficiary, if applicable, will be entitled to a lump sum payment equal to 6 months of Mr. Knaley’s base salary at the rate then in effect. If Nuburu terminates Mr. Knaley’s employment due to his “disability” (as defined in Mr. Knaley’s employment agreement), and Mr. Knaley executes a separation agreement and release of claims in a form reasonably satisfactory to Nuburu that becomes effective and irrevocable no later than 60 days following the date of such termination, then Mr. Knaley will be entitled to severance pay with an aggregate value equal to 6 months of Mr. Knaley’s base salary at the rate then in effect, payable in equal monthly installments.
Upon a change in control (as defined in Mr. Knaley's employment agreement), all remaining unvested shares subject to Mr. Knaley's outstanding options or other compensatory equity awards covering shares of the Company's common stock will accelerate vesting in full prior to the completion of the change in control.
Mr. Knaley’s employment agreement includes certain non-solicitation obligations for 24 months following his termination and certain non-competition obligations for 24 months following his termination, provided that Mr. Knaley will not be subject to any non-competition obligations following his termination upon the expiration of the term of the employment agreement. Mr. Knaley’s employment agreement further provides for certain mutual non-disparagement obligations with respect to both Mr. Knaley and Nuburu.
Brian Faircloth
Nuburu entered into an amended and restated employment agreement with Brian Faircloth, Nuburu’s Chief Operating Officer, effective as of December 2, 2022, which agreement was further amended effective January 1, 2024. Mr. Faircloth’s annual rate of base salary is $360,000, and he is eligible for incentive compensation as determined by the board of directors.
The term of employment for Mr. Faircloth under his amended and restated employment agreement is through October 31, 2025. If Nuburu terminates Mr. Faircloth’s employment without “cause” or Mr. Faircloth terminates his employment for “good reason” (each as defined in Mr. Faircloth’s amended and restated employment agreement), and Mr. Faircloth executes a separation agreement and release of claims in a form reasonably satisfactory to Nuburu that becomes effective and irrevocable no later than 60 days following the date of such termination, then Mr. Faircloth will be entitled to continuing payments of base salary, payable monthly at the rate then in effect, for 12 months following his termination. If Mr. Faircloth’s employment terminates due to his death, Mr. Faircloth’s surviving spouse or other beneficiary, if applicable, will be entitled to a lump sum payment equal to 6 months of Mr. Faircloth’s base salary at the rate then in effect. If Nuburu terminates Mr. Faircloth’s employment due to his “disability” (as defined in Mr. Faircloth’s amended and restated employment agreement), and Mr. Faircloth executes a separation agreement and release of claims in a form reasonably satisfactory to Nuburu that becomes effective and irrevocable no later than 60 days following the date of such termination, then Mr. Faircloth will be entitled to severance pay with an aggregate value equal to 6 months of Mr. Faircloth’s base salary at the rate then in effect, payable in equal monthly.
Mr. Faircloth’s employment agreement includes certain non-solicitation obligations for 24 months following his termination and certain non-competition obligations for 12 months following his termination, provided that Mr. Faircloth will not be subject to any non-competition obligations following his termination upon the expiration of the term of the employment agreement. Mr. Faircloth’s employment agreement further provides for certain mutual non-disparagement obligations with respect to both Mr. Faircloth and Nuburu.
DIRECTOR COMPENSATION
Pursuant to the Company's Director Compensation Policy for 2024, each non-employee director will receive the following cash amounts for their service:
| | | | |
Compensation element | | | |
Director Annual Retainer | | $ | 50,000 | |
Audit Committee Chair | | $ | 50,000 | |
The Company's Director Compensation Policy for 2024 provides that non-employee directors can convert all or 50% of their annual cash retainers into additional options at an implied 75% Black Scholes value. For those that elect this option, 25% of the annual retainer to be paid in options will be granted as vested options on the first day of each quarter in 2024. If the director chooses the cash payment option, the amount will be paid quarterly in arrears. On January 13, 2025, the Company agreed that, with respect to any unpaid compensation with respect to the year-ended 2024, directors would accept common stock in lieu of cash.
Director Compensation for Fiscal Year Ended December 31, 2023
In November 2022, Nuburu entered into letter agreements with each of Daniel Hirsch, Kristi Hummel, Lily Yan Hughes and Elizabeth Mora, and in August 2023 Nuburu entered into a letter agreement with John Bolton, each of whom serves or has served on the board of directors as a non-employee director. Pursuant to the non-employee director letter agreements, during 2023 each such non-employee director was entitled to a fee of $50,000 per annum (or $100,000 per annum in the case of Elizabeth Mora, who serves as the chair of the audit committee of the board of directors), payable quarterly in arrears (on a prorated basis, as applicable, with respect to board services rendered during the applicable quarter), as well as reimbursement of reasonable travel and other business expenses incurred in the performance of the non-employee director’s duties to Nuburu. Additionally, pursuant to the non-employee director letter agreements, following the effectiveness of the Registration Statement on Form S-8 (File No. 333-271183) registering shares of Common Stock to be issued pursuant to the Company's 2022 Equity Incentive Plan (the "2022 Plan"), each such non-employee director on the Board at the time was granted a one-time award of restricted stock units covering 25,000 shares of Common Stock, scheduled to vest on a quarterly basis in equal installments over a two-year period commencing at the closing of the Business Combination (the "Closing"), subject to the non-employee director’s continued status as a service provider through the applicable vesting dates and such other terms and conditions as set forth in the 2022 Plan and the applicable award agreement thereunder. The foregoing description of the letter agreements is qualified in its entirety by the full text of the letter agreements, a form of which is attached as Exhibit 10.26 to our Registration Statement on Form S-1 (File No. 333-269610) filed with the SEC on February 7, 2023, and is incorporated herein by reference.
In August 2023, Nuburu included in its director compensation policy an annual option grant of 50,000 non-qualified stock options per director, with a grant date of the next trading day following the Company's annual meeting of stockholders in 2024 and beyond. The awards vest monthly, on the first day of the month, over 12 months, with any remaining unvested awards accelerating if the next annual meeting is less than 12 months after the last one. The 2023 option awards were granted on August 31, 2023. The options will vest in 12 monthly installments starting from June 16, 2023.
Additionally, in August 2023, Nuburu included in its director compensation policy an annual option grant to recognize service of the chairs of the board and its committees and the service of committee members. Awards in the following were granted on June 16, 2023, and will be awarded in 2024 upon the completion of the 2024 annual meeting of stockholders. The annual option grants awarded to the Board are summarized in the table below.
| | | | |
Board Position | | Options Granted | |
Board Member Service | | | 50,000 | |
Board Chair | | | 50,000 | |
Compensation and Nominating Committee Chairs | | | 40,000 | |
Committee Members | | | 10,000 | |
Additionally, each director serving on the Board at the time of the Closing was provided 18,750 non-qualified stock options for the 4.5 months of service provided during the period commencing upon the consummation of the Business Combination and ending June 16, 2023. Such award was granted on August 31, 2023, with vesting over 12 months beginning January 31, 2023. Each director was also granted an additional award of non-qualified stock options for 37.5% of their 2023 committee service award noted in the table above, with the same vesting provisions as the 18,750 stock options previously mentioned.
Nuburu may further revise its executive and director compensation program from time to time to better align compensation with Nuburu’s business objectives and the creation of stockholder value, while enabling Nuburu to attract, retain, incentivize and reward individuals who contribute to the long-term success of Nuburu. Decisions on the executive compensation program will be made by the compensation committee.
The following table presents the total compensation for each non-employee director that served on our Board during 2023. Other than as set forth in the table and described more fully below, we did not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our Board in 2023.
| | | | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($)(1) | | | Stock Awards ($)(2)(4) | | | Option Awards ($)(3)(4) | | | Total ($) | |
John Bolton | | $ | 16,667 | | | $ | — | | | $ | 11,557 | | | $ | 28,224 | |
Daniel Hirsch | | $ | 45,833 | | | $ | 53,500 | | | $ | 5,638 | | | $ | 104,971 | |
Kristi Hummel | | $ | 45,883 | | | $ | 53,500 | | | $ | 10,148 | | | $ | 109,531 | |
Lily Yan Hughes | | $ | 45,883 | | | $ | 53,500 | | | $ | 11,740 | | | $ | 111,123 | |
Elizabeth Mora | | $ | 91,667 | | | $ | 53,500 | | | $ | 6,765 | | | $ | 151,932 | |
(1)Board retainers were pro-rated for Mr. Bolton as he became a non-employee director in August 2023. Board retainers were pro-rated for the remaining directors as they began earning the retainers after the Closing occurred on January 31, 2023.
(2)The amounts in this column represent the aggregate grant-date fair value of awards of restricted stock units granted to the applicable named executive officer for the applicable year, computed in accordance with ASC 718. For a discussion of the assumptions made by Nuburu in determining the grant-date fair value of Nuburu’s restricted stock unit awards, please see Note 11. Stock-Based Compensation to the audited consolidated financial statements of the Company for the years ended December 31, 2023 and 2022, included herein.
(3)The amounts in this column represent the aggregate grant-date fair value of stock options granted to the applicable named executive officer for the applicable year, computed in accordance with ASC 718. For a discussion of the assumptions made by Nuburu in determining the grant-date fair value of Nuburu’s stock option awards, please see Note 11. Stock-Based Compensation to the audited consolidated financial statements of the Company for the years ended December 31, 2023 and 2022, included herein. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by Nuburu’s named executive officers.
(4)As of December 31, 2023, the aggregate number of shares subject to outstanding equity awards held by our non-employee directors who served on our Board during 2023 were:
| | | | | | | | |
Name | | Stock Awards | | | Stock Options | |
John Bolton | | | - | | | | 111,667 | |
Daniel Hirsch | | | 15,625 | | | | 68,750 | |
Kristi Hummel | | | 15,625 | | | | 123,750 | |
Lily Yan Hughes | | | 15,625 | | | | 110,417 | |
Elizabeth Mora | | | 15,625 | | | | 82,500 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company regarding the beneficial ownership of the Common Stock as of November 8, 2024 (the “Ownership Date”), by:
•each person or “group” who is known by the Company to be the beneficial owner of more than 5% of the issued and outstanding Common Stock;
•each of the Company’s named executive officers and directors; and
•all current named executive officers and directors of the Company, as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our Common Stock subject to common stock warrants, options that are currently exercisable or exercisable within 60 days of the Ownership Date, and restricted stock units and performance share awards that vest within 60 days of the Ownership Date, are deemed to be outstanding and to be beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. This table is based upon information supplied by named executive officers, directors and principal stockholders and Schedules 13G or 13D filed with the SEC.
Percentage ownership of our Common Stock in the table below is based on 18,686,931 shares of our Common Stock issued and outstanding on November 8, 2024. Unless noted otherwise, the address of each of the individuals and entities named below is c/o Nuburu, Inc., 7442 S. Tucson Way, Suite 130, Centennial, CO 80112.
| | | | | | | | |
Name of Beneficial Owner | | Number of Outstanding Common Shares Beneficially Owned | | Number of Common Shares Exercisable Within 60 Days | | Number of Common Shares Beneficially Owned | | Percentage of Beneficial Ownership |
Greater than 5% Stockholders: | | | | | | | | |
Esousa Group Holdings LLC(1) |
| 7,183,908 | | — | | 7,183,908 | | 38.4% |
Named Executive Officers and Directors: | | | | | | | | |
Brian Knaley(2) |
| 32,930 | | 17,559 | | 50,489 | | * |
Brian Faircloth(3) |
| 6,427 | | 3,719 | | 10,146 | | * |
Ron Nicol(4) |
| 63,560 | | 51,792 | | 115,352 | | * |
Daniel Hirsch(5) |
| 547 | | 17,519 | | 18,066 | | * |
Elizabeth Mora(6) |
| 547 | | 2,063 | | 2,610 | | * |
Mark Zediker(7) |
| 107,706 | | -- | | 107,706 | | * |
Common Shares all directors and executive officers own as a group (5 persons) |
| 104,011 | | 92,651 | | 196,662 | | * |
* Represents beneficial ownership of less than one percent of our outstanding shares of Common Stock.
(1)Includes shares of Common Stock issuable to Esousa Group Holdings upon conversion of certain convertible notes held by Esousa Group Holdings
(2)Includes (i) 32,930 shares of Common Stock held by Mr. Knaley and (ii) 17,559 shares of Common Stock that may be acquired within 60 days of the Ownership Date pursuant to stock options held by Mr. Knaley.
(3)Includes (i) 6,427 shares of Common Stock held by Mr. Faircloth, (ii) 3,281 shares of Common Stock that may be acquired through the exercise of vested stock options held by Mr. Faircloth and (iii) 438 shares of Common Stock that may be acquired within 60 days of the Ownership Date pursuant to stock options held by Mr. Faircloth.
(4)Includes (i) 23,033 shares of Common Stock held by Eunomia, LP, of which Mr. Nicol is the manager, (ii) 36,337 shares of Common Stock issuable to Eunomia, LP upon conversion of certain convertible notes held by Eunomia, LP, (iii) 3,643 shares of Common Stock held by Mr. Nicol, and (iv) 47,292 shares of Common Stock that may be acquired through the exercise of vested stock options held by Mr. Nicol and (v) 4,500 shares of Common Stock that may be acquired within 60 days of the Ownership Date pursuant to stock options held by Mr. Nicol.
(5)Includes (i) 547 shares of Common Stock held by Mr. Hirsch and (ii) 17,519 shares of Common Stock that may be acquired through the exercise of vested stock options held by Mr. Hirsch.
(6)Includes (i) 547 shares of Common Stock held by Ms. Mora and (ii) 17,519 shares of Common Stock that may be acquired through the exercise of vested stock options held by Ms. Mora.
(7)Includes 107,706 shares of Common Stock held by Mr. Zediker.
Percentage ownership of our non-voting Series A preferred stock (“Preferred Stock”) in the table below is based on 2,388,905 shares of our Preferred Stock issued and outstanding on November 8, 2024. Unless noted otherwise, the address of each of the individuals and entities named below is c/o Nuburu, Inc., 7442 S. Tucson Way, Suite 130, Centennial, CO 80112.
| | | | | | | | | | | | | | |
Name of Beneficial Owner | | Number of Outstanding Series A Preferred Shares Beneficially Owned | | | Number of Series A Preferred Shares Exercisable Within 60 Days | | Number of Series A Preferred Shares Beneficially Owned | | | Percentage of Beneficial Ownership | |
Greater than 5% Stockholders: | | | | | | | | | | | |
Anzu Investors(1) | | | 1,081,361 | | | | | | 1,081,361 | | | | 45.3 | % |
Wilson-Garling 2020 Family Trust uad 9/20/20(2) | | | 121,205 |
|
| | | | 121,205 | | | | 5.1 | % |
Mark Zediker | | | | | | | | | | | |
Named Executive Officers and Directors: | | | | | | | | | | | |
Brian Knaley | | | | | | | | | | | |
Brian Faircloth | | | | | | | | | | | |
Ron Nicol(3) | | | 121,308 | | | | | | 121,308 | | | | 5.1 | % |
Daniel Hirsch | | | | | | | | | | | |
Elizabeth Mora | | | | | | | | | | | |
Series A Preferred Shares all directors and executive officers own as a group (5 persons) |
|
| 121,308 |
|
|
|
|
| 121,308 |
|
|
| 5.1 | % |
* Represents beneficial ownership of less than one percent of our outstanding shares of Preferred Stock.
(1)Includes (i) 97,409 shares of Preferred Stock held by Anzu Nuburu LLC, (ii) 44,767 shares of Preferred Stock held by Anzu Nuburu II LLC, (iii) 36,937 shares of Preferred Stock held by Anzu Nuburu III LLC, (iv) 244,414 shares of Preferred Stock held by Anzu Nuburu V LLC, (v) 500,000 shares of Preferred Stock held by Anzu Partners LLC, (vi) 121,411 shares of Preferred Stock held by David Seldin, (vii) 24,282 shares of Preferred Stock held by CST Global LLC and (viii) 12,141 shares of Preferred Stock held by Whitney Haring-Smith. The aforementioned information is based partially on the information reported on Schedule 13D/A filed by the Anzu Investors on November 13, 2023. The foregoing Anzu Investors have entered into the 10b5-1 Sales Plan authorizing Tigress to sell all of the shares of Common Stock received by the Anzu Investors at the Closing of the Business Combination during the period specified in such plan, subject to certain price and volume parameters, and therefore may be deemed a “group” as that term is used in Section 13(d)(3) of the Exchange Act. Mr. Seldin, a Managing Partner of Anzu Partners LLC, and Debrah C. Herman, Chief Financial Officer of Anzu Partners LLC, each serve as the managers of each of the Anzu SPVs and share voting and investment power with respect thereto. The principal office of each of the Anzu Investors is 12610 Race Track Road, Suite 250, Tampa, Florida 33626.
(2)Includes 121,205 shares of Preferred Stock held by W-G Investments LLC, of which Ms. Garling is a member and of which her spouse, Thomas Wilson, is the sole manager. The aforementioned information is based partially on the information reported on Schedule 13D/A filed by the Wilson-Garling Family Trust uad 9/20/20 on June 13, 2023.
(3)Includes 121,308 shares of Preferred Stock held by Eunomia, LP, of which Mr. Nicol is the manager.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Person Transactions Policy
The Company’s Board has adopted a written Related Person Transactions Policy that sets forth the Company’s policies and procedures regarding the identification, review, consideration and oversight of “related person transactions.” For purposes of the Company’s policy only, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company or any of its subsidiaries are participants involving an amount that exceeds $120,000, in which any “related person” has a material interest.
Transactions involving compensation for services provided to the Company as an employee, consultant or director are not considered related person transactions under this policy. A related person is any executive officer, director, nominee to become a director or a holder of more than 5% of any class of the Company’s voting securities (including Common Stock), including any of their immediate family members and affiliates, including entities owned or controlled by such persons.
Under the policy, the related person in question or, in the case of transactions with a holder of more than 5% of any class of the Company’s voting securities, an officer with knowledge of a proposed transaction, must present information regarding the proposed related person transaction to the Audit Committee (or, where review by the Audit Committee would be inappropriate, to another independent body of the Company’s Board) for review. To identify related person transactions in advance, the Company will rely on information supplied by the Company’s executive officers, directors and certain significant stockholders.
In considering related person transactions, the Audit Committee will take into account the relevant available facts and circumstances, which may include, but are not limited to:
•the risks, costs, and benefits to the Company;
•the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
•the terms of the transaction;
•the availability of other sources for comparable services or products; and
•the terms available to or from, as the case may be, unrelated third parties.
The Audit Committee will approve only those transactions that it determines are fair to the Company and in the Company’s best interests. All of the transactions described in this section were entered into prior to the adoption of such policy.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to the compensation arrangements, including employment and termination of employment, discussed in "Executive Compensation" and "Executive Officer Employment Agreement" above, the following is a description of each transaction since January 1, 2022, and each currently proposed transaction, in which:
•Legacy Nuburu or the Company has been or is to be a participant;
•the amount involved exceeded or exceeds $120,000; and
•any of Legacy Nuburu’s directors, executive officers, or beneficial holders of more than 5% of any class of Legacy Nuburu’s capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
Legacy Nuburu
Financings
Series C Preferred Stock Financing
In multiple closings in December 2021 and January 2022, Legacy Nuburu sold an aggregate of 1,166,372 shares of Legacy Nuburu Series C Preferred Stock, at a purchase price of $5.00 per share, for an aggregate purchase price of approximately $6 million. The table below summarizes the sale of the Legacy Nuburu Series C Preferred Stock to related parties.
| | | | | | | | |
Stockholder | | Shares of Nuburu Series C Preferred Stock | | | Total Purchase Price Commitment | |
Anzu Nuburu LLC(1) | | | 141,842 | | | $ | 709,210 | |
Anzu Nuburu II LLC(1) | | | 58,230 | | | $ | 291,150 | |
Anzu Nuburu III LLC(1) | | | 26,637 | | | $ | 133,185 | |
Anzu Nuburu V LLC(1) | | | 438,452 | | | $ | 2,192,260 | |
W-G Investments LLC(2) | | | 220,000 | | | $ | 1,100,000 | |
(1)David Michael and David Seldin were members of the Legacy Nuburu board of directors. At the time of the financing transaction, Mr. Seldin was the sole manager of the Anzu SPVs, which held more than 5% of Legacy Nuburu’s capital stock immediately prior to the Closing, and currently is one of the managers of the Anzu SPVs. Mr. Michael works with Mr. Seldin with respect to a number of related investment entities.
(2)Thomas J. Wilson, an affiliate of W-G Investments LLC, was a member of the Legacy Nuburu board of directors.
Company Notes
Over the course of multiple closings in March, August and December 2022 and January 2023, Legacy Nuburu issued and sold Company Notes payable to various investors with aggregate gross proceeds of $11.4 million. The Company Notes accrued interest at a rate of 8% per annum. The outstanding principal amount of and all accrued and unpaid interest on the Company Notes (the “Conversion Amount”), immediately prior to the consummation of the Business Combination, automatically converted into 2,642,239 shares of Legacy Nuburu Common Stock that, upon consummation of the Business Combination, entitled the holders of the Company Notes to receive 1,361,787 shares of Common Stock, which was equal to (x) the Conversion Amount divided by (y) $8.50. The table below summarizes the sale of the Company Notes to related parties.
| | | | |
Noteholder | | Principal Amount of Company Notes | |
W-G Investments LLC(1) | | $ | 1,000,000 | |
David Seldin(2) | | $ | 1,000,000 | |
Ron Nicol(3) | | $ | 1,000,000 | |
CST Global LLC(4) | | $ | 200,000 | |
Curtis N Maas Revocable Trust(5) | | $ | 150,000 | |
Ake Almgren(6) | | $ | 100,000 | |
(1)Thomas J. Wilson, an affiliate of W-G Investments LLC, was a member of the Legacy Nuburu board of directors.
(2)David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of the Anzu SPVs, which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(3)Ron Nicol is the Chairman of the Company’s board of directors and was a member of the Legacy Nuburu board of directors.
(4)David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
(5)Curtis Maas, an affiliate of the Curtis N Maas Revocable Trust, was a member of the Legacy Nuburu board of directors.
(6)Ake Almgren resigned as a member of the Company's board of directors effective May 19, 2023.
Investors’ Rights Agreement
Legacy Nuburu entered into an Amended and Restated Investors’ Rights Agreement, dated as of December 10, 2021, which provided, among other things, that certain holders of its capital stock, including (i) the Anzu Holders, which at the time held more than 5% of Legacy Nuburu’s capital stock, and (ii) Thomas J. Wilson as Trustee of the Thomas J. Wilson Revocable Trust u/a/d March 13, 2015 and W-G Investments LLC, which are affiliated with then-Legacy Nuburu director Thomas J. Wilson, were granted certain registration rights and information rights. David Michael and David Seldin, each of whom were directors of Legacy Nuburu, are affiliated with Anzu Partners. The registration and information rights granted under this agreement terminated upon completion of the Business Combination.
Right of First Refusal Agreement
Pursuant to the Amended and Restated Right of First Refusal and Co-sale Agreement, dated as of December 10, 2021 (the “ROFR Agreement”), Legacy Nuburu had the right of first refusal with respect to shares of Legacy Nuburu capital stock if certain stockholders were to propose to sell to other parties. Certain holders of Legacy Nuburu capital stock, including (i) the Anzu Holders, which at the time held more than 5% of Legacy Nuburu’s capital stock, and (ii) Thomas J. Wilson as Trustee of the Thomas J. Wilson Revocable Trust u/a/d March 13, 2015 and W-G Investments LLC, which are affiliated with then-Legacy Nuburu director Thomas J. Wilson, were granted certain secondary rights of first refusal and co-sale under the ROFR Agreement. David Michael and David Seldin, each of whom was a director of Legacy Nuburu, are affiliated with Anzu Partners. This agreement terminated upon completion of the Business Combination.
Voting Agreement
Legacy Nuburu entered into an Amended and Restated Voting Agreement, dated as of December 10, 2021, pursuant to which certain holders of its capital stock, including (i) the Anzu Holders, which then held more than 5% of Legacy Nuburu’s capital stock, (ii) Thomas J. Wilson as Trustee of the Thomas J. Wilson Revocable Trust u/a/d March 13, 2015 and W-G Investments LLC, which were affiliated with then-Legacy Nuburu director Thomas J. Wilson, and (iii) Dr. Mark Zediker, Legacy Nuburu’s chief executive officer, agreed to vote their shares of capital stock on certain matters, including with respect to the election of directors. David Seldin, who was a director of Legacy Nuburu, shares voting and investment power with respect to the shares held by the Anzu SPVs. This agreement terminated upon completion of the Business Combination.
Director and Officer Indemnification
Legacy Nuburu’s charter and Legacy Nuburu’s bylaws provided for indemnification and advancement of expenses for its directors and officers to the fullest extent permitted by the DGCL, subject to certain limited exceptions.
Services Agreement
Anzu Partners provided certain services to Legacy Nuburu in the past, including financial analysis support, marketing and communications support, business analysis support, and personnel recruitment support (the “Services”). These Services continued until the completion of the Business Combination.
Legacy Nuburu reimbursed Anzu Partners on a periodic basis for Anzu Partners’ out-of-pocket expenses relating to these Services. For fiscal years 2020 through 2022, these reimbursements totaled approximately $190,000 in the aggregate. Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 (the “Services Agreement”) relating to this arrangement pursuant to which Legacy Nuburu, in recognition of past Services, (i) paid $500,000 to Anzu Partners upon the Closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing. The further provision of future Services by Anzu Partners will be subject to additional terms and conditions set forth in the Services Agreement, including an obligation on Legacy Nuburu to reimburse Anzu Partners for out-of-pocket expenses related thereto.
Transactions with the Company
Financing
Senior Convertible Notes Issued June 2023
On June 12, 2023 and June 16, 2023, the Company entered into Note and Warrant Purchase Agreements (the “Senior Convertible Note Purchase Agreements”) primarily with certain investors including existing investors (each, an “Investor”) for the sale of (i) convertible promissory notes (“Senior Convertible Notes”) in the aggregate principal amount of $9,225,000, and (ii) warrants (“Senior Note Warrants") to purchase up to 11,518,895 shares of the Company’s common stock from the June 12, 2023 Purchase Agreement and up to 1,889,535 shares of Common Stock from the June 16, 2023 Purchase Agreement. The Company intends to use the net proceeds (after deducting offering expenses of $160,345) from the Senior Convertible Note Purchase Agreements for general corporate purposes.
The Senior Convertible Notes are senior, secured obligations of the Company, which became secured by the Company's patent portfolio per the Security Agreement as of November 2023, bear interest at the rate of 7.0% per annum, and are payable on the earlier of June 23, 2026 or the occurrence of an Event of Default, as defined in the Senior Convertible Notes. The Senior Convertible Notes are senior to the Junior Notes pursuant to an intercreditor agreement between the parties. The Senior Convertible Notes may be converted at any time following June 23, 2023 prior to the payment in full of the principal amount of the Senior Convertible Notes at the Investor’s option. In the event of the Sale of the Company (as defined in the Senior Convertible Notes), the outstanding principal amount of each Senior Convertible Note, plus all accrued and unpaid interest not otherwise converted into equity securities pursuant to the terms of the Senior Convertible Notes, shall (i) if the Investor so elects, be converted into equity securities pursuant to the terms of the Senior Convertible Notes at a price equal to $0.688 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), or (ii) be due and payable immediately prior to the closing of such Sale of the Company, together with a premium equal to 150% of the principal amount to be prepaid. Subsequent to the effectiveness of a registration statement registering the Registrable Securities (as defined below), the Company may elect to pay interest in kind through the issuance of shares of Common Stock at the Conversion Price, in lieu of payments in cash (the “Interest Shares”).
The Warrants issued by the Company to the Investors pursuant to the Senior Convertible Note Purchase Agreement entitle the relevant Investor to purchase that number of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) determined by dividing the principal amount of each Convertible Note by the Conversion Price. The Warrants have an exercise price equal to $1.03, which represents a 50% premium over the Conversion Price, and expire on June 23, 2028.
On June 16, 2023, the Company and the Investors also entered into a Registration Rights and Lock-Up Agreement (as amended, the “Registration Rights Agreement”), pursuant to which the Company agreed, following February 6, 2024 (the “Filing Deadline”), to use its commercially reasonable efforts to file a registration statement with the Securities and Exchange Commission for the resale of the Conversion Shares, the Warrant Shares and the Interest Shares (the “Registrable Securities”). Following the Filing Deadline, the Investors also are entitled to demand registration rights. Pursuant to the Registration Rights Agreement, the Investors agree that except for limited exceptions as provided therein, no Notes, Warrants, Conversion Shares, Warrant Shares or Interest Shares may be transferred until the earliest of the date that is one year from the anniversary of the date of the Registration Rights Agreement or the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction wherein all the Company’s stockholders have the right to exchange their shares of Common Stock for cash, securities, or other property.
The Senior Convertible Note Purchase Agreement contains customary representations, warranties and covenants in connection with the transaction. The representations, warranties and covenants in the Senior Convertible Note Purchase Agreement are not intended to provide any other factual information about the Company. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of the date thereof, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.
The foregoing is only a brief description of the material terms of the Senior Convertible Note Purchase Agreement, the Senior Convertible Notes, the Senior Note Warrants and the Registration Rights Agreement, does not purport to be a complete description of the rights and obligations of the parties thereunder.
The offer and sale of the Convertible Notes and the Warrants (the “Securities”) were not registered under the Securities Act of 1933, as amended (the “Act”), in reliance on the exemption provided by Rule 506 of Regulation D promulgated under the Act. The offer and sale of the Securities was made only to persons whom the Company believed were accredited investors and the Securities are subject to transfer restrictions. Further, the Company did not engage in any general solicitation or advertising and the securities were offered to a limited number of persons, most of whom the Company had pre-existing relationships with.
The table below summarizes the sale of the Senior Convertible Notes and Senior Note Warrants to related parties:
| | | | |
Investor | | Principal Amount of Convertible Notes | |
Wilson-Garling 2023 Family Trust(1) | | $ | 5,000,000 | |
David Seldin(2) | | | 1,200,000 | |
Eunomia, LP(3) | | | 1,000,000 | |
CST Global LLC(4) | | | 100,000 | |
Curtis N Maas Revocable Trust(5) | | | 100,000 | |
(1)Thomas J. Wilson, an affiliate of Wilson-Garling 2023 Family Trust, was a member of the Legacy Nuburu board of directors.
(2)David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC (the "Anzu SPVs"), which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(3)Ron Nicol, manager of Eunomia, LP, is the Executive Chairman of the Company’s board of directors.
(4)David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
(5)Curtis Maas, an affiliate of the Curtis N Maas Revocable Trust, was a member of the Legacy Nuburu board of directors.
Junior Notes Issued November 2023
On November 13, 2023, the Company entered into Note and Warrant Purchase Agreements (the "Junior Note Purchase Agreements") with the lenders identified therein (the "Lenders") providing for (i) zero-interest promissory notes, issued with a 10% original issue discount, in the aggregate principal amount of $5,500,000 (the "Junior Notes"), and (ii) warrants ("Junior Note Warrants," refer to Note 10, Warrants), exercisable for an amount of the Company's common stock equal to 100% principle amount of the Junior Notes (limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders), which will be exercisable for $0.25 per share of the Company's common stock. The Company intends to use the net proceeds (after deducting the original issue discount of $500,000 and offering expenses of $691,399) from the Junior Note Purchase Agreements for general corporate purposes.
The Junior Notes are junior and secured by the Company's patent portfolio pursuant to a security agreement among the parties (the "Security Agreement"). The Junior Notes will mature on the earlier of: (i) the Company closing a credit facility in principal amount of at least $20 million, (ii) a Sale Event (as defined in the Junior Note Purchase Agreements), or (iii) twelve months after issuance. The Junior Notes contain customary events of default. If the Junior Notes have not been repaid within six or nine months after issuance, the Junior Notes will begin to bear interest at the SOFR rate plus 9% and at the SOFR rate plus 12%, respectively, and an additional 25% warrant coverage will be provided at each such date, with a per share exercise price equal to 120% of the trading price of the Company's common stock at the time of issuance and a redemption right in favor of the Company when the trading price of the common stock is greater than 200% of the applicable exercise price for 20 out of any 30 consecutive trading days. Shares of common stock issuable upon exercise of the Junior Note Warrants will be limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders.
The parties to the Purchase Agreement also entered into an intercreditor and subordination agreement with the holders of the Company’s senior secured convertible notes, which notes will now be secured pursuant to the Security Agreement and rank senior in priority to the Notes.
The description above is a summary and is qualified in its entirety by the complete text of the Purchase Agreement, the form of Note, the form of warrant, the Security Agreement, the registration rights agreement, and the intercreditor and subordination agreement, which were filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as amended.
The table below summarizes the issuance of the Junior Notes and Junior Note Warrants to related parties:
| | | | |
Noteholder | | Principal Amount of Notes | |
David Seldin(1) | | $ | 1,100,000 | |
Eunomia, LP(2) | | | 1,100,000 | |
CST Global LLC(3) | | | 220,000 | |
(1)David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of the Anzu SPVs, which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(2)Ron Nicol, manager of Eunomia, LP, is the Executive Chairman of the Company’s board of directors.
(3)David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
Founder Shares
In June 2020, the Sponsor purchased 8,625,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. The Founder Shares included an aggregate of up to 1,125,000 shares subject to forfeiture by the Sponsor to the extent the underwriter’s over-allotment is not exercised in full. There was an aggregate of up to 269,607 shares that were subject to forfeiture by the Sponsor following the underwriter’s election to partially exercise its over-allotment option so that the number of Founder Shares would collectively represent approximately 20% of the Company’s issued and outstanding shares after the IPO. The underwriter’s over-allotment option expired unexercised on October 24, 2020, and as such 269,607 Founder Shares were forfeited, resulting in there being an aggregate of 8,355,393 Founder Shares outstanding.
The Sponsor agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A) one year after the completion of a business combination and (B) subsequent to a business combination, (x) if the last reported sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a business combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property. These restrictions on transferring, assigning or selling the Founder Shares were amended effective as of Closing pursuant to the Sponsor Letter Agreement Amendment. See “— Sponsor Letter Agreement Amendment” below.
Share Transfer Agreement
On January 25, 2023, the Sponsor entered into an agreement (the “Share Transfer Agreement”) with an unaffiliated third party (the “Purchasing Party”) whereby the Purchasing Party agreed to use commercially reasonable efforts to seek to acquire 100,000 shares of Class A Common Stock of Tailwind (the “Acquired Shares”) from a third party which had previously submitted an election to redeem for the purposes of the Purchasing Party reversing such election to redeem on or following the date of the agreement. In exchange for the foregoing commitment to acquire and reverse the redemption of the Acquired Shares, the Sponsor agreed to transfer to the Purchasing Party an aggregate of 150,000 shares of Common Stock of the Company held by the Sponsor immediately following the consummation of the Business Combination (the “Transferred Founder Shares”) if the Purchasing Party continued to hold such Acquired Shares through the consummation of the Business Combination. In connection with the Closing, the Transferred Founder Shares were transferred to the Purchasing Party.
Administrative Support Agreement
The Company entered into an agreement, commencing on September 9, 2020, to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial, and administrative support services. These obligations under this agreement ceased upon completion of the Business Combination.
Sponsor Support Agreement
Tailwind and the Sponsor, concurrently with the execution and delivery of the Business Combination Agreement, entered into the Sponsor Support Agreement, pursuant to which the Sponsor agreed, among other things, (A) to vote (or execute and return an action by written consent), or cause to be voted at the Tailwind Special Meeting all of its Class B Common Stock or any other voting securities of the Company which it holds, owns, or is entitled to vote, in favor of the approval and adoption of the Business Combination Agreement and approval of the Business Combination, including the Merger, (B) not to redeem any of the Class B Common Stock pursuant to or in connection with any vote for the approval of any extension of the deadline for Tailwind to consummate its initial business combination, and (C) to forfeit the shares of Common Stock held by the Sponsor other than certain retained shares of Class B Common Stock equal to (i) (x) 2,000,000 shares in the aggregate, if the Post-Redemption Trust Amount is greater than $40,000,000 in the aggregate or (y) 1,500,000 shares in the aggregate, if the Post-Redemption Trust Amount is equal to or less than $40,000,000 in the aggregate, in either case, minus (ii) the Expense Excess Shares, if any. “Expense Excess Shares” means an amount of Class B Common Stock equal to the product of (i) two (2.0), multiplied by (ii) the quotient obtained by dividing (x) the excess, if any, of (A) the SPAC Forfeiture Expenses over (B) $6,000,000, by (y) ten dollars ($10). “SPAC Forfeiture Expenses” means all fees, expenses and disbursements incurred by or on behalf of Tailwind or Merger Sub in connection with the Business Combination or otherwise in connection with Tailwind’s operations, including in connection with any prior transactions pursued by Tailwind and all obligations (including principal and accrued but unpaid interest) for the payment of borrowed money, other than (i) expenses incurred by Tailwind and owed to Loop Capital Markets, Tigress and Cohen in their capacities as capital markets advisors in connection with the Business Combination, (ii) expenses incurred in obtaining a D&O Tail Policy and any directors and officers insurance premium with respect to the renewal of Tailwind’s D&O Policy, (iii) any reasonable and documented out-of-pocket fees and expenses incurred in connection with any third-party litigation threatened or commenced in connection with the Business Combination prior to the Closing and (iv) any other fees or expenses borne by Legacy Nuburu pursuant to Section 10.11 of the Business Combination Agreement. “Post-Redemption Trust Amount” means the aggregate amount of funds held in the Trust Account, to be held as available cash on the balance sheet of the Company following the redemption of Tailwind’s public shares. Because the Post-Redemption Trust Amount was less than $40,000,000 after taking into account the Extension Redemptions, the Sponsor retained 1,500,000 shares of Class B Common Stock after the consummation of the Business Combination. The Amendment to the Sponsor Support and Forfeiture Agreement clarified that the Sponsor would not forfeit shares by virtue of Tailwind’s incurrence of the Sponsor Loan (as defined in the Amendment to the Sponsor Support and Forfeiture Agreement).
Upon the occurrence of the Closing, the Sponsor automatically cancelled, without any further action by the Sponsor or any other person, all of the Private Placement Warrants that were held by the Sponsor. The Sponsor also waived, for no consideration, its right to receive the Preferred Stock Issuance, other than with respect to 1,000,000 shares of Preferred Stock.
On January 31, 2023, Tailwind, Legacy Nuburu and the Sponsor amended and restated the Sponsor Support Agreement (the “Amended and Restated Sponsor Support and Forfeiture Agreement”). The Amended and Restated Sponsor Support and Forfeiture Agreement amended the Sponsor Support and Forfeiture Agreement to, among other things, (a) reduce the amount of Preferred Stock of the Company that were issued
to the Sponsor pursuant to the Preferred Stock Issuance, from 1,000,000 to 650,000 shares and (b) reduce the amount of shares of Common Stock that were retained by the Sponsor in connection with the consummation of the Business Combination from 1,500,000 to 1,000,000 (after transfer of 150,000 shares pursuant to the Share Transfer Agreement). The Amended and Restated Sponsor Support and Forfeiture Agreement became effective immediately following the Closing of the Business Combination.
Sponsor Letter Agreement Amendment
Tailwind, on the one hand, and the Sponsor and the Sponsor Insiders, on the other hand, are parties to the Sponsor Letter Agreement. In connection with the Business Combination Agreement, the Form Amendment was agreed upon. The Sponsor Letter Agreement Amendment entered into on November 22, 2022 superseded the Form Amendment and amended and restated the lock-up restrictions under the Sponsor Letter Agreement to provide that the Sponsor Insiders may not transfer any Founder Shares (as defined therein) (A) if the completion of an initial Business Combination occurs prior to March 30, 2023, until the earliest of (i) nine (9) months following the completion of an initial Business Combination and (ii) September 30, 2023 and (B) if the completion of an initial Business Combination occurs on or after March 30, 2023, six (6) months following the completion of an initial Business Combination; provided that transfers of the Company’s securities following the Closing will be permitted to the extent (i) the proceeds from any such transfer are used by the Sponsor to repay the Sponsor Debt (as defined therein) and/or (ii) any such transfer itself constitutes repayment of the Sponsor Debt pursuant to the terms thereof. The amendments set forth in the Sponsor Letter Agreement Amendment became effective immediately following the Closing.
On January 31, 2023, the parties to the Sponsor Letter Agreement amended and restated the Letter Agreement (the “Amended and Restated Letter Agreement”). The Amended and Restated Letter Agreement, as compared to the Form Amendment, among other things, amended the specified exceptions to the lock-up restrictions under the Sponsor Letter Agreement to permit transfers of the Company’s securities following the Closing of the Business Combination to the extent (i) the transfer(s) is made at a price no less than the daily volume-weighted average price on the trading day prior to such transfer(s), as reported by Bloomberg and (ii) the net proceeds from any such transfer(s) does not exceed $1,350,000 in the aggregate and the proceeds from any such transfer are used by the Sponsor to repay the Sponsor Debt (as defined therein); however, if such transfer(s) is proposed to be made at a price that is less than the daily volume-weighted average price on the day prior to any such transfer, as reported by Bloomberg, Nuburu’s prior written consent must be obtained prior to any such transfer(s). The Amended and Restated Letter Agreement became effective immediately following the Closing of the Business Combination.
Related Party Loans
In addition, in order to finance transaction costs in connection with a business combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates could, but were not obligated to, make further loans to the Company as funds may be required (“Working Capital Loans”). Upon Closing, the Company repaid the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Extension Loan
On September 7, 2022, Tailwind held a special meeting of the stockholders (the “Extension Meeting”), at which Tailwind’s stockholders voted to amend the Pre-Closing Tailwind Certificate of Incorporation to extend the date by which Tailwind must consummate a business combination (the “Termination Date”) from September 9, 2022 to January 9, 2023 (the “Charter Extension Date”), and to allow Tailwind, without another stockholder vote, to elect to extend the Termination Date to consummate a business combination on a monthly basis for up to two times by an additional one month each time after the Charter Extension Date, by resolution of Tailwind’s board of directors if requested by the Sponsor, and upon five days’ advance notice prior to the applicable deadlines, until March 9, 2023, or a total of up to six months after September 9, 2022, unless the closing of Tailwind’s initial business combination shall have occurred prior to such date (the “Extension Amendment”). In connection with the approval of the Extension Amendment, on September 9, 2022, Tailwind issued an unsecured promissory note in the principal amount of up to $750,000 (the “Sponsor Note”) to the Sponsor, pursuant to which the Sponsor (or one or more of its affiliates, members or third-party designees) contributed $600,000 to the Trust Account. The Sponsor Note did not bear interest and was repaid upon Closing of the Business Combination.
Registration Rights and Lock-Up Agreement
Concurrently with the execution of the Business Combination Agreement, the Company and the Holders (as defined in the Registration Rights and Lock-Up Agreement) entered into the Registration Rights and Lock-Up Agreement, which amended and restated in its entirety the Registration and Stockholder Rights Agreement between the Company and the Sponsor, dated September 9, 2020.
Pursuant to the terms of the Registration Rights and Lock-up Agreement, the Company agreed to file a registration statement to register the resale of certain shares of Common Stock held by the Holders (as defined in the Registration Rights and Lock-up Agreement), including any Common Stock issuable to such Holders upon conversion of any Preferred Stock issued at Closing or pursuant to the Sale Option Agreement (see “—Sale Option Agreement” below). Further, pursuant to the terms of the Registration Rights and Lock-Up Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Holders (as defined in the Registration Rights and Lock-Up Agreement) holding at least a majority in interest of the then-outstanding number of Registrable Securities (as such term is defined in the Registration Rights and Lock-Up Agreement) held by all New Holders (as defined in the Registration Rights and Lock-Up Agreement), may demand at any time or from time to time, that the Company file a registration statement on Form S-1 or Form S-3 to register certain shares of Common Stock held by such Holders (as defined in the Registration Rights and Lock-Up Agreement). The Registration Rights and Lock-Up Agreement will also provide the Holders (as defined in the Registration Rights and Lock-Up Agreement) with “piggy-back” registration rights, subject to certain requirements and customary conditions.
In addition, subject to certain exceptions, each Holder (as defined in the Registration Rights and Lock-Up Agreement (which does not include Anzu Partners)) shall not transfer any Restricted Securities (each as defined in the Registration Rights and Lock-Up Agreement) beneficially owned or owned of record by such Holder until the end of the Lock-up Period applicable to such Holder. “Lock-up Period” shall mean:
(a)For the “Nuburu Holders” (as so listed in Schedule A to the Registration Rights and Lock-Up Agreement) and the Anzu SPVs, the period beginning on the Closing Date and ending on the earliest of: (i) the date that is 180 days from the Closing Date, (ii) if the volume weighted-average price (“VWAP”) of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period within 150 days after the Closing Date, the date that is 150 days from the Closing Date, or (iii) such date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property; and
(b)for the persons designated as “Founder Holders” on Schedule A of the Registration Rights and Lock-Up Agreement (the “Founder Holders”), the period beginning on the Closing Date and ending on the earliest of: (i) the date that is four (4) years from the Closing Date, (ii) (A) for 25% of the Restricted Securities (as defined in the Registration Rights and Lock-Up Agreement) held by each Founder Holder and their respective permitted transferees, the date that is 180 days from the Closing Date or if the VWAP of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period within 150 days after the Closing Date, the date that is 150 days from the Closing Date, (B) for an additional 25% of the Restricted Securities (as defined in the Registration Rights and Lock-Up Agreement) held by each Founder Holder and their respective permitted transferees, the date on which the Closing Price (as defined in the Registration Rights and Lock-Up Agreement) of the Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least one (1) year after the Closing Date, (C) for an additional 25% of the Restricted Securities held by each Founder Holder and their respective permitted transferees, the date on which the Closing Price of the Common Stock equals or exceeds $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least one (1) year after the Closing Date, and (D) for the remaining 25% of the Restricted Securities held by each Founder Holder and their respective permitted transferees, the date on which the Closing Price of the Common Stock equals or exceeds $17.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least one (1) year after the Closing Date; or (iii) such date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property; provided, that, for the avoidance of doubt, the Lock-up Period for any Restricted Securities for which the Lock-up Period has not ended on the fourth-year anniversary of the Closing Date shall end on the fourth-year anniversary of the Closing Date.
Notwithstanding the foregoing, (i) a Holder (as defined in the Registration Rights and Lock-Up Agreement) may transfer any shares of Converted Common Stock (as such term is defined in the Registration Rights and Lock-Up Agreement) beneficially owned or owned of record by such Holder at any time if the sale price of the Converted Common Stock at which the transfer occurs (x) exceeds the 10-day VWAP (as defined in the Registration Rights and Lock-Up Agreement) per share of Common Stock, and (y) exceeds $5.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), and (ii) an Anzu SPV may transfer any shares of Common Stock received by such Holder at the effective time as aggregate common stock merger consideration that are beneficially owned or owned of record by such Anzu SPV at any time if the sale price of the Common Stock at which the transfer occurs exceeds the 10-day VWAP per share of Common Stock.
The Company has also agreed to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and agents and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including reasonable outside attorneys’ fees) (as determined by a final and non-appealable judgment, order or decree of a court of competent jurisdiction) caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein.
On November 2, 2022, the Company and certain other parties entered into an amendment (the “Amendment to Registration Rights and Lock-Up Agreement”) to the Registration Rights and Lock-Up Agreement. The Amendment to Registration Rights and Lock-Up Agreement amended the original Registration Rights and Lock-Up Agreement to, among other things, (a) exclude from the definition of “Restricted Securities” shares of the Company’s securities transferred in connection with the repayment of such loans to those individuals from whom the Sponsor borrowed funds in connection with the Sponsor Loan; (b) expand the definition of “Original Holder” to include those individuals from whom the Sponsor borrowed funds in connection with the Sponsor Loan; (c) expand the scope of “Permitted Transfers” to include any Common Stock to be issued to the Anzu Holders at the Effective Time as merger consideration pursuant to the Business Combination Agreement (each as defined in the Registration Rights and Lock-Up Agreement); and (d) make such other amendments as set forth in the Amendment to Registration Rights and Lock-Up Agreement. The amendments set forth in the Amendment to Registration Rights Agreement became effective immediately following the Closing of the Business Combination.
On January 31, 2023, the Company and certain other parties entered into an amendment (the “Second Amendment to Registration Rights and Lock-Up Agreement”) to Registration Rights and Lock-Up Agreement.
The Second Amendment to Registration Rights and Lock-Up Agreement amended the Registration Rights and Lock-Up Agreement to, among other things, (a) amend the parties to the Registration Rights and Lock-Up Agreement, (b) amend the defined term “Lock-Up Period” to specify the lock-up period applicable to the Transferred Founder Shares held by the Purchasing Party; (c) expand the definition of “New Holder” to include the Purchasing Party; and (d) expand the scope of “Restricted Securities” to include the Transferred Founder Shares. The amendments set forth in the Second Amendment to Registration Rights Agreement became effective immediately following the Closing of the Business Combination.
Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC (“CCM”), previously agreed with the Company to accept shares (the “Consideration Shares”) as payment for certain services rendered in connection with the Business Combination. On January 31, 2023, Tailwind and certain other parties entered into an amendment (the “Third Amendment to Registration Rights and Lock-Up Agreement”) to the Registration Rights and Lock-Up Agreement. The Third Amendment to Registration Rights and Lock-Up Agreement further amended the original Registration Rights and Lock-Up Agreement to, among other things, (a) amend the parties to the Registration Rights and Lock-Up Agreement, (b) amend the defined term “Lock-Up Period” to specify the lock-up period applicable to the Consideration Shares held by CCM, which lasts until the earlier of September 30, 2023 or such date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property, (c) expand the definition of “New Holder” to include CCM, (d) expand the scope of “Restricted Securities” to include the Consideration Shares and (e) allow CCM to transfer any shares of Common Stock prior to the expiration of the Lock-Up Period if the sale price of the common stock at which the transfer occurs (x) equals or exceeds the VWAP per share of common stock for the previous trading day, and (y) exceeds $5.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like); provided, however, that any such transfer(s) by CCM may not exceed more than 20% of the traded volume on the date of transfer. The amendments set forth in the Third Amendment to Registration Rights Agreement became effective immediately following the Closing of the Business Combination.
On March 10, 2023, the Company and certain other parties entered into an amendment to the Registration Rights and Lock-Up Agreement (the “Fourth Amendment to Registration Rights and Lock-Up Agreement”). The Fourth Amendment to Registration Rights and Lock-Up Agreement amended the Registration Rights and Lock-Up Agreement to expand the scope of “Permitted Transfers” by the Anzu Investors by removing the requirement that the price at which such transfers occur must exceed $5.00 per share of Common Stock.
Sale Option Agreement
Concurrently with the execution and delivery of the Registration Rights and Lock-Up Agreement, the Company and the Anzu SPVs entered into the Sale Option Agreement. Pursuant to the terms of the Sale Option Agreement, in the event an Anzu SPV transfers any shares of Common Stock beneficially owned or owned of record by such holder prior to the expiration of the lock-up period applicable to such holder in a Permitted Transfer (as defined therein), such holder must notify the Company of the Permitted Transfer, whereupon, the Company has the right, but not the obligation, to cause such holder to use up to 2/3 of the gross proceeds of the Permitted Transfer to purchase Preferred Stock from the Company at a price equal to $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).
On November 22, 2022, Tailwind and certain other parties entered into an Amendment to Preferred Stock Sale Option Agreement that, among other things, amended the parties to the original Sale Option Agreement, which such amendment became effective immediately following the Closing.
On November 28, 2022, Tailwind and certain other parties entered into a Second Amendment to Preferred Stock Sale Option Agreement that, among other things restricts the ability of the Anzu SPVs to transfer (i) any shares of Preferred Stock that was acquired by such Anzu SPV pursuant to the Company’s exercise of the Option(as defined in the Sale Option Agreement), and (ii) any shares of Common Stock to be issued to such Anzu SPV as a result of any conversion of any shares of Preferred Stock referred to in the foregoing clause (i), until the earliest of (A) December 29, 2023, (B) the date that the aggregate number of shares of Common Stock sold under the 10b5-1 Sales Plan results in no remaining shares of Common Stock being available for Tigress to sell under the plan with respect to such Anzu SPV or (C) the termination of the 10b5-1 Sales Plan with respect to such Anzu SPV. Each of the Anzu SPVs has agreed in the Sale Option Agreement not to sell any shares of Preferred Stock which it may be required by the Company to purchase pursuant to the Sale Option Agreement or any shares of Common Stock issued upon conversion thereof, absent consent of the Company or for certain related party transfers, gifts or transfers to the Company or certain related parties, while the 10b5-1 Sales Plan is in effect with respect to such Anzu SPV, unless (x) an announcement of a bona fide tender or exchange offer is made by a person other than (A) the Anzu SPVs or (B) an affiliate of the Anzu SPVs where such affiliation does not arise with or through the Company with respect to the Common Stock or Preferred Stock or (y) a public announcement is made by the Company or a person controlled by the Company with respect to a bona fide merger, acquisition, reorganization, recapitalization or comparable transaction affecting the securities of the Company as a result of which the Common Stock or Preferred Stock will be exchanged for or converted into shares of another company. The Second Amendment to Preferred Stock Sale Option Agreement also provides that the Company will request the board of directors of the Company, or an appropriate committee of “non-employee directors” (as defined in Rule 16b-3 of the Exchange Act) thereof, to adopt one or more resolutions consistent with the interpretive guidance of the SEC designed to cause each acquisition of shares of Preferred Stock by the Anzu SPVs pursuant to the Sale Option Agreement to be an exempt transaction for purposes of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder to the extent consistent with applicable law.
On March 10, 2023, Tailwind and certain other parties entered into a Third Amendment to Preferred Stock Sale Option Agreement that revised the definition of an “Option Period” during which the Company may exercise the Option to mean (i) the first through third trading day of each month, with respect to permitted transfers made by the holder during the period beginning with the start of the eleventh trading day of the preceding month and continuing through the end of the preceding month, and (ii) the eleventh through thirteenth trading day of each month, with respect to permitted transfers made during the first ten trading days of that month.
Stockholder Support Agreement
In connection with the execution of the Business Combination Agreement, the Company and certain stockholders of Legacy Nuburu entered into the Stockholder Support Agreement, pursuant to which such stockholders of Legacy Nuburu agreed to, among other things, vote all of their shares of Nuburu Common Stock and Nuburu Preferred Stock in favor of the Business Combination Agreement and the Business Combination, including the Merger, and to waive all of their right in respect of the Preferred Stock Issuance (other than with respect to any shares issued pursuant to the conversion of the Company Notes).
Indemnification Agreements
The Company has entered into separate indemnification agreements with its directors and executive officers, in addition to the indemnification provided for in the Certificate of Incorporation and our bylaws. These agreements, among other things, require the Company to indemnify the Company’s directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at the Company’s request. The Company believes that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in the Certificate of Incorporation and our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit the Company and its stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Director Letter Agreements
Nuburu has entered into letter agreements with the persons serving on the board of directors as non-employee directors. See the section titled “Executive Compensation — Director Compensation”.
Anzu Designee Letter Agreement
On November 28, 2022, the Company, Legacy Nuburu and Anzu Partners entered into the Anzu Designee Letter Agreement that, among other things provides that the Company and Legacy Nuburu will use their respective reasonable best efforts to cause Daniel Hirsch (or, if Mr. Hirsch is unable to serve as a director of the Company at the Effective Time, then another representative designated by Anzu Partners in writing and reasonably acceptable to Legacy Nuburu) to be a member of the board of directors of the Company as a Class III director pursuant to Section 2.05(b) and Section 7.15(a) of the Business Combination Agreement (such representative, the “Anzu Representative”). In addition, following the Effective Time, in connection with any vacancy caused by the departure of the Anzu Representative from the board of directors of the Company (unless Anzu Partners declines in writing to designate a successor nominee), the Company will cause such vacancy to be filled by one designee of Anzu Partners (to be selected by Anzu Partners, with notice of such selection to be delivered in writing to the Company, and reasonably acceptable to the Company). The foregoing obligation automatically terminates at the close of business on the day on which the initial term of the Class III directors ends, which is expected to be in the second quarter of 2025.
Anzu Resolutions Letter Agreement
On December 8, 2022, the Company and Anzu Partners entered into a Letter Agreement requiring the Company to adopt resolutions substantially in the form set forth as Schedule A thereto. Such resolutions were adopted by Tailwind’s board of directors prior to Closing and again ratified by the Company’s board of directors immediately following Closing. The resolutions approved the acquisition of certain pecuniary interests in Common Stock and Preferred Stock of the Company by each Anzu Investor, and certain affiliates of the Anzu Investors (the “Designated Persons”) (including any Designator Persons that may be deemed “directors by deputization” of the Company so long as they remain such “directors by deputization”), for purposes of Rule 16b-3 promulgated under the Exchange Act, as a result of the Business Combination or otherwise pursuant to the Business Combination Agreement and the other agreements and documents contemplated thereby (including, without limitation, the Anzu Partners Warrant, all other outstanding warrants to purchase Legacy Nuburu capital stock or the Sale Option Agreement, and the conversion of any Preferred Stock acquired as otherwise described in the resolutions) (collectively, the “Exempt Transactions”).
Rule 16b-3 exempts from the short-swing profits liability provisions of Section 16(b) of the Exchange Act certain transactions in an issuer’s securities between the issuer or its majority-owned subsidiaries and its officers and directors if, among other things, the transaction is approved in advance by the issuer’s board of directors or a disinterested committee of the issuer’s board of directors. The Rule 16b-3 exemption extends to any such transactions by an entity beneficially owning more than 10% of a class of an issuer’s equity securities if the entity is a “deputized” director because it has a representative on the issuer’s board of directors. The board of directors’ intent in approving the Exempt Transactions for purposes of Rule 16b-3 was to exempt such transactions from the short-swing profits liability provisions of Section 16(b) of the Exchange Act.
Permitted Anzu SPV Transactions
Pursuant to the Registration Rights Agreement, the Anzu SPVs may at any time following the Closing Date, including during the 180-day Lock-up Period otherwise applicable to such holders, transfer otherwise restricted shares of Common Stock if the sale price of the Common Stock at which the transfer occurs exceeds the 10-day VWAP per share of Common Stock (each such transfer by an Anzu SPV, a “Permitted Transfer”).
Pursuant to the Sale Option Agreement, during each Option Period (as defined below) the Company shall have the right (an “Option”), but not the obligation, to cause any Anzu SPV to use up to 2/3 of the gross proceeds of Permitted Transfers made by such holder to purchase Preferred Stock from the Company at a purchase price of $10.00 per share of Preferred Stock (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) (each such a purchase by an Anzu SPV, a “Preferred Stock Purchase”). An “Option Period” shall mean (i) the first through third trading day of each month, with respect to Permitted Transfers made by the holder during the period beginning with the start of the eleventh trading day of the preceding month and continuing through the end of the preceding month, and (ii) the eleventh through thirteenth trading day of each month, with respect to Permitted Transfers made during the first ten trading days of that month. If the Company causes the Anzu SPV to make Preferred Stock Purchases, the Company has an obligation to file a registration statement to register the shares of underlying Common Stock issuable upon conversion of any Preferred Stock so purchased.
On November 28, 2022, the Company and certain other parties entered into a Second Amendment to Preferred Stock Sale Option Agreement that, among other things provides that the Company will request the board of directors, or an appropriate committee of “non-employee directors” (as defined in Rule 16b-3 of the Exchange Act) thereof, to adopt one or more resolutions consistent with the interpretive guidance of the SEC designed to cause each acquisition of shares of Preferred Stock by the Anzu SPVs pursuant to the Sale Option Agreement to be an exempt transaction for purposes of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder to the extent consistent with applicable law (for more information, see “— Sale Option Agreement”).
Plan of Distribution
We are registering the shares of Common Stock to permit the resale of these shares of Common Stock by the holders thereof from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the Selling Stockholders of the shares of Common Stock. We will bear all fees and expenses incident to our obligation to register the shares of Common Stock.
The Selling Stockholders may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers, the Selling Stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions:
•on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
•in the over-the-counter market;
•in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
•through the writing of options, whether such options are listed on an options exchange or otherwise;
•ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
•block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
•purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
•an exchange distribution in accordance with the rules of the applicable exchange;
•privately negotiated transactions;
•sales pursuant to Rule 144;
•broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
•a combination of any such methods of sale; and
•any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares of Common Stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus. In addition, the Selling Stockholders may transfer the shares of Common Stock by other means not described in this prospectus. If the Selling Stockholders effect such transactions by selling shares of Common Stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Stockholders or commissions from purchasers of the shares of Common Stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). The Selling Stockholders may also loan or pledge shares of Common Stock to broker-dealers that in turn may sell such shares.
The Selling Stockholders may pledge or grant a security interest in some or all of their Common Stock and, if the Selling Stockholders default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The Selling Stockholders also may transfer and donate the shares of Common Stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required by the Securities Act and the rules and regulations thereunder, the Selling Stockholders and any broker-dealer participating in the distribution of the shares of Common Stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of Common Stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of Common Stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that the Selling Stockholders will sell any or all of the shares of Common Stock registered pursuant to the registration statement, of which this prospectus forms a part.
The Selling Stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of Common Stock by the Selling Stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of Common Stock to engage in market-making activities with respect to the shares of Common Stock. All of the foregoing may affect the marketability of the shares of Common Stock and the ability of any person or entity to engage in market-making activities with respect to the shares of Common Stock.
We will pay all expenses of the registration of the shares of Common Stock pursuant to the registration rights agreement, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a Selling Stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the Selling Stockholders against liabilities, including some liabilities under the Securities Act in accordance with the registration rights agreements or the Selling Stockholders will be entitled to contribution. We may be indemnified by the Selling Stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished to us by the Selling Stockholders specifically for use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares of Common Stock will be freely tradable in the hands of persons other than our affiliates.
Legal Matters
The validity of the securities offered hereby will be passed upon for us by Holland & Hart, Denver, Colorado.
Experts
WithumSmith+Brown, PC, an independent registered public accounting firm, has audited our consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022, as stated in its report included herein, and such audited consolidated financial statements have been so included reliance upon the report of such firm given upon its authority as experts in accounting and auditing. The report on the consolidated financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website, at http://www.sec.gov, that contains registration statements, reports, proxy statements and other information regarding registrants that file electronically with the SEC, including us. Our website address is http://www.nuburu.net.
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our Common Stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our Common Stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy
of the contract or document that has been filed. Each statement is this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
You may request a copy of this prospectus by contacting us at: Nuburu, Inc. at 7442 S Tucson Way, Suite 130, Centennial, CO 80112. Our investor relations website is located at https://ir.nuburu.net and such reports and documents may be accessed from our website. Information contained on or accessible through Nuburu’s website is not a part of the registration statement of which this prospectus forms a part, and the inclusion of Nuburu’s website address in this prospectus is an inactive textual reference only.
NUBURU, INC.
TABLE OF CONTENTS
.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Nuburu, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Nuburu, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, consolidated statements of changes in convertible preferred stock and stockholders’ equity (deficit), and consolidated statements of cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022, and in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has sustained recurring operating losses and negative cash flows from operating activities and substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Restatement
As discussed in Notes 1 and 14 to the financial statements, the 2023 and 2022 financial statements have been restated to correct certain misstatements.
Emphasis of Matter – Restatement of Unaudited Interim Financial Statements
As discussed in Notes 1 and 14 to the financial statements, the unaudited interim financial statements as of March 31, 2023, June 30, 2023 and September 30, 2023 have been restated to correct certain misstatements.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company's auditor since 2021.
East Brunswick, New Jersey
April 15, 2024, except for Note 1 and 14, as to which the date is November 8, 2024.
PCAOB ID Number 100
NUBURU, INC.
CONSOLIDATED BALANCE SHEETS (As Restated)
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
| | (As Restated) | | | (As Restated) | |
ASSETS | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 2,148,700 | | | $ | 2,880,254 | |
Accounts receivable | | | 482,279 | | | | 327,200 | |
Inventories, net of allowance of $1,133,457 and $292,990, respectively | | | 1,456,275 | | | | 972,695 | |
Deferred financing costs | | | 50,000 | | | | 4,258,515 | |
Prepaid expenses and other current assets | | | 156,255 | | | | 46,737 | |
Total current assets | | | 4,293,509 | | | | 8,485,401 | |
Property and equipment, net | | | 5,650,976 | | | | 3,771,849 | |
Construction in progress | | | — | | | | 188,912 | |
Right-of-use assets | | | 586,164 | | | | 641,651 | |
Other assets | | | 34,359 | | | | 34,359 | |
TOTAL ASSETS | | $ | 10,565,008 | | | $ | 13,122,172 | |
| | | | | | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | 4,744,606 | | | $ | 4,456,587 | |
Accrued expenses | | | 2,750,305 | | | | 2,312,118 | |
Current portion of operating lease liability | | | 355,385 | | | | 343,049 | |
Contract liabilities | | | 30,400 | | | | 178,750 | |
Current portion of notes payable | | | 2,147,992 | | | | — | |
Current portion of convertible notes payable | | | — | | | | 22,688,097 | |
Total current liabilities | | | 10,028,688 | | | | 29,978,601 | |
Operating lease liability | | | 237,369 | | | | 373,907 | |
Convertible notes payable | | | 6,713,241 | | | | — | |
Warrant liabilities | | | 2,238,519 | | | | — | |
TOTAL LIABILITIES | | | 19,217,817 | | | | 30,352,508 | |
Commitments and Contingencies (Note 6) | | | | | | |
| | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 2,388,905 and 23,237,703 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | | | 23,889,050 | | | | 4,040 | |
| | | | | | |
Stockholders’ Deficit | | | | | | |
Common stock, $0.0001 par value; 250,000,000 shares authorized; 36,894,323 and 5,556,857 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | | | 3,689 | | | | 1,077 | |
Additional paid-in capital | | | 64,741,241 | | | | 59,344,952 | |
Accumulated deficit | | | (97,286,789 | ) | | | (76,580,405 | ) |
Total Stockholders’ Deficit | | | (32,541,859 | ) | | | (17,234,376 | ) |
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | $ | 10,565,008 | | | $ | 13,122,172 | |
The accompanying notes are an integral part of the consolidated financial statements.
NUBURU, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (As Restated)
| | | | | | | | |
| | Year Ended
December 31, | |
| | 2023 | | | 2022 | |
| | | | | (As Restated) | |
Revenue | | $ | 2,085,532 | | | $ | 1,440,428 | |
Cost of revenue | | | 5,695,433 | | | | 4,859,599 | |
Gross margin | | | (3,609,901 | ) | | | (3,419,171 | ) |
Operating expenses: | | | | | | |
Research and development | | | 5,462,680 | | | | 4,546,057 | |
Selling and marketing | | | 1,539,690 | | | | 708,144 | |
General and administrative | | | 11,223,449 | | | | 5,324,417 | |
Total operating expenses | | | 18,225,819 | | | | 10,578,618 | |
Loss from operations | | | (21,835,720 | ) | | | (13,997,789 | ) |
Change in fair value of convertible notes payable | | | — | | | | (15,388,097 | ) |
Interest income | | | 117,372 | | | | 43,976 | |
Interest expense | | | (754,549 | ) | | | (175,288 | ) |
Other income, net | | | 1,766,513 | | | | — | |
Loss before provision for income taxes | | $ | (20,706,384 | ) | | $ | (29,517,198 | ) |
Provision for income taxes | | | — | | | | — | |
Net loss and comprehensive loss | | $ | (20,706,384 | ) | | $ | (29,517,198 | ) |
Net loss per common share, basic and diluted | | $ | (0.63 | ) | | $ | (5.41 | ) |
Weighted-average common shares used to compute net loss per common share, basic and diluted | | | 33,064,250 | | | | 5,458,184 | |
The accompanying notes are an integral part of the consolidated financial statements.
NUBURU, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (As Restated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Convertible
Preferred Stock | | | | Common Stock | | | | | | | | | | |
| | Shares(1) | | | Amount | | | | Shares(1) | | | Amount | | | Additional
Paid-in
Capital | | | Accumulated
Deficit | | | Total
Stockholders'
Equity
(Deficit) | |
Balance as of January 1, 2022 | | | 23,196,296 | | | $ | 4,036 | | | | | 5,153,286 | | | $ | 999 | | | $ | 56,646,247 | | | $ | (47,063,207 | ) | | $ | 9,584,039 | |
Issuance of Legacy Nuburu Series C preferred stock | | | 41,407 | | | | 4 | | | | | — | | | | — | | | | 188,886 | | | | — | | | | 188,886 | |
Issuance of Legacy Nuburu common stock from option exercises | | | — | | | | — | | | | | 403,571 | | | | 78 | | | | 147,479 | | | | — | | | | 147,557 | |
Stock-based compensation | | | — | | | | — | | | | | — | | | | — | | | | 2,362,340 | | | | — | | | | 2,362,340 | |
Net loss | | | — | | | | — | | | | | — | | | | — | | | | — | | | | (29,517,198 | ) | | | (29,517,198 | ) |
Balance as of December 31, 2022 | | | 23,237,703 | | | $ | 4,040 | | | | | 5,556,857 | | | $ | 1,077 | | | $ | 59,344,952 | | | $ | (76,580,405 | ) | | $ | (17,234,376 | ) |
Issuance of Common Stock and Series A preferred stock upon conversion of convertible notes in connection with the reverse recapitalization | | | 1,361,787 | | | | 13,617,870 | | | | | 1,361,787 | | | | 136 | | | | 13,345,377 | | | | — | | | | 13,345,513 | |
Conversion of Legacy Nuburu convertible preferred stock into Common Stock in connection with the reverse recapitalization | | | (23,237,703 | ) | | | (4,040 | ) | | | | 23,237,703 | | | | 2,323 | | | | 1,717 | | | | — | | | | 4,040 | |
Issuance of Common Stock and Series A preferred stock upon the reverse recapitalization, net of issuance costs | | | 1,481,666 | | | | 14,816,660 | | | | | 3,233,745 | | | | (197 | ) | | | (18,073,988 | ) | | | — | | | | (18,074,185 | ) |
Issuance of Common Stock and Series A preferred stock to satisfy certain reverse recapitalization costs | | | 195,452 | | | | 1,954,520 | | | | | 195,452 | | | | 20 | | | | (1,954,540 | ) | | | — | | | | (1,954,520 | ) |
Recognition of Public Warrants upon the reverse recapitalization | | | — | | | | — | | | | | — | | | | — | | | | (1,336,863 | ) | | | — | | | | (1,336,863 | ) |
Issuance of Common Stock from the Lincoln Park Purchase Agreement | | | — | | | | — | | | | | 1,681,898 | | | | 167 | | | | 2,099,830 | | | | — | | | | 2,099,997 | |
Issuance of Common Stock warrants in connection with the June 2023 Convertible Notes (net of issuance cost of $160,345) | | | — | | | | — | | | | | — | | | | — | | | | 2,351,414 | | | | — | | | | 2,351,414 | |
Issuance of Common Stock upon conversion of convertible preferred stock | | | (650,000 | ) | | | (6,500,000 | ) | | | | 1,300,000 | | | | 130 | | | | 6,499,870 | | | | — | | | | 6,500,000 | |
Issuance of Common Stock from option exercises | | | — | | | | — | | | | | 5,153 | | | | 1 | | | | 6,998 | | | | — | | | | 6,999 | |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 391,651 | | | | 39 | | | | (39 | ) | | | — | | | | — | |
Restricted stock units used for tax withholdings | | | — | | | | — | | | | | (69,923 | ) | | | (7 | ) | | | (33,896 | ) | | | — | | | | (33,903 | ) |
Stock-based compensation | | | — | | | | — | | | | | — | | | | — | | | | 2,490,409 | | | | — | | | | 2,490,409 | |
Net loss | | | — | | | | — | | | | | — | | | | — | | | | — | | | | (20,706,384 | ) | | | (20,706,384 | ) |
Balance as of December 31, 2023 | | | 2,388,905 | | | $ | 23,889,050 | | | | | 36,894,323 | | | $ | 3,689 | | | $ | 64,741,241 | | | $ | (97,286,789 | ) | | $ | (32,541,859 | ) |
(1) The number of shares of convertible preferred stock and common stock issued and outstanding prior to the Business Combination have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Business Combination. See Note 1 - Description of Business and Note 3 - Reverse Recapitalization for more information.
The accompanying notes are an integral part of the consolidated financial statements.
NUBURU, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (As Restated)
| | | | | | | | |
| | Year Ended
December 31, | |
| | 2023 | | | 2022 | |
| | | | | (As Restated) | |
Cash Flows from Operating Activities: | | | | | | |
Net loss | | $ | (20,706,384 | ) | | $ | (29,517,198 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | | 505,898 | | | | 450,505 | |
Stock-based compensation | | | 2,490,409 | | | | 2,362,340 | |
Change in fair value of convertible notes payable | | | — | | | | 15,388,097 | |
Change in fair value of warrant liabilities | | | (1,766,513 | ) | | | — | |
Inventory reserve adjustments | | | 840,467 | | | | (258,116 | ) |
Amortization of debt discount | | | 416,636 | | | | — | |
Amortization of deferred financing costs | | | 105,924 | | | | — | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | | | (155,079 | ) | | | (103,925 | ) |
Inventories | | | (1,613,781 | ) | | | (199,429 | ) |
Prepaid expenses and other current assets | | | (268,118 | ) | | | 23,336 | |
Operating lease right-of-use asset | | | 319,426 | | | | 292,932 | |
Accounts payable | | | 2,715,504 | | | | 628,702 | |
Accrued expenses | | | 111,939 | | | | 1,013,437 | |
Contract liabilities | | | (148,350 | ) | | | 5,700 | |
Operating lease liability | | | (388,141 | ) | | | (314,111 | ) |
Net cash used in operating activities | | | (17,540,163 | ) | | | (10,227,730 | ) |
Cash Flows from Investing Activities: | | | | | | |
Purchase of property and equipment | | | (1,167,751 | ) | | | (536,038 | ) |
Net cash used in investing activities | | | (1,167,751 | ) | | | (536,038 | ) |
Cash Flows from Financing Activities: | | | | | | |
Proceeds from issuance of Legacy Nuburu convertible promissory notes | | | 4,100,000 | | | | 7,300,000 | |
Proceeds from issuance of June 2023 Senior Convertible Notes and Warrants | | | 9,225,000 | | | | — | |
Proceeds from issuance of November 2023 Junior Notes and Warrants (net of original issue discount) | | | 5,000,000 | | | | — | |
Proceeds from the exercise of stock options | | | 6,999 | | | | 147,557 | |
Restricted stock units used for tax withholdings | | | (33,903 | ) | | | — | |
Proceeds from the issuance of Legacy Nuburu preferred stock | | | — | | | | 188,890 | |
Proceeds from reverse recapitalization | | | 3,243,079 | | | | — | |
Proceeds from the issuance of preferred stock | | | 5,000 | | | | — | |
Proceeds from issuance of Common Stock from the Lincoln Park Purchase Agreement | | | 2,099,997 | | | | — | |
Payment of transaction costs related to the reverse recapitalization | | | (4,734,913 | ) | | | — | |
Repayment of related party convertible promissory notes | | | (675,000 | ) | | | — | |
Payment of deferred financing costs | | | (259,899 | ) | | | — | |
Net cash provided by financing activities | | | 17,976,360 | | | | 7,636,447 | |
NET CHANGE IN CASH DURING THE PERIOD | | | (731,554 | ) | | | (3,127,321 | ) |
CASH AND CASH EQUIVALENTS ―BEGINNING OF PERIOD | | | 2,880,254 | | | | 6,007,575 | |
CASH AND CASH EQUIVALENTS ―END OF PERIOD | | $ | 2,148,700 | | | $ | 2,880,254 | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | |
Cash paid for interest | | $ | — | | | $ | — | |
Cash paid for income taxes | | $ | — | | | $ | — | |
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | |
Right-of-use assets obtained in exchange for new operating lease liabilities | | $ | 263,939 | | | $ | 934,583 | |
Transfer of property and equipment from inventory | | $ | 430,666 | | | $ | — | |
Transfer of property and equipment from prepaid expenses | | $ | 198,600 | | | $ | — | |
Purchase of property and equipment in accounts payable and accrued expenses | | $ | 540,028 | | | $ | — | |
Deferred financing costs included in accounts payable and accrued expenses | | $ | 681,845 | | | $ | 4,258,515 | |
Transaction costs related to the reverse recapitalization not yet paid | | $ | 1,007,439 | | | $ | — | |
Issuance of Common Stock upon conversion of preferred stock | | $ | 65 | | | | |
Issuance of Common Stock upon conversion of preferred stock in connection with the reverse recapitalization | | $ | 11,575,286 | | | $ | — | |
The accompanying notes are an integral part of the consolidated financial statements.
NUBURU, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (As Restated)
NOTE 1. BACKGROUND AND ORGANIZATION
Nuburu, Inc. (“Nuburu” or the “Company”) and its wholly-owned subsidiary Nuburu Subsidiary, Inc., is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high-value applications including welding and 3D printing. The Company is located in Centennial, Colorado.
Nuburu was originally incorporated in Delaware on July 21, 2020 under the name Tailwind Acquisition Corp. (“Tailwind”) as a special purpose acquisition company, formed for the purpose of effecting an initial business combination with one or more target businesses. On September 9, 2020 (the “IPO Closing Date”), the Company consummated its initial public offering (the “IPO”). On January 31, 2023 (the "Closing Date"), the Company consummated a business combination with Nuburu Subsidiary, Inc. f/k/a Nuburu, Inc. (“Legacy Nuburu”), a privately held operating company which merged into the Company's subsidiary Compass Merger Sub, Inc. (the “Business Combination”) and changed its name to “Nuburu, Inc.,” and the Company became the owner, directly or indirectly, of all of the equity interests of Nuburu Subsidiary, Inc. and its subsidiaries. In light of the fact that the Business Combination has closed and the Company's ongoing business will be the business formerly operated by Legacy Nuburu, these financial statements primarily include information regarding Legacy Nuburu’s business.
Throughout the notes to the consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Legacy Nuburu prior to the consummation of the Business Combination, and Nuburu and its subsidiaries after the consummation of the Business Combination.
Going Concern and Liquidity
The Company devotes its efforts to business planning, research and development, and raising capital. The Company is an emerging growth company that has not yet achieved full commercialization and is expected to incur losses until it does.
From inception through December 31, 2023, the Company has incurred operating losses and negative cash flows from operating activities. For the years ended December 31, 2023 and 2022, the Company has incurred net losses of $20,706,384 and $29,517,198, respectively, and the Company has an accumulated deficit of $97,286,789 as of December 31, 2023. The Company expects to continue to expand its operations, including by investing in manufacturing, sales and marketing, research and development, and infrastructure to support its growth. The Company anticipates that it will incur net losses for the foreseeable future and, even if it increases its revenue, there is no guarantee that it will ever become profitable. All of the aforementioned factors raise substantial doubt about the Company's ability to continue as a going concern.
Until the Company can generate sufficient revenue to cover its operating expenses, working capital, and capital expenditures, the Company will rely on funds raised from the closing of the Business Combination, from the $9,225,000 of Senior Convertible Notes and Warrants issued in June 2023, from the $5,500,000 of Junior Notes and Warrants issued in November 2023, and from the $11,400,000 of Legacy Nuburu Convertible Notes, as defined and described in Note 8, issued prior to the Closing (refer to Note 8, Notes and Convertible Notes Payable for more information on the Company's notes); as well as from the Lincoln Park Purchase Agreement pursuant to which Lincoln Park has agreed to purchase from the Company, at the sole discretion of the Company, up to $100,000,000 of Common Stock from time to time over a 48-month period. In accordance with the Lincoln Park Purchase Agreement, Lincoln Park has purchased, at the option of the Company, approximately $2.1 million of Common Stock during the year ended December 31, 2023 but is not required to purchase shares if the Company's stock price falls below $1.00 per share.
The Company plans to finance its operations with proceeds from the issuance and sale of equity securities or debt; however, there is no assurance that management's plans to obtain additional debt or equity financing will be successfully implemented or implemented on terms favorable to the Company.
Certain Significant Risks and Uncertainties
The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, competition from substitute products and larger companies, protection of proprietary technology, ability to maintain distributor relationships, and dependence on key individuals.
Restatement
See Note 14, “Restatement of Previously Issued Consolidated Financial Statements and Previously Issued Unaudited Interim Condensed Consolidated Financial Statements ”, for additional information regarding the restatement of amounts included in the Company's previously issued financial statements as of and for the year ended December 31, 2023, the comparative period herein as of and for the year ended December 31, 2022 and for each of the quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission ("SEC").
Reclassification
Certain prior period balances in the consolidated statements of cash flows have been combined or reclassified to conform to current period presentation pursuant to Rule 10-01(a)(2) of Regulation S-X of the SEC. Such reclassifications had no impact on net income, cash flows or shareholders' equity previously reported.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Estimates and assumptions made by management include, but are not limited to, the Company's inventory reserve and valuation of stock-based awards and warrants issued. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
Cash equivalents are defined as short term, highly liquid investments, which are readily convertible to cash and have remaining maturities of three months or less at the date of acquisition. Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. The Company currently has bank deposits with financial institutions in the U.S. that exceed Federal Deposit Insurance Corporation insurance limits of $250,000. The Company has not experienced any losses in such accounts, nor does the Company believe it is exposed to any significant credit risk on cash and cash equivalents. However, any loss incurred or lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. As of December 31, 2023 and 2022, substantially all of the cash on hand was considered cash equivalents.
Concentrations of Credit Risk, Other Risks and Uncertainties
The Company's financial instruments that are subject to credit risk consist primarily of cash and cash equivalents and accounts receivable. At December 31, 2023 and 2022, substantially all of the Company's cash and cash equivalents were held in one large financial institution located in the United States. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. The Company generally requires deposits from its customers. The Company's accounts receivable are derived from billings to customers and it has not experienced any collection issues to-date.
The Company's future results of operations involve a number of risks and uncertainties. The Company’s current business activities consist of business planning, research and development efforts to design and develop high-power, high-brightness blue laser technology, and capital raising to finance the Company through full commercialization. The Company is subject to the risks associated with such activities, including the need to further develop its technology and its marketing and distribution channels; further develop its supply chain and manufacturing; and hire additional management and other key personnel. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations, are dependent upon future events, including its ability to access potential markets and secure long-term financing.
The Company currently depends upon a small number of customers for a substantial portion of its revenue. During the year ended December 31, 2023, two customers accounted for 39% and 29% of the Company's revenue, respectively. During the year ended December 31, 2022, two customers accounted for 47% and 22% of the Company’s revenue, respectively. As of December 31, 2023, four customers accounted for 50%, 18%, 13%, and 10% of the Company's accounts receivable, respectively. As of December 31, 2022, three customers accounted for 62%, 26%, and 8% of the Company’s accounts receivable, respectively. Loss of any of the Company's customers could have a material adverse effect on the Company's operations.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities, including cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses, which qualify as financial instruments under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820 — Fair Value Measurement ("ASC 820") approximates the carrying amounts represented in the consolidated balance sheets, primarily due to their short-term nature.
Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1: Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2: Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The assets’ or liabilities’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable consist of uncollateralized obligations due from customers under normal trade terms, typically requiring a substantial deposit prior to any shipment. The carrying value of receivables, net of the allowance for credit losses, represents their net realizable value. The allowance for credit losses is estimated by management based on the nature and the age of outstanding receivables, historical collection experience, specific customer circumstances, and reasonable and supportable forecasts of future economic conditions. Past due receivables are written off when the Company's collection efforts have been deemed unsuccessful in collecting the amounts past due. Bad debt recoveries are credited to the allowance account as collected.
The Company manufactures and sells its products to a broad range of customers. Customers are typically provided payment terms of 30 to 120 days. The Company has tracked historical loss information for its trade receivables and has not experienced any material credit losses to date. Management has also determined that there were no economic conditions present to warrant an allowance for credit losses as of December 31, 2023 and 2022. As such, there was no allowance for credit losses recorded as of December 31, 2023 and 2022.
Inventories, Net
All inventories are stated at the lower of cost determined on the first in, first out basis or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predicted costs of completion, disposal, and transportation. Inventory includes parts and components that may be specialized in nature and subject to obsolescence. The Company maintains a reserve for excess or obsolete inventory items. On a quarterly basis, the Company reviews inventory quantities on hand in comparison to past consumption, recent purchases, and other factors to determine what inventory quantities, if any, may not be sellable. Based on this review, inventories are written off and charged to cost of revenue when identified as excess or obsolete. Subsequent changes in facts and circumstances do not result in an increase in the reserve previously recognized.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization of property and equipment on a straight-line basis for financial accounting purposes, and on an accelerated basis for tax purposes, over the estimated useful life of the respective asset.
Maintenance and repairs are charged to expense as incurred and major renewals or betterments which extend the life of such assets are capitalized based on the shorter of the life of the lease or the estimated useful life. The net gain or loss on property retired or otherwise disposed of is credited or charged to operating expenses and the costs and accumulated depreciation and amortization are removed from the accounts.
The estimated useful lives for each major depreciable classification of property and equipment are as follows:
| | |
Description of property and equipment | | Years |
Computer equipment | | 5 |
Office furniture and equipment | | 7 |
Leasehold improvements | | Lease term or useful life, whatever is shorter |
Machinery and equipment | | 10 |
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, and operating lease liabilities, current, and noncurrent, on the consolidated balance sheets. The Company currently does not have any finance lease arrangements.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date of the lease. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company's lease terms may include an option to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognized lease expense for these leases on a straight-line basis over the lease term.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets being reviewed for impairment, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. There was no impairment loss recognized for the years ended December 31, 2023 or 2022.
Revenue Recognition
The Company's primary business activity involves sales of high-powered lasers and related installation services. The Company has sales to customers throughout the U.S., Europe, and Asia. All sales are settled in U.S. dollars. The Company accounts for revenue contracts with customers by applying the requirements of FASB ASC 606 — Revenue from Contracts with Customers ("ASC 606"), which includes the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenue when, or as, the Company satisfies a performance obligation.
In all sales arrangements, revenues are recognized when control of the promised goods or services is transferred to customers, in an amount the Company expects to be entitled to receive in exchange for those goods and services.
At contract inception, the Company assesses the goods or services promised within each contract and determines the performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Determining the method and amount of revenue to recognize requires the Company to make judgments and estimates which include determining whether the performance obligation is satisfied over time or at a point in time, the selection of method to measure progress towards completion, and determining if the contract includes any variable consideration or material right elements.
The Company’s primary performance obligations include product sales and installation services. Revenue for product sales is recognized when the customer obtains control of the product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. Revenue for installation services is recognized over time, as the service is rendered. For this performance obligation, the Company has a right to consideration from customers that corresponds directly with the value to the customers of the Company's performance completed to date, and as such, the Company recognizes revenue in the amount to which it has a right to invoice the customer. Typically, invoices are issued upon shipment or completion of services, which varies based on the product and service duration.
The Company allocates the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved standard pricing related to the performance obligations.
The Company recognizes freight and shipping costs associated with outbound freight after control over a product has transferred to a customer, as a fulfillment cost and includes those costs in materials within cost of revenue. Revenue received from shipping and handling fees is reflected in net revenue.
The Company's standard terms and conditions which are applicable to the Company's contracts covering the sale of its products include warranty provisions that provide assurance to its customers that the products will comply with agreed upon specifications, which is standard in the industry. The product warranty is accounted for in accordance with the guidelines under ASC 460-10 — Guarantees. Therefore, losses from warranty obligations are accrued when the amount of loss can be reasonably estimated, and the information is available before the financial statements are issued or are available to be issued.
The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flow are most significantly affected by its customer concentration, changes in technology, and adverse changes in the economy that may have an adverse impact on the ability of customers to contract with and pay the Company.
Income Taxes
Income taxes are accounted for in accordance with the provisions of FASB ASC 740 — Income Taxes ("ASC 740"), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Income taxes are recognized for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for income tax purposes. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and income tax basis of assets and liabilities, as measured by the enacted tax rates which will be in effect when these differences are expected to reverse. Deferred tax expense (credit) is the result of changes in the deferred tax assets and liabilities.
In the event of the future consequences of differences between financial reporting bases and tax bases of assets and liabilities result in a deferred tax asset, the Company performs an evaluation of the probability of being able to realize future benefits indicated by such asset. A valuation allowance related to a net deferred tax asset is recorded when it is more likely than not that some portion or all of the net deferred tax asset will not be realized. The Company recorded a full valuation allowance as of December 31, 2023 and 2022, as it is more likely than not that the Company will not be able to utilize the net deferred tax assets in the foreseeable future (see Note 12, Income Taxes). The Company maintains valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances.
The Company recognizes in its financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of operating expense. Management has evaluated the Company's tax positions and concluded the Company has taken no uncertain tax positions that would require adjustments to the financial statements to comply with the provisions of this guidance. As there were no uncertain tax positions as of December 31, 2023 and 2022, no interest or penalties were recorded to operating expenses. Tax returns filed by the Company remain open to federal and state income tax examinations through the statutory time periods.
Cost of Revenue
Cost of revenue primarily consists of the cost of materials, overhead and employee compensation associated with the manufacturing of our high-powered lasers. Product cost also includes lower of cost or net realizable value ("LCNRV") adjustments to inventory for adjustments to reduce the carrying value of inventory if its value is greater than the net realizable value, as well as adjustments for excess or obsolete inventory.
Research and Development Expenses
Research and development ("R&D") expenses consist of costs incurred to further the Company's commercialization development efforts. These costs consist primarily of compensation and related costs for R&D personnel, including stock-based compensation, employee benefits, training, travel, third-party consulting services, laboratory supplies, and R&D equipment depreciation. R&D costs are charged to the statement of operations as incurred and are included in operating expenses.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of compensation and related costs for the Company's direct sales force, sales management, and marketing and include stock-based compensation, employee benefits, and travel for selling and marketing employees as well as costs related to trade shows, marketing programs, third-party consulting expenses, and application lab depreciation expenses. Selling and marketing costs are charged to the statement of operations as incurred and are included in operating expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and related costs for finance, human resources, and other administrative personnel, and include stock-based compensation, employee benefits, and travel expenses. In addition, general and administrative expenses include third-party consulting and advisory services; legal, audit, and accounting services; and facilities costs. General and administrative costs are charged to the statement of operations as incurred and are included in operating expenses.
Stock-Based Compensation Expenses
The Company measures and recognizes the compensation expenses for all stock-based awards made to employees, directors, and consultants based on estimated grant date fair values. The fair value of employee stock options is estimated on the grant date using the Black-Scholes model. The fair value for time-based stock awards is based on the grant date share price reduced by the present value of the expected dividend yield prior to vesting. The fair value of market-based stock awards is estimated using an option-pricing model on the date of grant. Stock-based compensation is reduced for forfeitures, which are accounted for as they occur.
Deferred Financing Costs
Deferred financing costs related to financings not yet in place are included in deferred financing costs on the consolidated balance sheet and are not amortized until the associated financing is received, at which point the costs will be amortized over the term of the agreement. Deferred financing costs related to the Company's Junior Notes (as defined and described in Note 8) are included as a deduction from the carrying amount of the notes in current notes payable in the consolidated balance sheets and are amortized to interest expense over the term of the notes.
Debt Discount
The debt discount related to the Company's Junior Notes (as defined and described in Note 8) is included as a deduction from the carrying amount of the notes in current notes payable in the consolidated balance sheets and is amortized to interest expense over the term of the notes.
Net Loss Per Common Share
The Company's basic net loss per common share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Contingently issuable shares are included in the computation of basic net loss per share as of the date that all necessary conditions have been satisfied and issuance of the shares is no longer contingent. The Company's diluted net loss per share is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, restricted stock units, and warrants to purchase common stock equivalents have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13 — Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The standard was adopted by the Company effective January 1, 2023 and did not have any significant changes to the Company's financial statements and related notes.
In February 2016, the FASB issued ASU No. 2016-02 — Leases, and issued subsequent amendments to the initial guidance in September 2017 within ASU 2017-13, in January 2018 within ASU 2018-01, in July 2018 within ASU 2018-11, in December 2018 within ASU 2018-20, in March 2019 within ASU 2019-01, in November 2019 within ASU 2019-10, in February 2020 within ASU 2020-02, in September 2020 within ASU 2020-05, in July 2021 within ASU 2021-05, and November 2021 within ASU 2021-09 (collectively, "Topic 842"). Topic 842 supersedes Topic 840 — Leases, and requires lessees to recognize all leases on their balance sheets, with the exception of short-term leases, as a right-of-use asset and a corresponding lease liability measured at the present value of the lease payments. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard requires expanded disclosures regarding leasing arrangements. Effective January 1, 2022, the Company adopted Topic 842 using a modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to retained deficit upon adoption.
Topic 842 provides several optional practical expedients in transition. The Company elected to use the package of practical expedients permitted under the transition guidance, which allows the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs for any leases that existed prior to January 1, 2022. The Company did not elect to use the other practical expedients provided.
Upon adoption, the Company recognized the right-of-use asset and operating lease liability totaling $934,584 and $1,031,067, respectively, to reflect the present value of remaining lease payments under an existing lease arrangement with no impact to the opening balance of retained deficit as a result of adoption. The difference between the leased asset and lease liability represents the existing deferred rent liability balance, resulting from historical straight-lining of an operating lease, which was effectively reclassified upon adoption to reduce the measurement of the leased asset. Results for reporting periods beginning January 1, 2022 are presented under ASC 842. For more information on the impact of adoption and the disclosures required by the new standard, refer to Note 6, Commitments and Contingencies.
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 the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The standard is effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as reconciling items that meet a quantitative threshold. Further, the ASU requires additional disclosures on income tax expense and taxes paid, net of refunds received, by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024 on a prospective basis with the option to apply it retrospectively. Early adoption is permitted. The adoption of this guidance will result in the Company being required to include enhanced income tax related disclosures. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3. REVERSE RECAPITALIZATION
On January 31, 2023, upon the consummation of the Business Combination, all holders of 10,782,091 issued and outstanding shares of Legacy Nuburu common stock and 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock received shares of Nuburu common stock at a deemed value of $10.00 per share after giving effect to the exchange ratios set forth below (the “Exchange Ratios”):
| | | | |
Legacy Nuburu Class / Series | | Exchange Ratio | |
Legacy Nuburu Common Stock | | | 0.515 | |
Legacy Nuburu Series A Preferred Stock | | | 0.566 | |
Legacy Nuburu Series A-1 Preferred Stock | | | 0.599 | |
Legacy Nuburu Series B Preferred Stock | | | 0.831 | |
Legacy Nuburu Series B-1 Preferred Stock | | | 0.515 | |
Legacy Nuburu Series C Preferred Stock | | | 1.146 | |
This resulted in 31,323,904 shares of Nuburu Common Stock issued and outstanding as of the Closing and all holders of 7,132,467 issued and outstanding Legacy Nuburu equity awards received Nuburu equity awards covering 3,675,976 shares of Nuburu Common Stock at a deemed value of $10.00 per share after giving effect to the Exchange Ratios, based on the following events contemplated by the Business Combination Agreement:
•the cancellation and conversion of all 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock into 23,237,703 shares of Nuburu Common Stock at the conversion rate as calculated pursuant to Legacy Nuburu's Certificate of Incorporation, multiplied by the Exchange Ratios at the date and time the Business Combination became effective (“Effective Time”);
•the cancellation and conversion of all 10,782,091 issued and outstanding shares of Legacy Nuburu common stock into 5,556,857 shares of Nuburu Common Stock as adjusted by the Exchange Ratios;
•the net exercise of all 4,000,000 outstanding warrants to purchase shares of Legacy Nuburu common stock immediately prior to the Effective Time in accordance with its terms and subsequent conversion into 1,167,557 shares of Nuburu Common Stock at the Effective Time;
•the cancellation and conversion of all Legacy Nuburu Convertible Notes,which were accounted for as liabilities at fair value due to certain variable share settlement features contained within the notes, into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time, which 2,642,239 shares were then outstanding as Legacy Nuburu common stock as of immediately prior to the Effective Time and subsequently converted into 1,361,787 shares of Nuburu Common Stock and 1,361,787 shares of Nuburu Series A preferred stock at the Effective Time; and
•the cancellation and exchange of all 6,079,467 granted and outstanding vested and unvested Legacy Nuburu options, which became 3,133,270 Nuburu options exercisable for shares of Nuburu Common Stock with the same terms and vesting conditions except for a number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio; and
•the cancellation and exchange of all 1,053,000 granted and outstanding vested and unvested Legacy Nuburu RSUs, which became 542,706 Nuburu RSUs for shares of Nuburu Common Stock with the same terms and vesting conditions except for the number of shares, which was adjusted by the Legacy Nuburu common stock Exchange Ratio.
The other related events that occurred in connection with the Closing are summarized below:
•Tailwind and the Tailwind Sponsor entered into a letter agreement (the “Sponsor Support and Forfeiture Agreement”), dated as of August 5, 2022 (as amended by the Amended and Restated Sponsor Support and Forfeiture Agreement, dated January 31, 2023). In connection with the Business Combination, the 8,355,393 Tailwind Sponsor Class B shares were forfeited other than 1,150,000 shares of Common Stock (of which, 150,000 shares were transferred to Nautilus Maser Fund, L.P. and 50,000 shares were transferred to Cohen & Company Capital Markets at Closing) and 650,000 shares of Series A preferred stock. Additionally, upon the Closing, the Sponsor cancelled the 9,700,000 Private Placement Warrants that were held by the Sponsor.
•Tailwind, Legacy Nuburu and Lincoln Park entered into a purchase agreement pursuant to which Nuburu may direct Lincoln Park to purchase up to $100 million of Common Stock from time to time over a 48-month period, subject to certain limitations contained in the Lincoln Park Purchase Agreement. At the Closing, Nuburu issued 200,000 shares of Nuburu Common Stock to Lincoln Park.
•Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 (the “Services Agreement”) relating to this arrangement pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $500,000 to Anzu Partners upon the closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing.
After giving effect to the Business Combination as described above, the number of shares of Common Stock and Series A preferred stock issued and outstanding immediately following the consummation of the Business Combination was as follows:
| | | | | | | | |
| | Common Shares | | | Series A
Preferred Shares | |
Tailwind public shares | | | 316,188 | | | | — | |
Tailwind Sponsor Class B shares | | | 8,355,393 | | | | — | |
Total shares of Tailwind common stock outstanding immediately prior to the Business Combination | | | 8,671,581 | | | | — | |
Less: forfeiture of the Tailwind Sponsor Class B Common Stock other than 1,150,000 shares of Common Stock and 650,000 shares of Series A Preferred Stock | | | (7,205,393 | ) | | | — | |
Tailwind Sponsor Series A Preferred Stock | | | — | | | | 650,000 | |
Tailwind public shares issuance of Series A Preferred Stock | | | — | | | | 316,188 | |
Legacy Nuburu shares | | | 31,323,904 | | | | 1,377,265 | |
Lincoln Park Commitment Shares | | | 200,000 | | | | — | |
Anzu Warrant Shares | | | — | | | | 500,000 | |
Total shares of Nuburu Common Stock outstanding immediately after the Business Combination(1)(2) | | | 32,990,092 | | | | 2,843,453 | |
(1) Excludes 3,675,976 shares of Common Stock as of the Closing of the Business Combination to be reserved for potential future issuance upon the exercise of Nuburu options or settlement of Nuburu RSUs.
(2) Excludes 16,710,785 Public Warrants issued and outstanding as of the Closing of the Business Combination.
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP because Legacy Nuburu has been determined to be the accounting acquirer. Under this method of accounting, Tailwind, which is the legal acquirer, is treated as the accounting acquiree for financial reporting purposes and Legacy Nuburu, which is the legal acquiree, is treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Nuburu have become the historical financial statements of Nuburu, and Tailwind’s assets, liabilities and results of operations have been consolidated with Legacy Nuburu’s beginning on the acquisition date. For accounting purposes, the financial statements of Nuburu represent a continuation of the financial statements of Legacy Nuburu with the Business Combination being treated as the equivalent of Legacy Nuburu issuing stock for the net assets of Tailwind, accompanied by a recapitalization. The net assets of Tailwind are stated at historical costs and no goodwill or other intangible assets have been recorded. Operations prior to the Business Combination will be presented as those of Legacy Nuburu in future reports of Nuburu.
Legacy Nuburu was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•Legacy Nuburu stockholders comprise a majority of the voting power of Nuburu;
•The Nuburu board of directors consists only of members of the Legacy Nuburu board of directors or nominees selected by Legacy Nuburu;
•Legacy Nuburu’s operations prior to the acquisition comprise the only ongoing operations of Nuburu;
•Legacy Nuburu’s senior management comprises the senior management of Nuburu;
•Nuburu has assumed the Legacy Nuburu name; and
•Legacy Nuburu’s headquarters have become Nuburu’s headquarters.
All periods prior to the Business Combination have been retrospectively adjusted using the Exchange Ratios for the equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization.
In connection with the Closing of the Business Combination, the Company received net proceeds from the Business Combination totaling $3.2 million, prior to deducting transaction and issuance costs. Legacy Nuburu’s total transaction expenses were approximately $3.2 million and Tailwind’s total transaction expenses were approximately $2.5 million after taking into account waivers of costs incurred by Legacy Nuburu and Tailwind.
NOTE 4. BALANCE SHEET COMPONENTS
Inventories, Net
Inventories, net as of December 31, 2023 and 2022 consisted of the following:
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
Raw materials and supplies | | $ | 1,973,634 | | | $ | 1,011,421 | |
Work-in-process | | | 158,346 | | | | 15,213 | |
Finished goods | | | 457,752 | | | | 239,051 | |
Inventories, gross | | | 2,589,732 | | | | 1,265,685 | |
Less: inventory reserve | | | (1,133,457 | ) | | | (292,990 | ) |
Inventories, net | | $ | 1,456,275 | | | $ | 972,695 | |
During the year ended December 31, 2023, the Company recorded net adjustments to inventories for LCNRV, obsolescence or scrap of approximately $640,000 to the statement of operations, primarily related to fully reserving inventory related to the Company's AO series as it shifted focus to producing the newer BLTM series, offset by scrap adjustments. During the year ended December 31, 2022, the Company recorded net credits for LCNRV, obsolescence or scrap of approximately $250,000 to the statement of operations, primarily due to reversals of LCNRV adjustments on items that were sold.
Property and Equipment, Net
Property and equipment, net as of December 31, 2023 and 2022 consisted of the following:
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
Machinery and equipment | | $ | 7,179,629 | | | $ | 4,827,626 | |
Leasehold improvements | | | 897,948 | | | | 810,248 | |
Furniture and office equipment | | | 205,897 | | | | 180,747 | |
Computer equipment and software | | | 197,386 | | | | 136,282 | |
Property and equipment, gross | | | 8,480,860 | | | | 5,954,903 | |
Less: accumulated depreciation and amortization | | | (2,829,884 | ) | | | (2,183,054 | ) |
Property and equipment, net | | $ | 5,650,976 | | | $ | 3,771,849 | |
Depreciation and amortization expense related to property and equipment was $505,898 and $450,505 for the years ended December 31, 2023 and 2022, respectively.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of December 31, 2023 and 2022 consisted of the following:
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
Prepaid insurance | | $ | 61,342 | | | $ | — | |
Other prepaid assets | | | 94,653 | | | | 34,889 | |
Other current assets | | | 260 | | | | 11,848 | |
Total prepaid expenses and other current assets | | $ | 156,255 | | | $ | 46,737 | |
Accrued Expenses
Accrued expenses as of December 31, 2023 and 2022 consisted of the following:
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
Accrued payroll and related benefits | | $ | 754,904 | | | $ | 636,009 | |
Accrued legal, accounting and professional fees | | | 838,865 | | | | 548,569 | |
Accrued transaction costs related to the reverse recapitalization | | | 503,600 | | | | 651,818 | |
Accrued taxes payable | | | 89,346 | | | | 108,516 | |
Accrued interest | | | 337,913 | | | | 175,288 | |
Other | | | 225,677 | | | | 191,918 | |
Total accrued expenses | | $ | 2,750,305 | | | $ | 2,312,118 | |
NOTE 5. FAIR VALUE MEASUREMENTS
The Company’s financial instruments that are carried at fair value consists of Level 1 and Level 3 assets and liabilities. Level 1 assets include highly liquid bank deposits and money market funds, which were not material as of December 31, 2023 and 2022. Level 1 liabilities include the Public Warrants and are classified as Level 1 due to the use of an observable market quote in an active market. The Company measured the fair value of the Public Warrants on the date of the Closing of the Business Combination based on the close price of the Public Warrant. During the year ended December 31, 2023, no warrants were exercised. Level 3 liabilities include the Junior Note Warrants and Legacy Nuburu Convertible Notes (each as defined in Note 8) and are classified as Level 3 due to the use of unobservable inputs in the valuation of the liability, as further described in Note 10.
The gains and losses from re-measurement of Level 1 financial liabilities are recorded as part of other (expense) income, net in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2023, the Company recorded a gain of $1,766,513, related to the change in fair value of the Public Warrants and Junior Note Warrants from the Closing to the end of the period. Refer to Note 10 for more information on the warrants issued by the Company during the periods presented. There were no transfers between Level 1, Level 2, and Level 3 in any periods presented.
The following table sets forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy:
| | | | | | | | | | | | | | | | |
| | At December 31, 2023 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Public Warrants(1) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Junior Note Warrants | | | — | | | | — | | | | 2,238,519 | | | | 2,238,519 | |
(1) The Public Warrants are a Level 1 fair value measurement, as noted further below and in Note 10 of these consolidated financial statements.
Level 1 Financial Liabilities
The following table sets forth a summary of the changes in fair value of the Company's Level 1 financial liabilities.
| | | | |
| | Year Ended December 31, | |
| | 2023 | |
Fair value, beginning of period | | $ | — | |
Recognition of Public Warrants upon the reverse recapitalization | | | 1,336,863 | |
Change in fair value | | | (1,336,863 | ) |
Fair value as of December 31, 2023 | | $ | — | |
On December 12, 2023, the New York Stock Exchange (“NYSE”) notified the Company, and publicly announced, that the NYSE had determined to (a) commence proceedings to delist the Company’s warrants, each whole warrant exercisable to purchase one share of the Company’s common stock, par value $0.0001 per share, at a price of $11.50 per share, and listed to trade on the NYSE under the symbol “BURU.WS”, and (b) immediately suspend trading in the Warrants due to “abnormally low” trading price levels. As such, the Public Warrants were determined to have no value as of December 31, 2023.
Level 3 Financial Liabilities
Junior Note Warrants
The following table sets forth a summary of the changes in fair value of the Company's Junior Note Warrants issued in November 2023:
| | | | |
| | Year Ended December 31, | |
| | 2023 | |
Fair value, beginning of period | | $ | — | |
Recognition of Junior Note Warrants upon issuance | | | 2,668,169 | |
Change in fair value | | | (429,650 | ) |
Fair value as of December 31, 2023 | | $ | 2,238,519 | |
Legacy Nuburu Convertible Notes
The following table sets forth a summary of the changes in fair value of the Company's Legacy Nuburu Convertible Notes, which were cancelled and converted into shares of Legacy Nuburu common stock in connection with the Business Combination:
| | | | |
| | Year Ended December 31, | |
| | 2023 | |
Fair value, beginning of period | | $ | 22,688,097 | |
Cancellation and conversion in connection with the Business Combination | | | (22,688,097 | ) |
Fair value as of December 31, 2023 | | $ | — | |
NOTE 6. COMMITMENTS AND CONTINGENCIES
Operating Lease
The Company leases and occupies approximately 27,900 square feet of office space in Centennial, Colorado under a noncancelable operating lease agreement. The original term of the lease was set to expire in December 2024, however, in November 2023, the Company elected to extend the lease through June 2025. In recognition of the ROU asset and the related lease liability as of December 31, 2023, any further options to extend the lease term have not been included as the Company was not reasonably certain to exercise any such option.
| | | | | | | | |
| | Year ended December 31, | |
| | 2023 | | | 2022 | |
Operating lease cost | | $ | 352,080 | | | $ | 340,146 | |
As of December 31, 2023 and 2022, the weighted-average remaining lease term was 1.5 years and 2.0 years, respectively, and the weighted-average discount rate used was 7.0% and 5.5%, respectively.
During the years ended December 31, 2023 and 2022, the Company recognized the following lease costs arising from the lease transaction:
| | | | | | | | |
| | Year ended December 31, | |
| | 2023 | | | 2022 | |
Cash paid for amounts included in the measurement of lease liabilities | | $ | 372,214 | | | $ | 361,324 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | | | 263,939 | | | | 934,584 | |
As of December 31, 2023, the future payments and interest expense for the operating lease are as follows:
| | | | |
Year Ending December 31, | | Future Payments | |
2024 | | $ | 383,383 | |
2025 | | | 240,834 | |
Total undiscounted cash flows | | | 624,217 | |
Less: imputed interest | | | (31,463 | ) |
Present value of lease liabilities | | $ | 592,754 | |
Legal Proceedings
In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for legal proceedings when it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. As of December 31, 2023 and 2022, the Company was not involved in any material legal proceedings.
Purchase Commitments
As of December 31, 2023 and 2022, the Company had $602,335 and $657,112 in outstanding firm purchase commitments to acquire inventory and research and development parts from suppliers for the Company's ongoing operations.
NOTE 7. REVENUE
The Company’s primary revenue-generating activity involves sales of high-powered lasers and related installation services. The Company has sales to customers throughout the U.S., Europe, and Asia. All sales are settled in U.S. dollars.
The following table presents revenue from contracts with customers disaggregated by geography:
| | | | | | | | |
| | Year ended December 31, | |
| | 2023 | | | 2022 | |
United States | | $ | 1,760,350 | | | $ | 1,038,403 | |
Asia | | | 117,835 | | | | 356,075 | |
Europe | | | 207,347 | | | | 45,950 | |
Total | | $ | 2,085,532 | | | $ | 1,440,428 | |
The following table presents revenue from contracts with customers disaggregated by the timing of revenue recognition:
| | | | | | | | |
| | Year ended December 31, | |
| | 2023 | | | 2022 | |
Revenue recognized at a point in time | | $ | 2,080,532 | | | $ | 1,438,628 | |
Revenue recognized over time | | | 5,000 | | | | 1,800 | |
Total | | $ | 2,085,532 | | | $ | 1,440,428 | |
Contract liabilities consist of customer deposits that are applied to invoices as the performance obligation is performed. Accounts receivable and contract liabilities as of December 31, 2023 and 2022 were as follows:
| | | | | | | | |
| | Accounts Receivable | | | Contract Liabilities | |
January 1, 2022 | | $ | 223,275 | | | $ | 173,050 | |
December 31, 2022 | | | 327,200 | | | | 178,750 | |
December 31, 2023 | | | 482,279 | | | | 30,400 | |
During the years ended December 31, 2023 and 2022, the Company recognized $32,500 and $1,800 of revenue that was included in the contract liabilities balance at the beginning of the reporting period, respectively.
NOTE 8. NOTES AND CONVERTIBLE NOTES PAYABLE
As of December 31, 2023 and 2022, the Company's outstanding debt consisted of the following. Please refer to the remainder of this footnote for more information on the debt issued during the periods presented.
| | | | | | | | |
| | December 31,
2023 | | | December 31,
2022 | |
| | | | | (As Restated) | |
Junior Notes Issued November 2023 | | $ | 5,500,000 | | | $ | — | |
Unamortized debt discount | | | (2,751,533 | ) | | | — | |
Unamortized deferred financing costs | | | (600,475 | ) | | | — | |
Current portion of notes payable | | | 2,147,992 | | | | — | |
Legacy Nuburu Convertible Notes | | | — | | | | 22,688,097 | |
Current portion of convertible notes payable | | | — | | | | 22,688,097 | |
Senior Convertible Notes Issued June 2023 | | | 6,713,241 | | | | — | |
Convertible notes payable, long-term | | | 6,713,241 | | | | — | |
Total debt | | $ | 8,861,233 | | | $ | 22,688,097 | |
Junior Notes Issued November 2023
On November 13, 2023, the Company entered into Note and Warrant Purchase Agreements (the "Junior Note Purchase Agreements") with the lenders identified therein (the "Lenders") providing for (i) zero-interest promissory notes, issued with a 10% original issue discount, in the aggregate principal amount of $5,500,000 (the "Junior Notes"), and (ii) warrants ("Junior Note Warrants," refer to Note 10, Warrants), exercisable for an amount of the Company's common stock equal to 100% principle amount of the Junior Notes (limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders), which will be exercisable for $0.25 per share of the Company's common stock. The Company intends to use the net proceeds (after deducting the original issue discount of $500,000 and offering expenses of $691,399) from the Junior Note Purchase Agreements for general corporate purposes.
The Junior Notes are junior and secured by the Company's patent portfolio pursuant to a security agreement among the parties (the "Security Agreement"). The Junior Notes will mature on the earlier of: (i) the Company closing a credit facility in principal amount of at least $20 million, (ii) a Sale Event (as defined in the Junior Note Purchase Agreements), or (iii) twelve months after issuance. The Junior Notes contain customary events of default. If the Junior Notes have not been repaid within six or nine months after issuance, the Junior Notes will begin to bear interest at the SOFR rate plus 9% and at the SOFR rate plus 12%, respectively, and an additional 25% warrant coverage will be provided at each such date, with a per share exercise price equal to 120% of the trading price of the Company's common stock at the time of issuance and a redemption right in favor of the Company when the trading price of the common stock is greater than 200% of the applicable exercise price for 20 out of any 30 consecutive trading days. Shares of common stock issuable upon exercise of the Junior Note Warrants will be limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders.
Refer to Note 10 for the Company's accounting for the Junior Note Warrants. As a result of that accounting, the Notes contain the original issue discount of $500,000 as well as the discount associated with the Junior Note Warrant liability of $2,668,169. The discount will be amortized over the term of the Junior Notes in accordance with FASB ASC 835 - Interest.
The table below summarizes the issuance of the Junior Notes and Junior Note Warrants to related parties:
| | | | |
Noteholder | | Principal Amount of Notes | |
David Seldin(1) | | $ | 1,100,000 | |
Eunomia, LP(2) | | | 1,100,000 | |
CST Global LLC(3) | | | 220,000 | |
(1) David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC (the "Anzu SPVs"), which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(2) Ron Nicol, manager of Eunomia, LP, is the Executive Chairman of the Company’s board of directors.
(3) David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
Senior Convertible Notes Issued June 2023
On June 12, 2023 and June 16, 2023, the Company entered into Note and Warrant Purchase Agreements (the “Senior Convertible Note Purchase Agreements”) primarily with certain investors including existing investors (each, an “Investor”) for the sale of (i) convertible promissory notes (“Senior Convertible Notes”) in the aggregate principal amount of $9,225,000, and (ii) warrants (“Senior Note Warrants," refer to Note 10, Warrants) to purchase up to 11,518,895 shares of the Company’s common stock from the June 12, 2023 Purchase Agreement and up to 1,889,535 shares of Common Stock from the June 16, 2023 Purchase Agreement. The Company intends to use the net proceeds (after deducting offering expenses of $160,345) from the Senior Convertible Note Purchase Agreements for general corporate purposes.
The Senior Convertible Notes are senior, secured obligations of the Company, which became secured by the Company's patent portfolio per the Security Agreement as of November 2023, bear interest at the rate of 7.0% per annum, and are payable on the earlier of June 23, 2026 or the occurrence of an Event of Default, as defined in the Senior Convertible Notes. The Senior Convertible Notes are senior to the Junior Notes pursuant to an intercreditor agreement between the parties. The Senior Convertible Notes may be converted at any time following June 23, 2023 prior to the payment in full of the principal amount of the Senior Convertible Notes at the Investor’s option. In the event of the Sale of the Company (as defined in the Senior Convertible Notes), the outstanding principal amount of each Senior Convertible Note, plus all accrued and unpaid interest not otherwise converted into equity securities pursuant to the terms of the Senior Convertible Notes, shall (i) if the Investor so elects, be converted into equity securities pursuant to the terms of the Senior Convertible Notes at a price equal to $0.688 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), or (ii) be due and payable immediately prior to the closing of such Sale of the Company, together with a premium equal to 150% of the principal amount to be prepaid.
The table below summarizes the sale of the Senior Convertible Notes and Senior Note Warrants to related parties:
| | | | |
Investor | | Principal Amount of Convertible Notes | |
Wilson-Garling 2023 Family Trust(1) | | $ | 5,000,000 | |
David Seldin(2) | | | 1,200,000 | |
Eunomia, LP(3) | | | 1,000,000 | |
CST Global LLC(4) | | | 100,000 | |
Curtis N Maas Revocable Trust(5) | | | 100,000 | |
(1) Thomas J. Wilson, an affiliate of Wilson-Garling 2023 Family Trust, was a member of the Legacy Nuburu board of directors.
(2) David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC (the "Anzu SPVs"), which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(3) Ron Nicol, manager of Eunomia, LP, is the Executive Chairman of the Company’s board of directors.
(4) David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
(5) Curtis Maas, an affiliate of the Curtis N Maas Revocable Trust, was a member of the Legacy Nuburu board of directors.
Legacy Nuburu Convertible Notes
Over the course of multiple closings in March, August and December 2022 and January 2023, Legacy Nuburu issued and sold Legacy Nuburu Convertible Notes payable to various investors with aggregate gross proceeds of $11,400,000. The Legacy Nuburu Convertible Notes accrued interest at a rate of 8% per annum and were accounted for as liabilities at fair value due to certain variable share settlement features contained within the notes, with changes in the fair value of the Legacy Nuburu Convertible Notes recognized within change in fair value of convertible notes payable on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. The outstanding principal amount and all accrued and unpaid interest on the Legacy Nuburu Convertible Notes (the “Conversion Amount”), immediately prior to the consummation of the Business Combination, automatically converted into 2,642,239 shares of Legacy Nuburu common stock that, upon consummation of the Business Combination, entitled the holders of the Legacy Nuburu Convertible Notes to receive 1,361,787 shares of Common Stock, which was equal to (x) the Conversion Amount divided by (y) $8.50.
The table below summarizes the sale of the Legacy Nuburu Convertible Notes to related parties:
| | | | |
Noteholder | | Principal Amount of Legacy Convertible Notes | |
W-G Investments LLC(1) | | $ | 1,000,000 | |
David Seldin(2) | | | 1,000,000 | |
Ron Nicol(3) | | | 1,000,000 | |
CST Global LLC(4) | | | 200,000 | |
Curtis N Maas Revocable Trust(5) | | | 150,000 | |
Ake Almgren(6) | | | 100,000 | |
(1) Thomas J. Wilson, an affiliate of W-G Investments LLC, was a member of the Legacy Nuburu board of directors.
(2) David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of the Anzu SPVs, which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(3) Ron Nicol is the Chairman of the Company’s board of directors and was a member of the Legacy Nuburu board of directors.
(4) David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
(5) Curtis Maas, an affiliate of the Curtis N Maas Revocable Trust, was a member of the Legacy Nuburu board of directors.
(6) Ake Almgren resigned as a member of the Company's board of directors effective as of May 19, 2023.
NOTE 9. CONVERTIBLE PREFERRED STOCK
Legacy Nuburu Preferred Stock Financing
In multiple closings in December 2021 and January 2022, Legacy Nuburu sold an aggregate of 1,166,372 shares of Legacy Nuburu Series C Preferred Stock, at a purchase price of $5.00 per share, for an aggregate purchase price of approximately $5.8 million.
Series A Preferred Stock
Ranking
The Company’s Preferred Stock ranks senior to the Company’s Common Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends
Holders of the Company’s Preferred Stock participate, on an as-converted basis (without regard to any conversion limitations) in all dividends paid to the holders of the Company’s Common Stock.
Conversion Rights
The Preferred Stock is convertible at any time into Common Stock at a conversion rate equal to $10.00 (subject to equitable adjustment in the event of a stock split, stock consolidation, subdivision or certain other events of a similar nature that increase or decrease the number of shares of Preferred Stock outstanding (the “Original Issuance Price”)) divided by the lesser of (i) $11.50 and (ii) the greater of (x) 115% of the lowest volume-weighted average price per share of the Company’s Common Stock as displayed under the heading Bloomberg VWAP (the “VWAP”) for any consecutive ninety-trading day period prior to the calculation of such VWAP and (y) $5.00, in each case subject to adjustment as set forth in the Certificate of Designations (the “Conversion Price”).
Any conversion will be settled only in shares of Common Stock; provided, that, upon any conversion that would result in the holders beneficially owning greater than 9.99% of the Company’s voting stock outstanding as of the conversion date or any individual holder beneficially owning Common Stock in excess of the maximum number of shares of Common Stock that could be issued to the holder without triggering a change of control under the applicable stock exchange listing rules, the excess, if any, of the conversion consideration otherwise payable upon such conversion shall be paid in cash, based on an amount per share of Common Stock equal to the last reported price per share of the Common Stock on the trading day immediately preceding the conversion date.
Mandatory Conversion
If the VWAP is greater than 200% of the Conversion Price for any 20 trading days in a 30-day trading day period, the Company may elect to convert all, but not less than all, of the Preferred Stock then outstanding into the Company’s Common Stock at a conversion rate with respect to each share of Preferred Stock equal to the Original Issuance Price as of the date of such conversion divided by the then applicable Conversion Price.
Voting Rights
The holders of Preferred Stock are not entitled to vote at or receive notice of any meeting of stockholders, except the holders of Preferred Stock are entitled to certain consent rights on matters related to (i) the creation or authorization of the creation of any equity or debt securities of the Company that rank senior or equal to certain rights of the Preferred Stock and (ii) the authorization of any adverse change to the powers, preferences, or special rights of the Preferred Stock set forth in the Company’s Certificate of Incorporation or Bylaws, and shall have voting rights as required by law.
Redemption
On the second anniversary of the Closing Date, or January 31, 2025 (the “Test Date”), the Company is obligated to redeem the maximum portion of the Preferred Stock permitted by law in cash at an amount equal to the Original Issuance Price as of such date if the Conversion Price exceeds the VWAP. If, on the Test Date, the Conversion Price is equal to or less than the VWAP, the Company must convert all shares of Preferred Stock then outstanding into shares of the Company’s Common Stock at the then applicable Conversion Price. Notwithstanding the foregoing, the Company shall not be required to redeem any shares of Preferred Stock to the extent the Company does not have legally available funds to effect such redemption. The mandatory redemption and conversion provisions described herein are further subject to certain limitations detailed in the Certificate of Designations. As a result of such redemption feature, the Company recorded the Preferred Stcok at its redemption value and classified the Preferred Stock as mezzanine equity on the consolidated balance sheet.
Series A Preferred Stock Issuances
The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2023 and 2022, there were 2,388,905 and 23,237,703 shares of preferred stock issued or outstanding, respectively.
Upon the Closing of the Business Combination, all 23,237,703 shares of issued and outstanding convertible preferred stock were cancelled and converted into 23,237,703 shares of Legacy Nuburu common stock based upon the conversion rate as calculated pursuant to Legacy Nuburu's Certificate of Incorporation, multiplied by the Exchange Ratios at the Effective Time.
Additionally, upon the Closing of the Business Combination, the cancellation and conversion of all Legacy Nuburu Convertible Notes into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time resulted in the issuance of 2,642,239 shares which were then outstanding as Legacy Nuburu common stock as of immediately prior to the Effective Time and subsequently converted into 1,361,787 shares of Nuburu Common Stock and 1,361,787 shares of Nuburu Series A preferred stock at the Effective Time.
As of the Closing, each Legacy Nuburu stockholder waived its right to participate in the Preferred Stock Issuance (for clarity, excluding any shares received as a result of the conversion of any Legacy Nuburu Convertible Notes prior to the Closing, which were entitled to participate in the Preferred Stock Issuance). Legacy Nuburu stockholders were entitled to receive approximately 99% of the Common Stock issued as merger consideration pursuant to the Business Combination Agreement agreed to waive such right by entering into the Stockholder Support Agreement (for clarity, excluding any shares received as a result of the conversion of any Legacy Nuburu Convertible Notes). Those Legacy Nuburu stockholders who did not waive their right to participate resulted in the issuance of 15,478 shares of Nuburu Series A preferred stock at the Effective Time.
Each Tailwind stockholder who did not redeem their shares received a share of Nuburu Series A preferred stock. This resulted in the issuance of 316,188 shares of Nuburu Series A preferred stock to those non-redeeming stockholders.
Tailwind and the Tailwind Sponsor entered into the Sponsor Support and Forfeiture Agreement. In connection with the Business Combination, the 8,355,393 Founder Shares were forfeited other than 1,150,000 shares of Common Stock (of which, 150,000 shares were transferred to Nautilus Maser Fund, L.P. and 50,000 shares were transferred to Cohen & Company Capital Markets at Closing) and 650,000 shares of Series A preferred stock.
Wilson Sonsini Goodrich & Rosati, Professional Corporation (“WSGR”) was engaged by Legacy Nuburu to act as its counsel for the Business Combination. As partial compensation for the services provided by WSGR to Legacy Nuburu in connection with the Business Combination, the Company agreed to issue to WSGR 195,452 shares of Common Stock and 195,452 shares of Preferred Stock pursuant to the terms of the Stock Purchase Agreement entered into by and between the Company and WSGR on March 10, 2023. The foregoing issuance was made in a transaction not involving a public offering pursuant to an exemption from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.
Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $500,000 to Anzu Partners upon the closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing and the $500,000 payment was made during the nine months ended September 30, 2023.
Conversions
In November 2023, a holder of Series A Preferred Stock converted 650,000 shares of Series A Preferred Stock to 1,300,000 share of Common Stock under the terms described under "Conversion Rights" above.
NOTE 10. WARRANTS
Liability Classified Warrants
November 2023 Junior Note Warrants
In connection with the Junior Notes discussed in Note 8 - Notes and Convertible Notes Payable the Company issued the Junior Note Warrants to purchase up to 22,000,000 shares of the Company's common stock. The Junior Note Warrants currently outstanding have an exercise price equal to $0.25 per share and expire on December 6, 2028. The Junior Note Purchase Agreements also provide for additional warrants to be issued if the Junior Notes remain outstanding for certain periods of time: (i) if the Junior Notes have not been repaid six months after issuance, additional warrants will be issued to each Lender in an amount equal to the principal amount of the Note multiplied by 25%, and such quotient divided by a per share cash exercise price equal to 120% of the Volume Weighted Average Price ("VWAP") of the Company's Common Stock during the ten trading days immediately prior to issuance and (ii) if the Junior Notes have not been repaid nine months after issuance, additional warrants will be issued to each Lender in an amount equal to the principal amount of the Note multiplied by 25%, and such quotient divided by a per share cash exercise price equal to 120% of the VWAP of the Company's Common Stock during the ten trading days immediately prior to issuance.
Based on the terms of the Junior Note Purchase Agreements, the Junior Note Warrants were evaluated under FASB ASC 815-40 - Derivatives and Hedging-Contracts in Entity's Own Equity ("ASC 815-40") and the Company concluded they did not initially meet the criteria to be classified in stockholders' equity (deficit). Specifically, there were contingent exercise provisions and settlement provisions that existed, as described above, where the number of shares available under the Junior Note Warrants may be adjusted. Because the number of outstanding common shares was not a fair value input to a fixed-for-fixed model, the Junior Note Warrants are treated as liabilities and are remeasured at each reporting date. The proceeds of $5,500,000 were allocated first to the Junior Note Warrant liability at fair value and then to the Junior Notes. The Company further determined that the Junior Warrant liability meets the criteria to be accounted for as a bifurcated derivative due to the significant discount it creates on the Junior Notes. The aggregate fair value of the Junior Note Warrants of $2,668,169 was estimated using a Monte Carlo simulation based approach, a Level 3 valuation. The significant inputs to the calculation of the fair value of the Junior Note Warrant liability were as follows:
| | | | | | |
| | | Upon Issuance | | | As of December 31, 2023 |
Common Stock Warrants: | | | | | | |
Stock price | | $ | 0.18 | | $ | 0.15 |
Expected term (in years) | | | 5.0 | | | 4.9 |
Expected volatility | | | 66.3% | | | 66.3% |
Risk-free interest rate | | | 4.1% | | | 3.8% |
Expected dividend yield | | | 0.0% | | | 0.0% |
Public Warrants
In connection with the closing of the Business Combination, Nuburu assumed the 16,710,785 Public Warrants outstanding on the date of Closing. As of December 31, 2023, all 16,710,785 Public Warrants remain outstanding. However, on December 12, 2023, the NYSE notified the Company and publicly announced that the NYSE had determined to (a) commence proceedings to delist the Company’s warrants, each whole warrant exercisable to purchase one share of the Company’s common stock, par value $0.0001 per share, at a price of $11.50 per share, and listed to trade on the NYSE under the symbol “BURU WS”, and (b) immediately suspend trading in the Warrants due to “abnormally low” trading price levels. As such, the Public Warrants were determined to have no value in the financial statements as of December 31, 2023.
Each whole warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the Business Combination. Pursuant to the Warrant Agreement, a warrant holder may exercise its warrants only for a whole number of shares of Common Stock. The warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
Redemptions of warrants when the price of Common Stock equals or exceeds $18.00 — Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
•in whole and not in part;
•at a price of $0.01 per warrant;
•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the closing price of the Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per share of Common Stock equals or exceeds $10.00 — Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Common Stock;
•if, and only if, the last reported sale price of the Common Stock equals or exceeds $10.00 per share (as adjusted per stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
•if the closing price of the Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share, the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
Equity Classified Warrants
June 2023 Senior Note Warrants
In connection with the Senior Convertible Notes discussed in Note 8 - Notes and Convertible Notes Payable, the Company issued the Senior Note Warrants to purchase up to 11,518,895 shares of the Company's common stock pursuant to the June 12, 2023 Purchase Agreement and 1,889,535 shares of Common Stock pursuant to the June 16, 2023 Purchase Agreement. The Senior Note Warrants have an exercise price equal to $1.03 per share and expire on June 23, 2028.
As the Senior Note Warrants were part of a bundled transaction, the gross proceeds from the Private Placement of $9,225,000 were allocated to the Senior Convertible Notes and the Senior Note Warrants based on their respective relative fair value upon issuance. The aggregate fair value of the Senior Note Warrants of $3,401,366 was estimated using the Black-Scholes option-pricing model with the following assumptions:
| | | |
| | | Upon Issuance |
Common Stock Warrants: | | | |
Expected term (in years) | | | 5.0 |
Expected volatility | | | 47.9% |
Risk-free interest rate | | | 4.0% |
Expected dividend yield | | | 0.0% |
NOTE 11. STOCK-BASED COMPENSATION
As of December 31, 2023, the Company had an active stock-based incentive compensation plan and an employee stock purchase plan: the 2022 Equity Incentive Plan (the “2022 Plan”) and the 2022 Employee Stock Purchase Plan (the “ESPP”). All new equity compensation grants are issued under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans.
The 2022 Plan provides for the grant of stock and stock-based awards including stock options, restricted stock, restricted stock units, performance awards, and stock appreciation rights. As of December 31, 2023, there are 4.1 million shares available for grant under the 2022 Plan and 0.4 million shares available for grant under the ESPP.
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations is classified as follows:
| | | | | | | | |
| | Year ended December 31, | |
| | 2023 | | | 2022 | |
Cost of revenue | | $ | 640,847 | | | $ | 988,003 | |
Research and development | | | 617,386 | | | | 143,439 | |
Selling and marketing | | | 266,675 | | | | 46,299 | |
General and administrative | | | 965,501 | | | | 1,184,599 | |
Total stock-based compensation expense | | $ | 2,490,409 | | | $ | 2,362,340 | |
The Company’s stock-based compensation expense is based on the value of the portion of stock-based payment awards that are ultimately expected to vest. During the years ended December 31, 2023 and 2022, stock-based compensation relating to stock-based awards granted to consultants was $458,174 and $961,040, respectively.
Restricted Stock Units
The Company grants Restricted Stock Units ("RSUs") to its employees for their services with a liquidity event requirement. The RSUs granted to employees vest over a period of time from the grant date and are subject to the participants continuing service to the Company over the period. The following table shows a summary of the Company's RSUs outstanding as of December 31, 2023 as well as activity the year then ended:
| | | | | | | | |
| | RSUs | |
| | Number of Shares | | | Weighted Average Grant Date Fair Value | |
Unvested at December 31, 2022 | | | 542,706 | | | $ | 6.11 | |
RSUs granted | | | 887,997 | | | $ | 1.92 | |
RSUs vested | | | (391,651 | ) | | $ | 4.42 | |
RSUs forfeited | | | (150,679 | ) | | $ | 1.47 | |
Unvested at December 31, 2023 | | | 888,373 | | | $ | 5.22 | |
The weighted average grant date fair value of RSUs granted to employees and consultants was $1.92 and $6.11 per share for the years ended December 31, 2023 and 2022, respectively. The total grant date fair value of RSUs awarded was $1,709,217 and $3,316,950 for the years ended December 31, 2023 and 2022, respectively. The total grant date fair value of RSUs vested was $1,730,895 and nil for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, total unrecognized stock-based compensation costs related to RSUs was $2,624,464, which is expected to be recognized over a remaining weighted average period of 1.6 years. As of December 31, 2023, all of the RSUs are expected to vest.
Stock Options
The Company's outstanding stock options generally expire 10 years from the date of grant and are exercisable when the options vest, generally over four years, the majority of which vest at a rate of 25% on the first anniversary of the grant date, with the remainder vesting ratably each month over the next three years. A summary of stock option activity is as follows:
| | | | | | | | | | | | | | | | |
| | Number of Stock Options Outstanding | | | Weighted-Average Exercise Price | | | Weighted-Average Remaining Contractual Life (Years) | | | Aggregate Intrinsic Value | |
Options outstanding at December 31, 2022 | | | 3,133,270 | | | $ | 4.35 | | | | 7.9 | | | $ | 5,484,316 | |
Options granted | | | 5,315,917 | | | $ | 0.48 | | | | | | | |
Options exercised | | | (5,153 | ) | | $ | 1.36 | | | | | | | |
Options cancelled or forfeited | | | (896,284 | ) | | $ | 2.27 | | | | | | | |
Options outstanding at December 31, 2023 | | | 7,547,750 | | | $ | 1.86 | | | | 7.9 | | | $ | — | |
Options exercisable at December 31, 2023 | | | 2,954,137 | | | $ | 3.10 | | | | 5.4 | | | $ | — | |
Options vested and expected to vest at December 31, 2023 | | | 7,547,750 | | | $ | 1.86 | | | | 7.9 | | | $ | — | |
The weighted-average grant date fair value of options granted to employees and consultants was $0.48 and $1.44 per share for the years ended December 31, 2023 and 2022, respectively.
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying Common Stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of options exercised was $1,040 and $2,319,018 for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, total unrecognized stock-based compensation cost related to stock options was $1,871,219, which is expected to be recognized over a weighted-average period of 2.3 years.
Determining the appropriate fair value of stock based awards requires the input of subjective assumptions including the fair value of the Company’s Common Stock, the expected life of the option, and expected stock price volatility. The Company used the Black Scholes option pricing model to value its stock option awards.
The Company estimates the fair value of the options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company’s share price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term, and actual forfeiture rates. A summary of the assumptions the Company utilized for option grants during the years ended December 31, 2023 and 2022, respectively, are as follows:
| | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 |
Expected term (in years) | | 0.75-5.0 | | 5.8 |
Expected volatility | | 44.9%-47.6% | | 42.0% |
Risk-free interest rate | | 3.8%-5.5% | | 2.6% |
Expected dividend yield | | 0.0% | | 0.0% |
NOTE 12. INCOME TAXES
Due to its current operating losses, the Company recorded zero income tax expense during the years ended December 31, 2023 and 2022. During these periods, the Company’s activities were limited to U.S. federal and state tax jurisdictions, as it does not have any significant foreign operations.
A summary of the sources of differences between income taxes at the federal statutory rate and the provision for income taxes for the years ended December 31, 2023 and 2022, respectively, is as follows:
| | | | | | | | |
| | Year Ended December 31, | |
| | 2023 | | | 2022 | |
Tax benefit at the statutory rate | | $ | (4,346,294 | ) | | $ | (2,967,112 | ) |
Increase (decrease) in taxes resulting from: | | | | | | |
State taxes | | | (400,290 | ) | | | (767,514 | ) |
Stock-based compensation | | | 82,430 | | | | 102,560 | |
Research and development tax credits | | | (418,321 | ) | | | (73,558 | ) |
Other | | | (167,497 | ) | | | 24,868 | |
Change in valuation allowance | | | 5,249,972 | | | | 3,680,756 | |
Total income tax expense (benefit) | | $ | — | | | $ | — | |
Significant components of the Company's deferred income tax assets and liabilities are as follows:
| | | | | | | | |
| | As of December 31, | |
| | 2023 | | | 2022 | |
Deferred tax assets: | | | | | | |
Net operating loss carryforwards | | $ | 13,095,540 | | | $ | 9,469,767 | |
Research and development credits | | | 1,647,502 | | | | 1,229,181 | |
Capitalized pre-business expenses | | | 2,229,904 | | | | 2,563,946 | |
Accrued expenses | | | 124,458 | | | | 26,290 | |
Stock-based compensation | | | 899,453 | | | | 481,062 | |
Inventory reserve | | | 243,070 | | | | 64,726 | |
Operating lease liability | | | 127,116 | | | | 158,388 | |
Capitalized §174 research and development costs | | | 1,905,522 | | | | 919,466 | |
Total deferred tax assets before valuation allowance | | | 20,272,565 | | | | 14,912,826 | |
Less valuation allowance | | | (19,756,671 | ) | | | (14,506,698 | ) |
Total deferred tax assets | | | 515,894 | | | | 406,128 | |
Deferred tax liabilities | | | | | | |
Fixed assets | | | (390,191 | ) | | | (264,377 | ) |
Right-of-use assets | | | (125,703 | ) | | | (141,751 | ) |
Total deferred tax liabilities | | | (515,894 | ) | | | (406,128 | ) |
Net deferred tax asset (liability) | | $ | — | | | $ | — | |
Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation ("R&E") activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities that are considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2022, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future. Also effective for tax years beginning after December 31, 2021, companies are subject to further limitations on the tax deductibility of interest expense, which becomes limited to approximately 30% of adjusted earnings before interest and income tax expense. Interest expense that is limited for tax purposes may be carried forward indefinitely.
Due to the Company’s history of cumulative losses and after considering all the available objective evidence, management concluded that it is not more likely than not that all of the Company’s net deferred tax assets will be realized in the future. Accordingly, the Company’s deferred tax assets, which include net operating loss (“NOL”) carryforwards and tax credits related primarily to research and development, continue to be subject to a valuation allowance as of December 31, 2023 and 2022. The Company expects to continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets.
As of December 31, 2023 and 2022, the Company had approximately $56 million and $42 million, respectively, of unused federal net operating losses and approximately $30 million and $29 million, respectively, of unused state net operating loss carryforwards, that may be applied against future federal and state taxable income. If not utilized, the Company has approximately $1.3 million of federal and $1.3 million of state carryforwards as of December 31, 2023 and 2022, that expire in the year 2035 through 2037 with the remainder having an indefinite carryforward yet being subject to 80% limitation as a result of the Tax Cuts and Jobs Act. In addition, the Company had federal research credit carryforwards as of December 31, 2023 and 2022 of approximately $1.6 million and $1.2 million, respectively, of which will expire in the year 2035 through 2043, if not utilized.
As of December 31, 2023 and 2022, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and the capital losses, and has recognized a valuation allowance of approximately $19.2 million and $14.5 million, respectively. The valuation allowance increased by approximately $5.3 million during the year ended December 31, 2023.
Utilization of the NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more "5-percent stockholders" increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period, or beginning the day after the most recent ownership change, if shorter. The Company has determined that a Section 382 change in ownership occurred during the year ended December 31, 2023. As a result of this change in ownership, we expect that certain of the Company's NOLs may not be utilized in the future to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. However, due to the full valuation allowance recorded as of December 31, 2023, the limitation does not affect the Company's results of operations for the periods presented.
A reconciliation of the federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2023 and 2022 is as follows:
| | | | | | | | |
| | Year Ended December 31, | |
| | 2023 | | | 2022 | |
Statutory federal income tax rate | | | 21.0 | % | | | 21.0 | % |
State taxes, net of federal tax benefit | | | 1.9 | % | | | 5.4 | % |
Stock-based compensation | | | -0.4 | % | | | -0.7 | % |
General business credits | | | 2.0 | % | | | 0.5 | % |
Other adjustments | | | 0.8 | % | | | -0.2 | % |
Change in valuation allowance | | | -25.3 | % | | | -26.0 | % |
Income tax provision | | | 0.0 | % | | | 0.0 | % |
NOTE 13. NET LOSS PER SHARE
Diluted earnings per share ("EPS") includes the dilutive effect of Common Stock equivalents and is computed using the weighted-average number of Common Stock and Common Stock equivalents outstanding during the reporting period. Diluted EPS during the years ended December 31, 2023 and 2022 excluded Common Stock equivalents because the effect of their inclusion would be anti-dilutive or would decrease the reported loss per share. The following table sets forth securities outstanding that could potentially dilute the calculation of diluted earnings per share:
| | | | | | | | |
| | For the Year Ended December 31, | |
| | 2023 | | | 2022 | |
Stock options outstanding | | | 7,547,750 | | | | 3,133,270 | |
Warrants to purchase Common Stock - liability classified | | | 38,710,785 | | | | — | |
Warrants to purchase Common Stock - equity classified | | | 13,408,430 | | | | 2,061,545 | |
Unvested restricted stock units | | | 888,373 | | | | 542,706 | |
If-converted Common Stock from Series A Preferred Stock(1) | | | 6,077,810 | | | | — | |
If-converted Common Stock from convertible notes | | | 13,426,430 | | | | — | |
If-converted common shares from Legacy Nuburu convertible notes | | | — | | | | 864,868 | |
Total | | | 80,059,578 | | | | 6,602,389 | |
(1)Assumes that all shares of Series A Preferred Stock are converted into Common Stock at a conversion rate equal to $10.00 divided by $5.00, representing the maximum number of shares issuable to holders of Series A Preferred Stock.
NOTE 14. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS AND PREVIOUSLY ISSUED UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restatement Background
On October 21, 2024, the Board of Directors and management, upon the recommendation of the Audit Committee of the Board of Directors concluded that the Company’s previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and unaudited condensed consolidated financial statements as of and for each of the interim quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023 should no longer be relied upon due to misstatements that are described below and that we would restate such financial statements to make the necessary accounting corrections. The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections were material to each period discussed above. As a result of the material misstatements, we have restated our previously issued financial statements for the periods referenced above, in accordance with ASC 250, Accounting Changes and Error Corrections.
We have determined that these errors were the result of a material weakness in internal control over financial reporting that is reported in management’s report on internal control over financial reporting as of December 31, 2023 in Part II, Item 9A, “Controls and Procedures” of this Amendment No. 4 on Form 10-K/A.
The Company has not filed, and does not intend to file, amendments to the previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, but instead is restating its unaudited interim condensed consolidated financial statements in this Amendment No. 4 on Form 10-K/A.
The restatements for the Company's previously issued financial statements as of and for the year ended December 31, 2023, the comparative period herein as of and for the year ended December 31, 2022 and for each of the quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023, include the following:
(i)as of and for the year ended December 31, 2022 (i.e. the comparative period included herein) to (i) account for the Legacy Nuburu Convertible Notes at fair value resulting in the recording of a loss related to the change in the fair value of, and corresponding increase to, the carrying value of these convertible notes, and (ii) (a) reclassify the Company's convertible preferred stock that is redeemable at a future point in time from permanent equity to mezzanine equity and (b) increase the carrying value of such preferred stock to reflect the redemption value of the outstanding preferred stock.
(ii)as of and for the year ended December 31, 2023, including the interim periods therein as of March 31, 2023, June 30, 2023 and September 30, 2023, to (i) reclassify convertible preferred stock that is redeemable at a future point in time from permanent equity to mezzanine equity, and (ii) increase the carrying value of such preferred stock to reflect the redemption value of the outstanding preferred stock. Additionally, the impact of the recording of the loss related to the change in the fair value of the Legacy Nuburu Convertible Notes for the year ended December 31, 2022 described above will be reflected as an adjustment to accumulated deficit and additional paid-in capital for these periods.
The consolidated statements of cash flows have been excluded from the financial statements presented below as they were only impacted by adjustments to net loss and change in fair value of warrant liabilities which are presented below in the consolidated statements of operations and comprehensive loss. The restatement had no impact on total net cash flows from operating, investing or financing activities.
Consolidated Balance Sheet
| | | | | | | | | | | | |
| | As of December 31, 2022 | |
| | Originally Reported | | | Restatement Adjustment | | | As
Restated | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | | | | |
Current portion of convertible notes payable | | $ | 7,300,000 | | | $ | 15,388,097 | | | $ | 22,688,097 | |
Total current liabilities | | $ | 14,590,504 | | | $ | 15,388,097 | | | $ | 29,978,601 | |
Total liabilities | | $ | 14,964,411 | | | $ | 15,388,097 | | | $ | 30,352,508 | |
| | | | | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 23,237,703 shares issued and outstanding at December 31, 2022 | | $ | - | | | $ | 4,040 | | | $ | 4,040 | |
| | | | | | | | | |
Stockholders’ Deficit | | | | | | | | | |
Accumulated deficit | | $ | (61,192,308 | ) | | $ | (15,388,097 | ) | | $ | (76,580,405 | ) |
Total Stockholders’ Deficit | | $ | (1,842,239 | ) | | $ | (15,392,137 | ) | | $ | (17,234,376 | ) |
| | | | | | | | | |
Consolidated Statement of Operations and Comprehensive Loss
| | | | | | | | | | | | |
| | Year Ended December 31, 2022 | |
| | Originally Reported | | | Restatement Adjustment | | | As
Restated | |
Change in fair value of convertible notes payable | | $ | - | | | $ | (15,388,097 | ) | | $ | (15,388,097 | ) |
Loss before provision for income taxes | | $ | (14,129,101 | ) | | $ | (15,388,097 | ) | | $ | (29,517,198 | ) |
Net loss and comprehensive loss | | $ | (14,129,101 | ) | | $ | (15,388,097 | ) | | $ | (29,517,198 | ) |
Net loss per common share, basic and diluted | | $ | (2.59 | ) | | $ | (2.82 | ) | | $ | (5.41 | ) |
| | | | | | | | | | | | |
| | As of March 31, 2023 (Unaudited) | |
| | Originally Reported | | | Restatement Adjustment | | | As
Adjusted | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,038,905 shares issued and outstanding at March 31, 2023 | | $ | 304 | | | $ | 30,388,746 | | | $ | 30,389,050 | |
| | | | | | | | | |
Stockholders’ Deficit | | | | | | | | | |
Additional paid-in capital | | $ | 66,791,282 | | | $ | (15,000,649 | ) | | $ | 51,790,633 | |
Accumulated deficit | | $ | (65,959,825 | ) | | $ | (15,388,097 | ) | | $ | (81,347,922 | ) |
Total Stockholders’ Deficit | | $ | 835,120 | | | $ | (30,389,050 | ) | | $ | (29,553,930 | ) |
| | | | | | | | | |
| | | | | | | | | | | | |
| | As of June 30, 2023 (Unaudited) | |
| | Originally Reported | | | Restatement Adjustment | | | As
Restated | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,038,905 shares issued and outstanding at June 30, 2023 | | $ | 304 | | | $ | 30,388,746 | | | $ | 30,389,050 | |
| | | | | | | | | |
Stockholders’ Deficit | | | | | | | | | |
Additional paid-in capital | | $ | 72,049,746 | | | $ | (15,000,649 | ) | | $ | 57,049,097 | |
Accumulated deficit | | $ | (72,066,537 | ) | | $ | (15,388,097 | ) | | $ | (87,454,634 | ) |
Total Stockholders’ Deficit | | $ | (16,399 | ) | | $ | (30,389,050 | ) | | $ | (30,405,449 | ) |
| | | | | | | | | | | | |
| | As of September 30, 2023 (Unaudited) | |
| | Originally Reported | | | Restatement Adjustment | | | As
Restated | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,038,905 shares issued and outstanding at September 30, 2023 | | $ | 304 | | | $ | 30,388,746 | | | $ | 30,389,050 | |
| | | | | | | | | |
Stockholders’ Deficit | | | | | | | | | |
Additional paid-in capital | | $ | 72,653,179 | | | $ | (15,000,649 | ) | | $ | 57,652,530 | |
Accumulated deficit | | $ | (77,151,838 | ) | | $ | (15,388,097 | ) | | $ | (92,539,935 | ) |
Total Stockholders’ Deficit | | $ | (4,498,267 | ) | | $ | (30,389,050 | ) | | $ | (34,887,317 | ) |
Consolidated Balance Sheet
| | | | | | | | | | | | |
| | As of December 31, 2023 | |
| | Originally Reported | | | Restatement Adjustment | | | As
Restated | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 2,388,905 shares issued and outstanding at December 31, 2023 | | $ | 239 | | | $ | 23,888,811 | | | $ | 23,889,050 | |
| | | | | | | | | |
Stockholders’ Deficit | | | | | | | | | |
Additional paid-in capital | | $ | 73,241,955 | | | $ | (8,500,714 | ) | | $ | 64,741,241 | |
Accumulated deficit | | $ | (81,898,692 | ) | | $ | (15,388,097 | ) | | $ | (97,286,789 | ) |
Total Stockholders’ Deficit | | $ | (8,652,809 | ) | | $ | (23,889,050 | ) | | $ | (32,541,859 | ) |
NOTE 15. SUBSEQUENT EVENTS
On February 22, 2024, the Company held a Special Meeting of Stockholders where stockholders of record as of January 22, 2024 approved proposals to authorize the Company to: (i) effect a reverse stock split of the Company's issued and outstanding Common Stock within a range from 1-for 30 to 1-for-75, with the exact ratio of the reverse stock split to be determined by the Company's board of directors, and (ii) issue up to $50.0 million of securities in one or more non-public offerings, where the maximum discount at which securities may be offered may be equivalent to a discount of up to 30% below the market price of the Company's Common Stock. As of the date of this report, the Company has not effected the reverse stock split.
On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors named therein (the “Investors”) pursuant to which the Investors agreed to purchase from the Company $3,000,000 of newly issued shares (the “Shares”) of the Company’s Common Stock, at a per Share purchase price of $0.125 per Share. This equates to 24,000,000 shares to be issued to the investors.
Pursuant to the SPA, the Company issued to the Investors warrants exercisable for an amount of Common Stock equal to 100% of the Shares, which will be exercisable for $0.1625 per share of Common Stock and have a 5-year term. The Investors will also have the right to nominate two out of seven directors for election to the Company’s board of directors.
PART 1 – FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
NUBURU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
| | (Unaudited) | | | (As Restated) | |
ASSETS | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 232,075 | | | $ | 2,148,700 | |
Accounts receivable | | | 54,600 | | | | 482,279 | |
Inventories, net of reserve of $1,161,469 and $1,133,457 at September 30, 2024 and December 31, 2023, respectively | | | 1,526,470 | | | | 1,456,275 | |
Deferred financing costs | | | — | | | | 50,000 | |
Prepaid expenses and other current assets | | | 527,061 | | | | 156,255 | |
Total current assets | | | 2,340,206 | | | | 4,293,509 | |
Property and equipment, net | | | 5,137,035 | | | | 5,650,976 | |
Operating lease right-of-use assets | | | 300,688 | | | | 586,164 | |
Other assets | | | 34,359 | | | | 34,359 | |
TOTAL ASSETS | | $ | 7,812,288 | | | $ | 10,565,008 | |
| | | | | | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | 5,962,062 | | | $ | 4,744,606 | |
Accrued expenses | | | 4,443,179 | | | | 2,750,305 | |
Current portion of operating lease liability | | | 328,554 | | | | 355,385 | |
Contract liabilities | | | 24,000 | | | | 30,400 | |
Shareholder advances | | | 644,936 | | | | — | |
Current portion of notes payable | | | 4,232,041 | | | | 2,147,992 | |
Convertible note derivative liability | | | 37,900 | | | | — | |
Total current liabilities | | | 15,672,672 | | | | 10,028,688 | |
Operating lease liability, net of current portion | | | — | | | | 237,369 | |
Convertible notes payable | | | 4,511,880 | | | | 6,713,241 | |
Warrant liabilities | | | 82,333 | | | | 2,238,519 | |
TOTAL LIABILITIES | | | 20,266,885 | | | | 19,217,817 | |
| | | | | | |
Commitments and Contingencies (Note 6) | | | | | | |
| | | | | | |
Convertible preferred stock, $0.0001 par value; 50,000,000 shares authorized; 2,388,905 shares issued and outstanding at September 30, 2024 and December 31, 2023 | | | 23,889,050 | | | | 23,889,050 | |
| | | | | | |
Stockholders’ Deficit | | | | | | |
Common stock, $0.0001 par value; 250,000,000 shares authorized; 5,686,498 and 922,362 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively (1) | | | 569 | | | | 92 | |
Additional paid-in capital (1) | | | 83,708,136 | | | | 64,744,838 | |
Accumulated deficit | | | (120,052,352 | ) | | | (97,286,789 | ) |
Total Stockholders’ Deficit | | | (36,343,647 | ) | | | (32,541,859 | ) |
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | | $ | 7,812,288 | | | $ | 10,565,008 | |
(1)Amount presented as of December 31, 2023 is adjusted to reflect the 1-for-40 reverse stock split on July 23, 2024. See Note 2 – Summary of Significant Accounting Policies for additional information.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Revenue | | $ | — | | | $ | 186,743 | | | $ | 142,827 | | | $ | 1,710,794 | |
Cost of revenue | | | 359,950 | | | | 1,115,703 | | | | 1,950,632 | | | | 4,813,404 | |
Gross margin | | | (359,950 | ) | | | (928,960 | ) | | | (1,807,805 | ) | | | (3,102,610 | ) |
Operating expenses: | | | | | | | | | | | | |
Research and development | | | 206,474 | | | | 1,348,450 | | | | 1,656,350 | | | | 4,300,166 | |
Selling and marketing | | | 113,445 | | | | 523,627 | | | | 385,965 | | | | 1,066,289 | |
General and administrative | | | 1,941,085 | | | | 2,335,605 | | | | 6,941,448 | | | | 8,409,877 | |
Total operating expenses | | | 2,261,004 | | | | 4,207,682 | | | | 8,983,763 | | | | 13,776,332 | |
Loss from operations | | | (2,620,954 | ) | | | (5,136,642 | ) | | | (10,791,568 | ) | | | (16,878,942 | ) |
Interest income | | | 721 | | | | 46,998 | | | | 17,202 | | | | 91,914 | |
Interest expense | | | (929,046 | ) | | | (162,765 | ) | | | (2,821,527 | ) | | | (175,149 | ) |
Change in fair value of warrant liabilities | | | 369,674 | | | | 167,108 | | | | 2,156,186 | | | | 1,002,647 | |
Change in fair value of derivative liability | | | 141,100 | | | | — | | | | 141,100 | | | | — | |
Loss on extinguishment of debt | | | (1,339,017 | ) | | | — | | | | (11,685,125 | ) | | | — | |
Other income, net | | | — | | | | — | | | | 218,169 | | | | — | |
Loss before provision for income taxes | | $ | (4,377,522 | ) | | $ | (5,085,301 | ) | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) |
Provision for income taxes | | | — | | | | — | | | | — | | | | — | |
Net loss and comprehensive loss | | $ | (4,377,522 | ) | | $ | (5,085,301 | ) | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) |
Net loss per common share, basic and diluted (1) | | $ | (1.12 | ) | | $ | (5.74 | ) | | $ | (10.45 | ) | | $ | (19.98 | ) |
Weighted-average common shares used to compute net loss per common share, basic and diluted (1) | | | 3,924,580 | | | | 885,628 | | | | 2,178,902 | | | | 798,888 | |
(1)Periods presented have been adjusted to reflect the 1-for-40 reverse stock split on July 23, 2024. See Note 2 – Summary of Significant Accounting Policies for additional information.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Convertible
Preferred Stock | | | | Common Stock | | | | | | | | | | |
| | Shares | | | Amount | | | | Shares (1) | | | Amount (1) | | | Additional
Paid-in
Capital (1) | | | Accumulated
Deficit | | | Total
Stockholders'
Deficit | |
Balance as of December 31, 2023 | | | 2,388,905 | | | $ | 23,889,050 | | | | | 922,362 | | | $ | 92 | | | $ | 64,744,838 | | | $ | (97,286,789 | ) | | $ | (32,541,859 | ) |
Issuance of Common Stock | | | — | | | | — | | | | | 40,000 | | | | 4 | | | | 199,996 | | | | — | | | | 200,000 | |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 1,237 | | | | 1 | | | | (1 | ) | | | — | | | | — | |
Restricted stock units used for tax withholdings | | | — | | | | — | | | | | (285 | ) | | | (1 | ) | | | (1,872 | ) | | | — | | | | (1,873 | ) |
Stock-based compensation | | | — | | | | — | | | | | - | | | | - | | | | 614,115 | | | | — | | | | 614,115 | |
Net loss | | | — | | | | — | | | | | - | | | | - | | | | - | | | | (5,700,653 | ) | | | (5,700,653 | ) |
Balance as of March 31, 2024 | | | 2,388,905 | | | $ | 23,889,050 | | | | | 963,314 | | | $ | 96 | | | | 65,557,076 | | | $ | (102,987,442 | ) | | $ | (37,430,270 | ) |
Issuance of Common Stock to extinguish debt | | | — | | | | — | | | | | 2,248,312 | | | | 225 | | | | 13,356,187 | | | | — | | | | 13,356,412 | |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 48,779 | | | | 5 | | | | (5 | ) | | | — | | | | — | |
Restricted stock units used for tax withholdings | | | — | | | | — | | | | | (13,082 | ) | | | (1 | ) | | | (70,712 | ) | | | — | | | | (70,713 | ) |
Issuance of pre-funded warrants | | | — | | | | — | | | | | - | | | | - | | | | 1,539,866 | | | | — | | | | 1,539,866 | |
Stock-based compensation | | | — | | | | — | | | | | - | | | | - | | | | 450,572 | | | | — | | | | 450,572 | |
Net loss | | | — | | | | — | | | | | - | | | | - | | | | - | | | | (12,687,388 | ) | | | (12,687,388 | ) |
Balance as of June 30, 2024 | | | 2,388,905 | | | $ | 23,889,050 | | | | | 3,247,323 | | | $ | 325 | | | | 80,832,984 | | | $ | (115,674,830 | ) | | $ | (34,841,521 | ) |
Fractional shares issued for stock split | | | — | | | | — | | | | | 25,635 | | | | 3 | | | | (3 | ) | | | — | | | | - | |
Common stock issued for services | | | — | | | | — | | | | | 12,500 | | | | 1 | | | | — | | | | — | | | | 1 | |
Issuance of Common Stock to extinguish debt | | | — | | | | — | | | | | 2,399,850 | | | | 240 | | | | 1,828,052 | | | | — | | | | 1,828,292 | |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 1,491 | | | | — | | | | — | | | | — | | | | - | |
Restricted stock units used for tax withholdings | | | — | | | | — | | | | | (301 | ) | | | — | | | | (502 | ) | | | — | | | | (502 | ) |
Issuance of pre-funded warrants | | | — | | | | — | | | | | - | | | | — | | | | 600,000 | | | | — | | | | 600,000 | |
Stock-based compensation | | | — | | | | — | | | | | - | | | | — | | | | 447,605 | | | | — | | | | 447,605 | |
Net loss | | | — | | | | — | | | | | - | | | | — | | | | — | | | | (4,377,522 | ) | | | (4,377,522 | ) |
Balance as of September 30, 2024 | | | 2,388,905 | | | $ | 23,889,050 | | | | | 5,686,498 | | | $ | 569 | | | $ | 83,708,136 | | | $ | (120,052,352 | ) | | $ | (36,343,647 | ) |
(1)Periods presented have been adjusted to reflect the 1-for-40 reverse stock split on July 23, 2024. See Note 2 – Summary of Significant Accounting Policies for additional information.
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(UNAUDITED) - (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Convertible
Preferred Stock | | | | Common Stock | | | | | | | | | | |
| | Shares(2) | | | Amount | | | | Shares(1) (2) | | | Amount | | | Additional
Paid-in
Capital | | | Accumulated
Deficit | | | Total
Stockholders'
Equity
(Deficit) | |
Balance as of December 31, 2022 | | | 23,237,703 | | | $ | 4,040 | | | | | 138,922 | | | $ | 13 | | | $ | 59,346,016 | | | $ | (76,580,405 | ) | | $ | (17,234,376 | ) |
Issuance of Common Stock and Series A preferred stock upon conversion of convertible notes in connection with the reverse recapitalization | | | 1,361,787 | | | | 13,617,870 | | | | | 34,045 | | | | 3 | | | | 13,345,377 | | | | — | | | | 13,345,380 | |
Conversion of Legacy Nuburu convertible preferred stock into Common Stock in connection with the reverse recapitalization | | | (23,237,703 | ) | | | (4,040 | ) | | | | 580,943 | | | | 59 | | | | 1,717 | | | | — | | | | 1,776 | |
Issuance of Common Stock and Series A preferred stock upon the reverse recapitalization, net of issuance costs | | | 1,481,666 | | | | 14,816,660 | | | | | 80,844 | | | | 9 | | | | (18,071,777 | ) | | | — | | | | (18,071,768 | ) |
Issuance of Common Stock and Series A preferred stock to satisfy certain reverse recapitalization costs | | | 195,452 | | | | 1,954,520 | | | | | 4,887 | | | | — | | | | (1,954,540 | ) | | | — | | | | (1,954,540 | ) |
Recognition of Public Warrants upon the reverse recapitalization | | | — | | | | — | | | | | — | | | | — | | | | (1,336,863 | ) | | | — | | | | (1,336,863 | ) |
Stock-based compensation | | | — | | | | — | | | | | — | | | | — | | | | 463,978 | | | | — | | | | 463,978 | |
Net loss | | | — | | | | — | | | | | — | | | | — | | | | — | | | | (4,767,517 | ) | | | (4,767,517 | ) |
Balance as of March 31, 2023 | | | 3,038,905 | | | $ | 30,389,050 | | | | | 839,641 | | | $ | 84 | | | $ | 51,793,908 | | | $ | (81,347,922 | ) | | $ | (29,553,930 | ) |
Issuance of Common Stock from option exercises | | | — | | | | — | | | | | 129 | | | | — | | | | 6,999 | | | | — | | | | 6,999 | |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 391 | | | | — | | | | — | | | | — | | | | — | |
Issuance of Common Stock from the Lincoln Park Purchase Agreement | | | — | | | | — | | | | | 42,048 | | | | 4 | | | | 2,099,993 | | | | — | | | | 2,099,997 | |
Issuance of Common Stock warrants in connection with the 2023 Note and Warrant Purchase Agreement (net of issuance cost of $160,345) | | | — | | | | — | | | | | — | | | | — | | | | 2,351,414 | | | | — | | | | 2,351,414 | |
Stock-based compensation | | | — | | | | — | | | | | — | | | | — | | | | 796,783 | | | | — | | | | 796,783 | |
Net loss | | | — | | | | — | | | | | — | | | | — | | | | — | | | | (6,106,712 | ) | | | (6,106,712 | ) |
Balance as of June 30, 2023 | | | 3,038,905 | | | $ | 30,389,050 | | | | | 882,209 | | | $ | 88 | | | $ | 57,049,097 | | | $ | (87,454,634 | ) | | $ | (30,405,449 | ) |
Issuance of Common Stock from releases of restricted stock units | | | — | | | | — | | | | | 8,165 | | | | 1 | | | | (1 | ) | | | — | | | | — | |
Restricted stock units used for tax withholdings | | | — | | | | — | | | | | (1,505 | ) | | | (1 | ) | | | (31,594 | ) | | | — | | | | (31,595 | ) |
Stock-based compensation | | | — | | | | — | | | | | — | | | | — | | | | 635,028 | | | | — | | | | 635,028 | |
Net loss | | | — | | | | — | | | | | — | | | | — | | | | — | | | | (5,085,301 | ) | | | (5,085,301 | ) |
Balance as of September 30, 2023 | | | 3,038,905 | | | $ | 30,389,050 | | | | | 888,869 | | | $ | 88 | | | $ | 57,652,530 | | | $ | (92,539,935 | ) | | $ | (34,887,317 | ) |
(1)Periods presented have been adjusted to reflect the 1-for-40 reverse stock split on July 23, 2024. See Note 2 – Summary of Significant Accounting Policies for additional information.
(2)The number of shares of convertible preferred stock and common stock issued and outstanding prior to the Business Combination have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Business Combination. See Note 1 - Description of Business and Note 3 - Reverse Capitalization for more information.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | |
| | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | |
Cash Flows from Operating Activities: | | | | | | |
Net loss | | $ | (22,765,563 | ) | | $ | (15,959,530 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | | 596,256 | | | | 369,971 | |
Stock-based compensation | | | 1,512,292 | | | | 1,895,789 | |
Change in fair value of warrant liabilities | | | (2,156,186 | ) | | | (1,002,647 | ) |
Change in fair value of derivative liability | | | (141,100 | ) | | | — | |
Inventory reserve adjustments | | | 28,012 | | | | 754,840 | |
Amortization of debt discount | | | 2,218,506 | | | | — | |
Amortization of deferred financing costs | | | 551,431 | | | | — | |
Loss on extinguishment of debt | | | 11,685,125 | | | | — | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | | | 427,679 | | | | (142,704 | ) |
Inventories | | | (203,497 | ) | | | (957,916 | ) |
Prepaid expenses and other current assets | | | (370,806 | ) | | | (492,507 | ) |
Operating lease right-of-use asset | | | 285,476 | | | | 231,463 | |
Accounts payable | | | 1,138,413 | | | | 2,695,273 | |
Accrued expenses | | | 1,964,723 | | | | (447,024 | ) |
Contract liabilities | | | (6,400 | ) | | | 51,325 | |
Operating lease liability | | | (264,200 | ) | | | (255,514 | ) |
Net cash used in operating activities | | | (5,499,839 | ) | | | (13,259,181 | ) |
Cash Flows from Investing Activities: | | | | | | |
Purchase of property and equipment | | | — | | | | (1,142,910 | ) |
Net cash used in investing activities | | | — | | | | (1,142,910 | ) |
Cash Flows from Financing Activities: | | | | | | |
Proceeds from issuance of June 2023 Senior Convertible Notes and Warrants | | | — | | | | 9,225,000 | |
Proceeds from issuance of common stock | | | 200,000 | | | | — | |
Proceeds from issuance of pre-funded warrants | | | 2,139,866 | | | | — | |
Proceeds from the exercise of stock options | | | — | | | | 6,999 | |
Restricted stock units used for tax withholdings | | | (73,088 | ) | | | (31,595 | ) |
Proceeds from the issuance of Legacy Nuburu preferred stock | | | — | | | | 5,000 | |
Proceeds from reverse recapitalization | | | — | | | | 3,243,079 | |
Proceeds from debt borrowings | | | 743,000 | | | | — | |
Proceeds from issuance of Common Stock from the Lincoln Park Purchase Agreement | | | — | | | | 2,099,997 | |
Payment of transaction costs related to the reverse recapitalization | | | — | | | | (4,734,913 | ) |
Proceeds from issuance of Legacy Nuburu convertible promissory notes | | | — | | | | 4,100,000 | |
Repayment of related party convertible promissory notes | | | — | | | | (675,000 | ) |
Payment of offering costs related to the 2023 Note and Warrant Purchase Agreement | | | — | | | | (25,000 | ) |
Shareholder advances | | | 644,936 | | | | — | |
Payment of deferred financing costs | | | (71,500 | ) | | | (65,000 | ) |
Net cash provided by financing activities | | | 3,583,214 | | | | 13,148,567 | |
NET CHANGE IN CASH DURING THE PERIOD | | | (1,916,625 | ) | | | (1,253,524 | ) |
CASH AND CASH EQUIVALENTS ―BEGINNING OF PERIOD | | | 2,148,700 | | | | 2,880,254 | |
CASH AND CASH EQUIVALENTS ―END OF PERIOD | | $ | 232,075 | | | $ | 1,626,730 | |
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | |
Transfer of property and equipment from inventory | | $ | 154,971 | | | $ | — | |
Purchase of property and equipment in accounts payable and accrued expenses | | $ | 540,028 | | | $ | — | |
Deferred financing costs included in accounts payable and accrued expenses | | $ | 712,363 | | | $ | — | |
Transaction costs related to the reverse recapitalization not yet paid | | $ | 1,007,439 | | | $ | 1,007,439 | |
Convertible promissory notes and warrants issuance costs included in accounts payable and accrued expenses | | $ | — | | | $ | 160,345 | |
Issuance of Common Stock upon extinguishment of debt | | $ | 15,184,704 | | | $ | — | |
Issuance of Common Stock upon conversion of preferred stock in connection with the reverse recapitalization | | $ | — | | | $ | 11,575,286 | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NOTE 1. BACKGROUND AND ORGANIZATION
Nuburu, Inc. (“Nuburu” or the “Company”) and its wholly-owned subsidiary Nuburu Subsidiary, Inc., is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high-value applications including welding and 3D printing.
Nuburu was originally incorporated in Delaware on July 21, 2020 under the name Tailwind Acquisition Corp. (“Tailwind”) as a special purpose acquisition company, formed for the purpose of effecting an initial business combination with one or more target businesses. On September 9, 2020 (the “IPO Closing Date”), we consummated our initial public offering (the “IPO”). On January 31, 2023, we consummated a business combination with Nuburu Subsidiary, Inc. f/k/a Nuburu, Inc. (“Legacy Nuburu”), a privately held operating company which merged into our subsidiary Compass Merger Sub, Inc. (the “Business Combination”) and changed our name to “Nuburu, Inc.,” and we became the owner, directly or indirectly, of all of the equity interests of Nuburu Subsidiary, Inc. and its subsidiaries. In light of the fact that the Business Combination has closed and our ongoing business will be the business formerly operated by Legacy Nuburu, this business section primarily includes information regarding Legacy Nuburu’s business.
Throughout the notes to the condensed consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Legacy Nuburu prior to the consummation of the Business Combination, and Nuburu and its subsidiaries after the consummation of the Business Combination.
Going Concern and Liquidity
The Company devotes its efforts to business planning, research and development, and raising capital. The Company is an emerging growth company that has not yet achieved full commercialization and is expected to incur losses until it does.
From inception through September 30, 2024, the Company has incurred operating losses and negative cash flows from operating activities. For the nine months ended September 30, 2024 and 2023, the Company has incurred operating losses, including net losses of $22,765,563 and $15,959,530, respectively, and the Company has an accumulated deficit of $120,052,352 as of September 30, 2024. The Company anticipates that it will incur net losses for the foreseeable future and, even if it increases revenue, there is no guarantee that it will ever become profitable. All of the aforementioned factors raise substantial doubt about the Company's ability to continue as a going concern.
Until the Company can generate sufficient revenue to cover its operating expenses, working capital, and capital expenditures, it will rely on private and public capital raising efforts.
The Company plans to finance its operations with proceeds from the issuance and sale of equity securities or debt; however, there is no assurance that management's plans to obtain additional debt or equity financing will be successfully implemented or implemented on terms favorable to the Company.
Significant Risks and Uncertainties
The Company’s current business activities consist of business planning, research and development efforts to design and develop high-power, high-brightness blue laser technology, and capital raising to finance the Company through full commercialization; however, the Company’s ability to operate has been significantly impacted by its inability to obtain sufficient financing. The Company is subject to the risks associated with such activities, including the need to further develop its technology and its marketing and distribution channels; further develop its supply chain and manufacturing; and hire additional management and other key personnel. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations, are dependent upon future events, including its ability to access potential markets and secure long-term financing.
The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, competition from substitute products and larger companies, protection of proprietary technology, ability to maintain distributor relationships and dependence on key individuals.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.
The results of operations for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period. These unaudited condensed consolidated financial statements and their notes should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 15, 2024, and as subsequently amended by the Form 10-K/As filed with the SEC on April 29, 2024, August 12, 2024, September 6, 2024, and November 8, 2024.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Reverse Stock Split
Following stockholder approval on February 22, 2024, the Company effected a reverse stock split of its Common Stock at a ratio of 1-for-40 (the “Reverse Stock Split.”) The Reverse Stock Split was effective July 23, 2024. No changes were made to the number of authorized shares. Proportional adjustments were made to the number of shares of Common Stock issuable upon exercise or conversion of the Company’s equity awards, warrants, and other equity instruments convertible into Common Stock, as well as the applicable exercise price. All share and per share amounts of our Common Stock presented have been retroactively adjusted to reflect the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
Reclassification
Certain prior period balances in the consolidated statements of cash flows have been combined or reclassified to conform to current period presentation pursuant to Rule 10-01(a)(2) of Regulation S-X of the SEC. Such reclassifications had no impact on net income, cash flows or shareholders' deficit previously reported.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in the notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on April 15, 2024 and as subsequently amended by the Form 10-K/As filed with the SEC on April 29, 2024, August 12, 2024, September 6, 2024, and November 8, 2024. Other than as noted below, the significant accounting policies have not changed significantly since that filing
Lessor Accounting
Beginning in 2024, the Company has begun to lease certain of its constructed lasers to its customers, which the Company accounts for under the Financial Accounting Standards Board's (the “FASB”) Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ASC 842”). The Company typically transfers legal ownership of the lasers to its customers at the end of the lease.
The sales and cost of sales are recognized at the inception of the lease, which is when control is transferred to the lessee. The Company accounts for the transfer of control as a sales type lease in accordance with ASC 842-10-25-2. The underlying asset is derecognized, and revenue is recorded when collection of payments is probable. This is in accordance with the revenue recognition principle in FASB ASC 606 – Revenue from contracts with customers. The investment in a sales-type leases consists of the sum of the minimum lease payments receivable less any unearned interest income and estimated executory costs. Minimum lease payments are part of the lease agreement between the Company (as the lessor) and the customer (as the lessee). The discount rate implicit in the lease is used to calculate the present value of minimum lease payments. The minimum lease payments consist of the gross lease payments net of executory costs and contingent rentals, if any. Unearned interest is amortized to income over the lease term to produce a constant periodic rate of return on the net investment in the lease. While revenue is recognized at the inception of the lease, the cash flow from the sales-type lease occurs over the course of the lease, which results in interest income and reduction of receivables.
During the nine months ended September 30, 2024, the Company recognized $76,744 in revenue at the commencement of the lease for sales-type leases, which is included in revenue in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2024, the Company recognized $0 and $1,256, respectively, in interest income for its sales-type leases, which is included in interest income in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the Company's net investment in sales-type leases is $54,600, which is included in accounts receivable on the consolidated balance sheets.
Convertible Debt
The Company reviews the terms of its convertible notes payable to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which expands public entities' segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and subsequent interim periods, with early adoption permitted. The Company currently evaluating the impact of adopting ASU 2023-07 will have on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as reconciling items that meet a quantitative threshold. Further, the ASU requires additional disclosures on income tax expense and taxes paid, net of refunds received, by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024 on a prospective basis with the option to apply it retrospectively. Early adoption is permitted. The adoption of this guidance will result in the Company being required to include enhanced income tax related disclosures. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In November 2024, the FASB issued ASC 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. This new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and disclosures.
NOTE 3. REVERSE RECAPITALIZATION
On January 31, 2023, upon the consummation of the Business Combination, all holders of 10,782,091 issued and outstanding shares of Legacy Nuburu common stock and 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock received shares of Nuburu common stock at a deemed value of $400.00 per share after giving effect to the exchange ratios set forth below (the “Exchange Ratios”):
| | | | |
Legacy Nuburu Class / Series | | Exchange Ratio | |
Legacy Nuburu Common Stock | | | 0.013 | |
Legacy Nuburu Series A Preferred Stock | | | 0.014 | |
Legacy Nuburu Series A-1 Preferred Stock | | | 0.015 | |
Legacy Nuburu Series B Preferred Stock | | | 0.021 | |
Legacy Nuburu Series B-1 Preferred Stock | | | 0.013 | |
Legacy Nuburu Series C Preferred Stock | | | 0.029 | |
This resulted in 783,098 shares of Nuburu Common Stock issued and outstanding as of the Closing and all holders of 7,132,467 issued and outstanding Legacy Nuburu equity awards received Nuburu equity awards covering 91,899 shares of Nuburu Common Stock at a deemed value of $400.00 per share after giving effect to the Exchange Ratios, based on the following events contemplated by the Business Combination Agreement:
•the cancellation and conversion of all 40,392,723 issued and outstanding shares of Legacy Nuburu preferred stock into 580,943 shares of Nuburu Common Stock at the conversion rate as calculated pursuant to Legacy Nuburu's Certificate of Incorporation, multiplied by the Exchange Ratios at the date and time the Business Combination became effective (“Effective Time”);
•the cancellation and conversion of all 10,782,091 issued and outstanding shares of Legacy Nuburu common stock into 138,922 shares of Nuburu Common Stock as adjusted by the Exchange Ratios;
•the net exercise of all 4,000,000 outstanding warrants to purchase shares of Legacy Nuburu common stock immediately prior to the Effective Time in accordance with its terms and subsequent conversion into 29,189 shares of Nuburu Common Stock at the Effective Time;
•the cancellation and conversion of all Legacy Nuburu Convertible Notes, which were accounted for as liabilities at fair value due to certain variable share settlement features contained within the notes, into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time, which 2,642,239 shares were then outstanding as Legacy Nuburu common stock as of immediately prior to the Effective Time and subsequently converted into 34,045 shares of Nuburu Common Stock and 1,361,787 shares of Nuburu Series A preferred stock at the Effective Time; and
•the cancellation and exchange of all 6,079,467 granted and outstanding vested and unvested Legacy Nuburu options, which became 78,332 Nuburu options exercisable for shares of Nuburu Common Stock with the same terms and vesting conditions except for a number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio; and
•the cancellation and exchange of all 1,053,000 granted and outstanding vested and unvested Legacy Nuburu RSUs, which became 13,568 Nuburu RSUs for shares of Nuburu Common Stock with the same terms and vesting conditions except for the number of shares, which was adjusted by the Legacy Nuburu common stock Exchange Ratio.
The other related events that occurred in connection with the Closing are summarized below:
•Tailwind and the Tailwind Sponsor entered into a letter agreement (the “Sponsor Support and Forfeiture Agreement”), dated as of August 5, 2022 (as amended by the Amended and Restated Sponsor Support and Forfeiture Agreement, dated January 31, 2023). In connection with the Business Combination, the 8,355,393 Tailwind Sponsor Class B shares were forfeited other than 28,750 shares of Common Stock (of which, 3,750 shares were transferred to Nautilus Maser Fund, L.P. and 1,250 shares were transferred to Cohen & Company Capital Markets at Closing) and 650,000 shares of Series A preferred stock. Additionally, upon the Closing, the Sponsor cancelled the 9,700,000 Private Placement Warrants that were held by the Sponsor.
•Tailwind, Legacy Nuburu and Lincoln Park entered into a purchase agreement pursuant to which Nuburu may direct Lincoln Park to purchase up to $100 million of Common Stock from time to time over a 48-month period, subject to certain limitations contained in the Lincoln Park Purchase Agreement. At the Closing, Nuburu issued 5,000 shares of Nuburu Common Stock to Lincoln Park.
•Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 (the “Services Agreement”) relating to this arrangement pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $500,000 to Anzu Partners upon the closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing.
After giving effect to the Business Combination as described above, the number of shares of Common Stock and Series A preferred stock issued and outstanding immediately following the consummation of the Business Combination was as follows:
| | | | | | | | |
| | Common Shares | | | Series A
Preferred Shares | |
Tailwind public shares | | | 7,905 | | | | — | |
Tailwind Sponsor Class B shares | | | 208,885 | | | | — | |
Total shares of Tailwind common stock outstanding immediately prior to the Business Combination | | | 216,790 | | | | — | |
Less: forfeiture of the Tailwind Sponsor Class B Common Stock other than 28,750 shares of Common Stock and 650,000 shares of Series A Preferred Stock | | | (180,135 | ) | | | — | |
Tailwind Sponsor Series A Preferred Stock | | | — | | | | 650,000 | |
Tailwind public shares issuance of Series A Preferred Stock | | | — | | | | 316,188 | |
Legacy Nuburu shares | | | 783,098 | | | | 1,377,265 | |
Lincoln Park Commitment Shares | | | 5,000 | | | | — | |
Anzu Warrant Shares | | | — | | | | 500,000 | |
Total shares of Nuburu Common Stock outstanding immediately after the Business Combination(1)(2) | | | 824,752 | | | | 2,843,453 | |
(1) Excludes 91,899 shares of Common Stock as of the Closing of the Business Combination to be reserved for potential future issuance upon the exercise of Nuburu options or settlement of Nuburu RSUs.
(2) Excludes 417,770 Public Warrants issued and outstanding as of the Closing of the Business Combination.
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP because Legacy Nuburu has been determined to be the accounting acquirer. Under this method of accounting, Tailwind, which is the legal acquirer, is treated as the accounting acquiree for financial reporting purposes and Legacy Nuburu, which is the legal acquiree, is treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Nuburu have become the historical financial statements of Nuburu, and Tailwind’s assets, liabilities and results of operations have been consolidated with Legacy Nuburu’s beginning on the acquisition date. For accounting purposes, the financial statements of Nuburu represent a continuation of the financial statements of Legacy Nuburu with the Business Combination being treated as the equivalent of Legacy Nuburu issuing stock for the net assets of Tailwind, accompanied by a recapitalization. The net assets of Tailwind are stated at historical costs and no goodwill or other intangible assets have been recorded. Operations prior to the Business Combination will be presented as those of Legacy Nuburu in future reports of Nuburu.
Legacy Nuburu was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•Legacy Nuburu stockholders comprise a majority of the voting power of Nuburu;
•The Nuburu board of directors consists only of members of the Legacy Nuburu board of directors or nominees selected by Legacy Nuburu;
•Legacy Nuburu’s operations prior to the acquisition comprise the only ongoing operations of Nuburu;
•Legacy Nuburu’s senior management comprises the senior management of Nuburu;
•Nuburu has assumed the Legacy Nuburu name; and
•Legacy Nuburu’s headquarters have become Nuburu’s headquarters.
All periods prior to the Business Combination have been retrospectively adjusted using the Exchange Ratios for the equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization.
In connection with the Closing of the Business Combination, the Company received net proceeds from the Business Combination totaling $3.2 million, prior to deducting transaction and issuance costs. Legacy Nuburu’s total transaction expenses were approximately $3.2 million and Tailwind’s total transaction expenses were approximately $2.5 million after taking into account waivers of costs incurred by Legacy Nuburu and Tailwind.
NOTE 4. BALANCE SHEET COMPONENTS
Inventories, Net
Inventories, net as of September 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Raw materials and supplies | | $ | 1,913,013 | | | $ | 1,973,634 | |
Work-in-process | | | 161,137 | | | | 158,346 | |
Finished goods | | | 613,789 | | | | 457,752 | |
Inventories, gross | | | 2,687,939 | | | | 2,589,732 | |
Less: inventory reserve | | | (1,161,469 | ) | | | (1,133,457 | ) |
Inventories, net | | $ | 1,526,470 | | | $ | 1,456,275 | |
The Company did not record any lower of cost or net realizable value charges during the three months ended September 30, 2024 and 2023, The Company recorded lower of cost or net realizable value charges of $28,012 and nil during the nine months ended September 30, 2024 and 2023, respectively.
Property and Equipment, Net
Property and equipment, net as of September 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Machinery and equipment | | $ | 7,311,625 | | | $ | 7,179,629 | |
Leasehold improvements | | | 897,948 | | | | 897,948 | |
Furniture and office equipment | | | 205,897 | | | | 205,897 | |
Computer equipment and software | | | 197,386 | | | | 197,386 | |
Property and equipment, gross | | | 8,612,856 | | | | 8,480,860 | |
Less: accumulated depreciation and amortization | | | (3,475,821 | ) | | | (2,829,884 | ) |
Property and equipment, net | | $ | 5,137,035 | | | $ | 5,650,976 | |
Depreciation and amortization expense related to property and equipment was $206,718 and $144,955 during the three months ended September 30, 2024 and 2023, respectively, and $596,256 and $369,971 during the nine months ended September 30, 2024 and 2023, respectively.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of September 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Prepaid insurance | | $ | 488,523 | | | $ | 61,342 | |
Other prepaid assets | | | 34,074 | | | | 94,653 | |
Other current assets | | | 4,464 | | | | 260 | |
Total prepaid expenses and other current assets | | $ | 527,061 | | | $ | 156,255 | |
Accrued Liabilities
Accrued liabilities as of September 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Accrued payroll and related benefits | | $ | 403,574 | | | $ | 754,904 | |
Accrued legal, accounting and professional fees | | | 2,500,983 | | | | 838,865 | |
Accrued transaction costs related to the reverse recapitalization | | | 503,600 | | | | 503,600 | |
Accrued taxes payable | | | 196,842 | | | | 89,346 | |
Accrued interest | | | 625,599 | | | | 337,913 | |
Other | | | 212,581 | | | | 225,677 | |
Total accrued expenses | | $ | 4,443,179 | | | $ | 2,750,305 | |
NOTE 5. FAIR VALUE MEASUREMENTS
Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1: Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2: Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
An asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments that are carried at fair value consist of Level 1 and Level 3 assets and liabilities. Level 1 assets include highly liquid bank deposits and money market funds, which were not material as of September 30, 2024 and December 31, 2023. Level 1 liabilities include the Public Warrants and are classified as Level 1 due to the use of an observable market quote in an active market. The Company measured the fair value of the Public Warrants on the date of the Closing of the Business Combination based on the close price of the Public Warrant price. Level 3 liabilities include (i) the Junior Note Warrants (as defined in Note 8, Notes and Convertible Notes Payable), (ii) the August 2024 Convertible Note Derivative Liability (as defined and described in Note 8, Notes and Convertible Notes Payable) and (iii) the Legacy Nuburu Convertible Notes (as described in Note 3, Reverse Recapitaliation), each of which is classified as Level 3 due to the use of unobservable inputs in the valuation of the liability. During the nine months ended September 30, 2024 and 2023, no warrants were exercised.
The gains and losses from re-measurement of Level 1 and Level 3 financial liabilities are recorded as part of change in fair value of warrant liabilities and change in fair value of derivative liability in the condensed consolidated statements of operations and comprehensive loss. There were no transfers between Level 1, Level 2, and Level 3 in any periods presented.
The following tables set forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy as of September 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | |
| | At September 30, 2024 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Public Warrants(1) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Junior Note Warrants | | | — | | | | — | | | | 82,333 | | | | 82,333 | |
Convertible note derivative liability(2) | | | — | | | | — | | | | 37,900 | | | | 37,900 | |
| | | | | | | | | | | | | | | | |
| | At December 31, 2023 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Public Warrants(1) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Junior Note Warrants | | | — | | | | — | | | | 2,238,519 | | | | 2,238,519 | |
(1) The Public Warrants are a Level 1 fair value measurement, as noted further below and in Note 10, Warrants, of these consolidated financial statements.
(2) Represents the August 2024 Convertible Note Derivative Liability, as defined and described in Note 8, Notes and Convertible Notes Payable.
On December 12, 2023, the New York Stock Exchange American (“NYSE American”) notified the Company, and publicly announced, that the NYSE American had determined to (a) commence proceedings to delist the Company’s Public Warrants, each whole warrant exercisable to purchase one share of the Company’s common stock, par value $0.0001 per share, at a price of $11.50 per share, and listed to trade on the NYSE American under the symbol “BURU.WS”, and (b) immediately suspend trading in the Public Warrants due to “abnormally low” trading price levels. As such, the Public Warrants were determined to have no value as of September 30, 2024 and December 31, 2023.
Level 3 Financial Liabilities
Junior Note Warrants
The following table sets forth a summary of the changes in fair value of the Company's Junior Note Warrants issued in November 2023:
| | | | |
Fair value, September 30, 2023 | | $ | — | |
Recognition of Junior Note Warrants upon issuance | | | 2,668,169 | |
Change in fair value | | | (429,650 | ) |
Fair value, December 31, 2023 | | | 2,238,519 | |
Change in fair value | | | (3,311 | ) |
Fair value, March 30, 2024 | | | 2,235,208 | |
Change in fair value | | | (1,783,201 | ) |
Fair value, June 30, 2024 | | | 452,007 | |
Change in fair value | | | (369,674 | ) |
Fair value, September 30, 2024 | | $ | 82,333 | |
The aggregate fair value of the Junior Note Warrants was estimated using a Monte Carlo simulation based approach, a Level 3 valuation. The significant inputs to the calculation of the fair value of the Junior Note Warrant liability were as follows:
| | | | | | |
| | Nine Months Ended
September 30, 2024 | | Year Ended
December 31, 2023 |
Common Stock Warrants: | | | | | | |
Stock price | | $ | 0.03 - 0.51 | | $ | 0.15 - 0.18 |
Expected term (in years) | | | 4.2 - 4.9 | | | 4.9 - 5.0 |
Expected volatility | | | 58.9% - 76.9% | | | 66.3% |
Risk-free interest rate | | | 3.6% - 4.3% | | | 3.8% - 4.1% |
Expected dividend yield | | | 0.0% | | | 0.0% |
August 2024 Convertible Note Derivative Liability
The following table sets forth a summary of the changes in fair value of the Company's August 2024 Convertible Note Derivative Liability:
| | | | |
Fair value, June 30, 2024 | | $ | — | |
Initial recognition at fair value | | | 179,000 | |
Change in fair value | | | (141,100 | ) |
Fair value, September 30, 2024 | | $ | 37,900 | |
The aggregate fair value of the August 2024 Convertible Note Derivative Liability was estimated using a Monte Carlo simulation based approach, a Level 3 valuation. The significant inputs to the calculation of the fair value of the August 2024 Convertible Note Derivative Liability during the nine months ended September 30, 3034 were as follows:
| | | |
| | Nine Months Ended
September 30, 2024 |
August 2024 Convertible Note Derivative Liability: | | | |
Stock price | | $ | $0.51 - $1.82 |
Expected term (in years) | | | 0.35 - 0.46 |
Expected volatility | | | 253.0% - 285.4% |
Risk-free interest rate | | | 4.6% - 5.0% |
Expected dividend yield | | | 0.0% |
Legacy Nuburu Convertible Notes
The following table sets forth a summary of the changes in fair value of the Company's Legacy Nuburu Convertible Notes, which were cancelled and converted into shares of Legacy Nuburu common stock in connection with the Business Combination:
| | | | |
Fair value, January 1, 2023 | | $ | 22,688,097 | |
Cancellation and convsion in connection with the Business Combination | | | (22,688,097 | ) |
Fair value as of March 31, 2023 | | $ | — | |
NOTE 6. COMMITMENTS AND CONTINGENCIES
Operating Lease
The Company leases office space in Centennial, Colorado under a noncancelable operating lease agreement. The Company leases and occupies approximately 27,900 square feet of office space. The original term of the lease was set to expire in December 2024, however, in November 2023, the Company elected to extend the lease through June 2025. In recognition of the ROU asset and the related lease liability as of September 30, 2024, any further options to extend the lease term have not been included as the Company was not reasonably certain to exercise any such option.
As of September 30, 2024 and December 31, 2023, the weighted-average remaining lease term was 0.8 years and 1.5 years, respectively, and the discount rate used was 7.0% as of each respective date.
During the periods presented, the Company recognized the following lease costs arising from the lease transaction:
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine months ended September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Operating lease cost | | $ | 102,938 | | | $ | 85,036 | | | $ | 308,814 | | | $ | 255,109 | |
The Company recognized the following cash flow transactions arising from lease transactions:
| | | | | | | | |
| | Nine months ended September 30, | |
| | 2024 | | | 2023 | |
Cash paid for amounts included in the measurement of lease liabilities | | $ | 287,537 | | | $ | 279,160 | |
On September 30, 2024, the future payments and interest expense for the operating leases are as follows:
| | | | |
Year Ending December 31, | | Future Payments | |
2024 | | $ | 95,846 | |
2025 | | | 240,834 | |
Total undiscounted cash flows | | | 336,680 | |
Less: imputed interest | | | (8,126 | ) |
Present value of lease liabilities | | $ | 328,554 | |
Legal Proceedings
In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for legal proceedings when it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. At September 30, 2024 and December 31, 2023, the Company was not involved in any material legal proceedings.
Purchase Commitments
As of September 30, 2024, the Company had approximately $467,000 in outstanding firm purchase commitments to acquire inventory and research and development parts from suppliers for the Company's ongoing operations.
NOTE 7. REVENUE
The Company’s primary revenue-generating activity involves sales of high-powered lasers and related installation services. The Company has sales to customers throughout the U.S., Europe, and Asia. All sales are settled in U.S. dollars.
The following table presents revenue disaggregated by geography:
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
United States | | $ | — | | | $ | 186,743 | | | $ | 15,000 | | | $ | 1,423,809 | |
Asia | | | — | | | — | | | | 9,112 | | | | 116,485 | |
Europe | | | — | | | — | | | | 118,715 | | | | 170,500 | |
Total | | $ | — | | | $ | 186,743 | | | $ | 142,827 | | | $ | 1,710,794 | |
Revenue from contracts with customers are disaggregated as follows:
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine months ended September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Revenue recognized at a point in time | | $ | — | | | $ | 186,743 | | | $ | 123,827 | | | $ | 1,705,794 | |
Revenue recognized over time | | | — | | | | — | | | | 19,000 | | | | 5,000 | |
Total | | $ | — | | | $ | 186,743 | | | $ | 142,827 | | | $ | 1,710,794 | |
Contract liabilities consist of customer deposits that are applied to invoices as the performance obligation is performed. Accounts receivable and contract liabilities as of the periods presented were as follows:
| | | | | | | | |
| | Accounts Receivable | | | Contract Liabilities | |
January 1, 2023 | | $ | 327,200 | | | $ | 178,750 | |
December 31, 2023 | | | 482,279 | | | | 30,400 | |
September 30, 2024 | | | 54,600 | | | | 24,000 | |
During the three months ended September 30, 2024 and 2023 the Company recognized no revenues that was included in the contract liabilities balance at the beginning of the period. During the nine months ended September 30, 2024 and 2023, the Company recognized $30,400 and $32,500 of revenue that was included in the contract liabilities balance at the beginning of the reporting period, respectively.
NOTE 8. NOTES AND CONVERTIBLE NOTES PAYABLE
As of September 30, 2024 and December 31, 2023, the Company's outstanding debt consisted of the following:
| | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Current portion of notes payable: | | | | | | |
Junior Notes Issued November 2023 | | $ | 3,182,855 | | | $ | 5,500,000 | |
August 2024 Convertible Notes | | | 673,000 | | | | - | |
Additional August 2024 Convertible Notes | | | 687,315 | | | | - | |
Unamortized debt discount and deferred financing costs | | | (311,129 | ) | | | (3,352,008 | ) |
Current portion of notes payable | | | 4,232,041 | | | | 2,147,992 | |
Long-term portion of notes payable: | | | | | | |
Senior Convertible Notes Issued June 2023 | | | 4,511,880 | | | | 6,713,241 | |
Total debt | | $ | 8,743,921 | | | $ | 8,861,233 | |
Junior Notes Issued November 2023
On November 13, 2023, the Company entered into Note and Warrant Purchase Agreements (the "Junior Note Purchase Agreements") with the lenders identified therein (the "Lenders") providing for (i) zero-interest promissory notes, issued with a 10% original issue discount, in the aggregate principal amount of $5,500,000 (the "Junior Notes"), and (ii) warrants ("Junior Note Warrants," refer to Note 10, Warrants), exercisable for an amount of the Company's common stock equal to 100% of the principal amount of the Junior Notes (limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders), which will be exercisable for $5.00 per share of the Company's common stock (subject to adjustments noted in the Junior Note Purchase Agreements).
The Junior Notes are junior and secured by the Company's patent portfolio pursuant to a security agreement among the parties (the "Security Agreement"). The Junior Notes will mature on the earlier of: (i) the Company closing a credit facility in principal amount of at least $20 million, (ii) a Sale Event (as defined in the Junior Note Purchase Agreements), or (iii) twelve months after issuance. The Junior Notes contain customary events of default. If the Junior Notes have not been repaid within six or nine months after issuance, the Junior Notes will begin to bear interest at the SOFR rate plus 9% and at the SOFR rate plus 12%, respectively, and an additional 25% warrant coverage will be provided at each such date, with a per share exercise price equal to 120% of the trading price of the Company's common stock at the time of issuance and a redemption right in favor of the Company when the trading price of the common stock is greater than 200% of the applicable exercise price for 20 out of any 30 consecutive trading days. Shares of common stock issuable upon exercise of the Junior Note Warrants will be limited to an aggregate of 19.9% of the Company's outstanding common stock until such time as the transaction is approved by the Company's stockholders.
Refer to Note 10 for the Company's accounting for the Junior Note Warrants. As a result of that accounting, the Notes contain the original issue discount of $500,000 as well as the discount associated with the Junior Note Warrant liability of $2,668,169. The total discount is amortized over the term of the Junior Notes in accordance with FASB ASC 835 - Interest.
The table below summarizes the outstanding principal amount of the Junior Notes to related parties:
| | | | | | | |
Noteholder | September 30,
2024 | | | December 31,
2023 | |
David Seldin(1) | $ | — | | | $ | 1,100,000 | |
Eunomia, LP(2) | | 1,100,000 | | | | 1,100,000 | |
CST Global LLC(3) | | — | | | | 220,000 | |
Total Junior Notes - related parties | $ | 1,100,000 | | | $ | 2,420,000 | |
(1)David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC (the "Anzu SPVs"), which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(2)Ron Nicol, manager of Eunomia, LP, is the Executive Chairman of the Company’s board of directors.
(3)David Michael, an affiliate of CST Global LLC, was a member of the Legacy Nuburu board of directors.
Junior Notes Issued August 2024 (the "August 2024 Convertible Notes")
On August 6, 2024 and August 19, 2024, the Company entered into a subordinated convertible note agreement (the "August 2024 Convertible Note Agreement") with Esousa Group Holdings LLC ("Esousa") for the sale of convertible notes (the "August 2024 Convertible Notes”) in the aggregate principal amount of $673,000, issued at a discount of $25,000. The August 2024 Convertible Notes bear interest at 15% per annum, with principal and accrued interest due at maturity on February 6, 2025, unless earlier paid or converted into common stock. The notes are prepayable at any time prior to the maturity date without penalty. Upon the occurrence and continuance of an event of default or spin-off of a subsidiary, a default interest rate of an additional 5% per annum may be applied to any outstanding borrowings (in the case of an event of default only) and the investor may declare all outstanding principal plus accrued interest immediately due. Additionally, at any point after issuance, the investor has the option to convert the August 2024 Convertible Notes into common stock at the lower of (i) a fixed price of $2.03 or (ii) 80% of the lowest daily volume weighted-average price in the 10 trading days prior to such conversion date, subject to certain adjustments. Issuances of common stock on conversion are (i) subject to approval by NYSE American of a supplemental listing application, (ii) limited to an amount equal to 19.9% of the outstanding common stock as of the date of execution, until such time as the transaction is approved by stockholders and (iii) required to be registered with the SEC for resale. With certain exceptions, the Company is prohibited from issuing new securities until such stockholder approval is obtained and the registration statement registering the securities issuable under such notes has been effective for a period of at least 30 days (the “Restricted Period”). As of September 30, 2024, the effective interest rate of the August 2024 Convertible Notes was 180.2%, which reflects the impact of the August 2024 Convertible Note Derivative Liability, defined and described below.
As required under the terms of the August 2024 Convertible Notes, the Company called a stockholder meeting to approve the securities issuable upon conversion of such notes. However, the Company was unable to achieve quorum and was forced to delay obtaining such approval. Further, while the Company timely filed a registration statement for the resale of shares issuable on conversion, it has not yet been declared effective by the SEC. As a result, the Company is currently in default under the terms of such notes.
The Company determined that the conversion and share-settled redemption features, as well as the automatic increase in interest rate upon an event of default feature, of the August 2024 Convertible Notes were embedded derivatives that were required to be bifurcated from the host instrument and accounted for as embedded derivative instruments, which the Company compounded (the "August 2024 Convertible Note Derivative Liability"). As the Company did not elect the fair value option for the August 2024 Convertible Notes, the proceeds from the August 2024 Convertible Notes were allocated to the initial fair value of the August 2024 Convertible Note Derivative Liability, which was determined to be $179,000, with the residual balance allocated to the initial carrying value of the August 2024 Convertible Notes host instrument. For additional information related to the fair value of the August 2024 Convertible Note Derivative Liability, see Note 5.
The Company incurred $114,800 in debt issuance costs for legal fees related to the issuance of the August 2024 Convertible Notes. Additionally, in connection with the issuance of the August 2024 Convertible Notes, the Company issued warrants to a financial services firm as compensation for their services performed, the fair value of which was determined to be $7,691 and was recorded as a debt issuance cost. For additional information regarding these warrants, see Note 10.
Concurrent with the above, Esousa also purchased $687,315 of outstanding principal and accrued interest under the Senior Convertible Notes from an existing investor and subsequently exchanged such notes for subordinated convertible notes (the "Additional August 2024 Convertible Notes"). The Additional August 2024 Convertible Notes may be prepaid at any time without penalty, do not accrue interest, mature on February 6, 2025 and may be converted at any time on or after the issuance date into common stock at a conversion price of 25% of the closing price of the common stock on the trading day prior to such conversion date, subject to certain adjustments.
The August 2024 Convertible Notes and Additional August 2024 Convertible Notes are unsecured and subordinated to the Company’s outstanding senior convertible notes and junior bridge notes in right of payment, whether in respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.
Senior Convertible Notes Issued June 2023
On June 12, 2023 and June 16, 2023, the Company entered into Note and Warrant Purchase Agreements (the “Senior Convertible Note Purchase Agreements”) with certain investors (each, an “Investor”) for the sale of (i) convertible promissory notes (“Senior Convertible Notes”) in the aggregate principal amount of $9,225,000, and (ii) warrants (“Senior Note Warrants," refer to Note 10, Warrants) to purchase up to 287,972 shares of the Company’s common stock from the June 12, 2023 Purchase Agreement and up to 47,238 shares of Common Stock from the June 16, 2023 Purchase Agreement.
The Senior Convertible Notes are senior, secured obligations of the Company, which became secured by the Company's patent portfolio per the Security Agreement as of November 2023, bear interest at the rate of 7.0% per annum, and are payable on the earlier of June 23, 2026 or the occurrence of an Event of Default, as defined in the Senior Convertible Notes. The Senior Convertible Notes are senior to the Junior Notes pursuant to an intercreditor agreement between the parties. The Senior Convertible Notes may be converted at any time following June 23, 2023 and prior to the payment in full of the principal amount of the Senior Convertible Notes at the Investor’s option. In the event of the Sale of the Company (as defined in the Senior Convertible Notes), the outstanding principal amount of each Senior Convertible Note, plus all accrued and unpaid interest not otherwise converted into equity securities pursuant to the terms of the Senior Convertible Notes, shall (i) if the Investor so elects, be converted into equity securities pursuant to the terms of the Senior Convertible Notes at a price equal to $27.52 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), or (ii) be due and payable immediately prior to the closing of such Sale of the Company, together with a premium equal to 150% of the principal amount to be prepaid.
As further described above, during August 2024, $687,000 of outstanding principal and accrued interest under the Senior Convertible Notes was purchased by another investor and subsequently exchanged for the issuance of a subordinated convertible note.
The table below summarizes the outstanding principal amount of the Senior Convertible Notes to related parties:
| | | | | | | |
Investor | September 30,
2024 | | | December 31,
2023 | |
Wilson-Garling 2023 Family Trust(1) | $ | 5,000,000 | | | $ | 5,000,000 | |
David Seldin(2) | | — | | | | 1,200,000 | |
Eunomia, LP(3) | | 1,000,000 | | | | 1,000,000 | |
Curtis N Maas Revocable Trust(4) | | 100,000 | | | | 100,000 | |
Total Senior Convertible Notes - related parties | $ | 6,100,000 | | | $ | 7,300,000 | |
(1)Thomas J. Wilson, an affiliate of Wilson-Garling 2023 Family Trust, was a member of the Legacy Nuburu board of directors.
(2)David Seldin was a member of the Legacy Nuburu board of directors and at the time of the issuance was the sole manager of Anzu Nuburu LLC, Anzu Nuburu II LLC, Anzu Nuburu III LLC and Anzu Nuburu V LLC (the “Anzu SPVs”), which at that time owned more than 5% of Legacy Nuburu’s capital stock.
(3)Ron Nicol, manager of Eunomia, LP, is the Chairman of the Company’s board of directors.
(4)Curtis Maas, an affiliate of the Curtis N Maas Revocable Trust, was a member of the Legacy Nuburu board of directors.
Extinguishments
During the three and nine months ended September 30, 2024, the Company issued 2,399,850 and 4,648,162 shares, respectively, to noteholders to extinguish an aggregate $0.7 million and $4.8 million, respectively, of principal and accrued interest under the Senior Notes and Junior Notes. The reacquisition value of the debt was higher than the related carrying value, and thus resulted in an aggregate net loss on debt extinguishment of $1,165,585 and $11,511,693, respectively, recorded in the condensed consolidated statement of operations.
NOTE 9. CONVERTIBLE PREFERRED STOCK
Legacy Nuburu Preferred Stock Financing
In multiple closings in December 2021 and January 2022, Legacy Nuburu sold an aggregate of 1,166,372 shares of Legacy Nuburu Series C Preferred Stock, at a purchase price of $5.00 per share, for an aggregate purchase price of approximately $5.8 million.
Series A Preferred Stock
Ranking
The Company’s Preferred Stock ranks senior to the Company’s Common Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends
Holders of the Company’s Preferred Stock participate, on an as-converted basis (without regard to any conversion limitations) in all dividends paid to the holders of the Company’s Common Stock.
Conversion Rights
The Preferred Stock is convertible at any time into Common Stock at a conversion rate equal to $0.25 (subject to equitable adjustment in the event of a stock split, stock consolidation, subdivision or certain other events of a similar nature that increase or decrease the number of shares of Preferred Stock outstanding (the “Original Issuance Price”)) divided by the lesser of (i) $11.50 and (ii) the greater of (x) 115% of the lowest volume-weighted average price per share of the Company’s Common Stock as displayed under the heading Bloomberg VWAP (the “VWAP”) for any consecutive ninety-trading day period prior to the calculation of such VWAP and (y) $5.00, in each case subject to adjustment as set forth in the Certificate of Designations (the “Conversion Price”).
Any conversion will be settled only in shares of Common Stock; provided, that, upon any conversion that would result in the holders beneficially owning greater than 9.99% of the Company’s voting stock outstanding as of the conversion date or any individual holder beneficially owning Common Stock in excess of the maximum number of shares of Common Stock that could be issued to the holder without triggering a change of control under the applicable stock exchange listing rules, the excess, if any, of the conversion consideration otherwise payable upon such conversion shall be paid in cash, based on an amount per share of Common Stock equal to the last reported price per share of the Common Stock on the trading day immediately preceding the conversion date.
Mandatory Conversion
If the VWAP is greater than 200% of the Conversion Price for any 20 trading days in a 30-day trading day period, the Company may elect to convert all, but not less than all, of the Preferred Stock then outstanding into the Company’s Common Stock at a conversion rate with respect to each share of Preferred Stock equal to the Original Issuance Price as of the date of such conversion divided by the then applicable Conversion Price.
Voting Rights
The holders of Preferred Stock are not entitled to vote at or receive notice of any meeting of stockholders, except the holders of Preferred Stock are entitled to certain consent rights on matters related to (i) the creation or authorization of the creation of any equity or debt securities of the Company that rank senior or equal to certain rights of the Preferred Stock and (ii) the authorization of any adverse change to the powers, preferences, or special rights of the Preferred Stock set forth in the Company’s Certificate of Incorporation or Bylaws, and shall have voting rights as required by law.
Redemption
On the second anniversary of the Closing Date, or January 31, 2025 (the “Test Date”), the Company is obligated to redeem the maximum portion of the Preferred Stock permitted by law in cash at an amount equal to the Original Issuance Price as of such date if the Conversion Price exceeds the VWAP. If, on the Test Date, the Conversion Price is equal to or less than the VWAP, the Company must convert all shares of Preferred Stock then outstanding into shares of the Company’s Common Stock at the then applicable Conversion Price. Notwithstanding the foregoing, the Company shall not be required to redeem any shares of Preferred Stock to the extent the Company does not have legally available funds to effect such redemption. The mandatory redemption and conversion provisions described herein are further subject to certain limitations detailed in the Certificate of Designations. As a result of such redemption feature, the Company recorded the Preferred Stock at its redemption value and classified the Preferred Stock as mezzanine equity on the consolidated balance sheet.
Series A Preferred Stock Issuances
The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of both September 30, 2024 and December 31, 2023, there were 2,388,905 shares of preferred stock issued and outstanding.
Upon the Closing of the Business Combination, all 23,237,703 shares of issued and outstanding convertible preferred stock were cancelled and converted into 580,943 shares of Legacy Nuburu common stock based upon the conversion rate as calculated pursuant to Legacy Nuburu's Certificate of Incorporation, multiplied by the Exchange Ratios at the Effective Time.
Additionally, upon the Closing of the Business Combination, the cancellation and conversion of all Legacy Nuburu Company Notes into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time resulted in the issuance of 2,642,239 shares which were then outstanding as Legacy Nuburu common stock as of immediately prior to the Effective Time and subsequently converted into 34,045 shares of Nuburu Common Stock and 1,361,787 shares of Nuburu Series A preferred stock at the Effective Time.
As of the Closing, each Legacy Nuburu stockholder waived its right to participate in the Preferred Stock Issuance (for clarity, excluding any shares received as a result of the conversion of any Legacy Company Notes prior to the Closing, which were entitled to participate in the Preferred Stock Issuance). Legacy Nuburu stockholders were entitled to receive approximately 99% of the Common Stock issued as merger consideration pursuant to the Business Combination Agreement agreed to waive such right by entering into the Stockholder Support Agreement (for clarity, excluding any shares received as a result of the conversion of any Legacy Company Notes). Those Legacy Nuburu stockholders who did not waive their right to participate resulted in the issuance of 15,478 shares of Nuburu Series A preferred stock at the Effective Time.
Each Tailwind stockholder who did not redeem their shares received a share of Nuburu Series A preferred stock. This resulted in the issuance of 316,188 shares of Nuburu Series A preferred stock to those non-redeeming stockholders.
Tailwind and the Tailwind Sponsor entered into the Sponsor Support and Forfeiture Agreement. In connection with the Business Combination, the 8,355,393 Founder Shares were forfeited other than 28,750 shares of Common Stock (of which, 3,750 shares were transferred to Nautilus Maser Fund, L.P. and 1,250 shares were transferred to Cohen & Company Capital Markets at Closing) and 650,000 shares of Series A preferred stock.
Wilson Sonsini Goodrich & Rosati, Professional Corporation (“WSGR”) was engaged by Legacy Nuburu to act as its counsel for the Business Combination. As partial compensation for the services provided by WSGR to Legacy Nuburu in connection with the Business Combination, the Company agreed to issue to WSGR 4,887 shares of Common Stock and 195,452 shares of Preferred Stock pursuant to the terms of the Stock Purchase Agreement entered into by and between the Company and WSGR on March 10, 2023. The foregoing issuance was made in a transaction not involving a public offering pursuant to an exemption from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.
Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $500,000 to Anzu Partners upon the closing of the Business Combination and (ii) issued a warrant with a strike price of $0.01 per share to Anzu Partners for 500,000 shares of Preferred Stock (the “Anzu Partners Warrant”). This warrant was exercised by Anzu Partners in connection with the Closing and the $500,000 payment was made during 2023.
Conversions
In November 2023, a holder of Series A Preferred Stock converted 650,000 shares of Series A Preferred Stock to 32,500 shares of Common Stock under the terms described under "Conversion Rights" above.
NOTE 10. WARRANTS
The following table provides a summary of the Company's outstanding warrants:
| | | | | | | | | | |
| | September 30,
2024 | | | December 31,
2023 | |
Liability classified warrants: | | | | | | | | |
Junior Note Warrants | | | $ | 859,315 | | | | $ | 550,000 | |
Public Warrants | | | | 417,770 | | | | | 417,770 | |
Total liability-classified warrants outstanding | | | $ | 1,277,085 | | | | $ | 967,770 | |
| | | | | | | | |
Equity classified warrants: | | | | | | | | |
June 2023 Senior Note Warrants | | | $ | 335,210 | | | | $ | 335,210 | |
Pre-Funded Warrants | | | | 837,116 | | | | | - | |
August 2024 Warrants Issued with Junior Notes | | | | 19,892 | | | | | - | |
Total equity-classified warrants outstanding | | | $ | 1,192,218 | | | | $ | 335,210 | |
Liability Classified Public Warrants
November 2023 Junior Note Warrants
In connection with the Junior Notes discussed in Note 8 - Notes and Convertible Notes Payable the Company issued the Junior Note Warrants to purchase up to 550,000 shares of the Company's common stock. The Junior Note Warrants currently outstanding have an exercise price equal to $5.00 per share (subject to adjustment per the Junior Note Purchase Agreements) and expire on December 6, 2028. The Junior Note Purchase Agreements also provide for additional warrants to be issued if the Junior Notes remain outstanding for certain periods of time: (i) if the Junior Notes have not been repaid six months after issuance, additional warrants will be issued to each Lender in an amount equal to the principal amount of the Note multiplied by 25%, and such quotient divided by a per share cash exercise price equal to 120% of the Volume Weighted Average Price ("VWAP") of the Company's Common Stock during the ten trading days immediately prior to issuance and (ii) if the Junior Notes have not been repaid nine months after issuance, additional warrants will be issued to each Lender in an amount equal to the principal amount of the Note multiplied by 25%, and such quotient divided by a per share cash exercise price equal to 120% of the VWAP of the Company's Common Stock during the ten trading days immediately prior to issuance. As a portion of the Junior Notes were outstanding at each of May 13, 2024 and August 13, 2024, the Company was required to issue 384,233 additional warrants pursuant to the Junior Note Purchase Agreements during the nine months ended September 30, 2024.
Based on the terms of the Junior Note Purchase Agreements, the Junior Note Warrants were evaluated under FASB ASC 815-40 - Derivatives and Hedging-Contracts in Entity's Own Equity ("ASC 815-40") and the Company concluded they did not initially meet the criteria to be classified in stockholders' equity (deficit). Specifically, there were contingent exercise provisions and settlement provisions that existed, as described above, where the number of shares available under the Junior Note Warrants may be adjusted. Because the number of outstanding common shares was not a fair value input to a fixed-for-fixed model, the Junior Note Warrants are treated as liabilities and are remeasured at each reporting date. The proceeds of $5,500,000 were allocated first to the Junior Note Warrant liability at fair value and then to the Junior Notes. The Company further determined that the Junior Warrant liability meets the criteria to be accounted for as a bifurcated derivative due to the significant discount it creates on the Junior Notes.
Public Warrants
In connection with the closing of the Business Combination, Nuburu assumed the 16,710,785 Public Warrants outstanding on the date of Closing. As of September 30, 2024, all 417,770 Public Warrants remain outstanding. However, on December 12, 2023, the NYSE American notified the Company and publicly announced that the NYSE American had determined to (a) commence proceedings to delist the Company’s Public Warrants, each whole Public Warrant exercisable to purchase one share of Common Stock at a price of $460.00 per share, and listed to trade on the NYSE American under the symbol “BURU WS”, and (b) immediately suspend trading in the Public Warrants due to “abnormally low” trading price levels. As such, the Public Warrants were determined to have no value in the financial statements as of September 30, 2024.
Each whole Public Warrant entitles the registered holder to purchase one share of Common Stock at a price of $460.00 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the Business Combination. Pursuant to the Warrant Agreement, a warrant holder may exercise its Public Warrants only for a whole number of shares of Common Stock. The Public Warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
Redemptions of Public Warrants when the price of Common Stock equals or exceeds $720.00 — Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
•in whole and not in part;
•at a price of $0.40 per warrant;
•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the closing price of the Common Stock equals or exceeds $720.00 per share for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $400.00 — Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
•in whole and not in part;
•at $16.00 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Common Stock;
•if, and only if, the last reported sale price of the Common Stock equals or exceeds $400.00 per share (as adjusted per stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
•if the closing price of the Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $720.00 per share, the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
Equity Classified Common Stock Warrants
June 2023 Senior Note Warrants
In connection with the issuance of the Senior Convertible Notes discussed in Note 8 - Notes and Convertible Notes Payable, the Company issued the Senior Note Warrants to purchase up to 287,972 shares of the Company's Common Stock pursuant to the June 12, 2023 Purchase Agreement and 47,238 shares of Common Stock pursuant to the June 16, 2023 Purchase Agreement. The Senior Note Warrants have an exercise price equal to $41.20 per share and expire on June 23, 2028.
As the Senior Note Warrants were part of a bundled transaction, the gross proceeds from the issuance of $9,225,000 were allocated to the Senior Convertible Notes and Senior Note Warrants based on their respective relative fair value upon issuance. The aggregate fair value of the Senior Note Warrants of $3,401,366 was estimated using the Black-Scholes option-pricing model with the following assumptions:
| | | | | |
| | Issuance Date | |
Common Stock Warrants: | | | | |
Expected term (in years) | | | | 5.0 | |
Expected volatility | | | 47.9% | |
Risk-free interest rate | | | 4.0% | |
Expected dividend yield | | | 0.0% | |
The allocated proceeds from the Senior Note Warrants of $2,511,759 were recorded in additional paid-in capital in the condensed consolidated balance sheets upon issuance of the Senior Note Warrants.
Pre-Funded Warrants
On May 1, 2024, the Company entered into a Pre-Funded Warrant Purchase Program (the “Program”) with strategic investors, pursuant to which from time-to-time the Company may sell and the investors may acquire pre-funded warrants, up to a total purchase price to the Company equal to $15 million. The exercise price for the pre-funded warrants is substantially paid by the purchaser at closing and, as a result, such warrants may be exercised in the future with a nominal exercise price payment. Investors will also receive a warrant to acquire the same number of shares covered by the pre-funded warrant for a purchase price equal to 150% of the relevant pre-funded warrant purchase price exercisable for a period of 5 years. Each specific transaction will be entered into on terms agreed by the parties; provided however, that in no case will the purchase price per share be less than 110% of the closing price per share of the Company’s common stock on the trading day immediately preceding the date of purchase. Contemporaneously with the acquisition of pre-funded warrants, the investors may also voluntarily convert outstanding notes previously issued by the Company; provided that such transactions, as a whole, may not result in an effective direct or indirect discount to market price to the investors of greater than 30%.
During the three and nine months ended September 30, 2024, the Company issued 665,410 and 837,116 pre-funded warrants, respectively, for total cash proceeds of $600,000 and $2,139,866, respectively, in pre-funded warrants pursuant to the Program. Each pre-funded warrant entitles the holder to purchase one share of common stock at an exercise price ranging from 125% to 140% of the relevant pre-funded warrant purchase price. The pre-funded warrant is exercisable any time after issuance through five years. No pre-funded warrants were exercised during the periods presented. The proceeds from the issuance of the pre-funded warrants were recorded to additional paid-in capital in the condensed consolidated balance sheets.
August 2024 Warrants Issued with Junior Notes
As discussed in Note 8, in connection with the issuance of the August 2024 Convertible Notes, the Company issued an aggregate 19,892 warrants to a financial services firm as compensation for their services performed, the fair value of which was determined to be $7,691 and was recorded as a debt issuance cost and associated additional paid-in capital in the condensed consolidated balance sheet, as the warrants were determined to be equity classified. The warrants are exercisable through payment of an exercise price ranging from $2.18 to $3.18, subject to certain customary antidilution adjustments, at any time after issuance through the expiration date in August 2029.
NOTE 11. STOCK-BASED COMPENSATION
As of September 30, 2024, the Company had an active stock-based incentive compensation plan and an employee stock purchase plan: the 2022 Equity Incentive Plan (the “2022 Plan”) and the 2022 Employee Stock Purchase Plan (the “ESPP”). All new equity compensation grants are issued under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans.
The 2022 Plan provides for the grant of stock and stock-based awards including stock options, restricted stock, restricted stock units, performance awards, and stock appreciation rights. As of September 30, 2024, there are approximately 67,000 shares available for grant under the 2022 Plan and approximately 10,000 shares available for grant under the ESPP.
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations and comprehensive loss is classified as follows:
| | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | | Nine months ended September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Cost of revenue | | $ | 118,774 | | | $ | 167,899 | | | $ | 364,286 | | | $ | 522,627 | |
Research and development | | $ | 112,528 | | | $ | 145,848 | | | $ | 378,442 | | | $ | 480,131 | |
Selling and marketing | | $ | 9,371 | | | $ | 81,901 | | | $ | (189,828 | ) | | $ | 181,413 | |
General and administrative | | $ | 206,932 | | | $ | 239,380 | | | $ | 959,392 | | | $ | 711,618 | |
Total stock-based compensation expense | | $ | 447,605 | | | $ | 635,028 | | | $ | 1,512,292 | | | $ | 1,895,789 | |
The Company’s stock-based compensation expense is based on the value of the portion of stock-based payment awards that are ultimately expected to vest. During the three months ended September 30, 2024 and 2023, stock-based compensation relating to stock-based awards granted to consultants was $40,993 and $149,434, respectively. During the nine months ended September 30, 2024 and 2023, stock-based compensation relating to stock-based awards granted to consultants was $152,010 and $411,602, respectively.
Restricted Stock Units
The Company grants Restricted Stock Units ("RSUs") to its employees for their services with a liquidity event requirement. The RSUs granted to employees vest over a period of time from the grant date and are subject to the participants continuing service to the Company over the period.
| | | | | | | | |
| | RSUs | |
| | Number of Shares | | | Weighted Average Grant Date Fair Value | |
Unvested at December 31, 2023 | | | 22,213 | | | $ | 208.80 | |
RSUs granted | | | 45,725 | | | $ | 5.38 | |
RSUs vested | | | (51,507 | ) | | $ | 20.37 | |
RSUs forfeited | | | (9,811 | ) | | $ | 95.42 | |
Unvested at September 30, 2024 | | | 6,620 | | | $ | 198.87 | |
The total grant date fair value of RSUs awarded was $246,000 and $1,709,217 for the nine months ended September 30, 2024 and 2023, respectively. The total grant date fair value of RSUs vested was $1,049,265 and $1,490,805 for the nine months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, total unrecognized stock-based compensation costs related to RSUs were $1,277,653, which are expected to be recognized over a remaining weighted average period of 1.53 years. As of September 30, 2024, all of the outstanding RSUs are expected to vest.
Stock Options
The Company's outstanding stock options generally expire 10 years from the date of grant and are exercisable when the options vest, generally over four years, the majority of which vest at a rate of 25% on the first anniversary of the grant date, with the remainder vesting ratably each month over the next three years. A summary of stock option activity is as follows:
| | | | | | | | | | | | | | | | |
| | Number of Stock Options Outstanding | | | Weighted-Average Exercise Price | | | Weighted-Average Remaining Contractual Life (Years) | | | Aggregate Intrinsic Value | |
Options outstanding at December 31, 2023 | | | 188,865 | | | $ | 74.41 | | | | 7.9 | | | $ | — | |
Options granted | | | 29,841 | | | $ | 5.46 | | | | | | | |
Options exercised | | | — | | | $ | — | | | | | | | |
Options cancelled or forfeited | | | (33,064 | ) | | $ | 151.39 | | | | | | | |
Options outstanding at September 30, 2024 | | | 185,642 | | | $ | 49.61 | | | | 8.3 | | | $ | — | |
Options exercisable at September 30, 2024 | | | 96,311 | | | $ | 71.87 | | | | 7.7 | | | $ | — | |
Options vested and expected to vest at September 30, 2024 | | | 185,642 | | | $ | 49.61 | | | | 8.3 | | | $ | — | |
The weighted-average grant date fair value of options granted to employees and consultants was $5.46 and $0.50 per share for the nine months ended September 30, 2024 and 2023, respectively.
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying Common Stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of options exercised was nil and $1,040 for the nine months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, total unrecognized stock-based compensation cost related to stock options was $898,238, which is expected to be recognized over a weighted-average period of 2.4 years.
Determining the appropriate fair value of stock based awards requires the input of subjective assumptions including the fair value of the Company’s Common Stock, the expected life of the option, and expected stock price volatility. The Company used the Black Scholes option pricing model to value its stock option awards.
The Company estimates the fair value of the options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company’s share price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term, and actual forfeiture rates. A summary of the weighted-average assumptions the Company utilized for option grants are as follows:
| | | | |
| | Nine Months Ended September 30, |
| | 2024 | | 2023 |
Expected term (in years) | | 4 | | 1.0 - 5.0 |
Expected volatility | | 47.8% - 55.0% | | 44.9% - 47.4% |
Risk-free interest rate | | 4.0% - 4.5% | | 3.8% - 5.4% |
Expected dividend yield | | 0.0% | | 0.0% |
Common Stock Issued for Services
During the three months ended September 30, 2024, the Company paid for certain services through the issuance of 12,500 fully vested common stock. The common stock awards are equity-classified, and compensation expense was recognized based on the fair value of the Company's common stock on the date of issuance. Stock-based compensation expense associated with the awards was immaterial for the nine months ended September 30, 2024.
NOTE 12. INCOME TAX
Due to its current operating losses, the Company recorded zero income tax expense during the three and nine months ended September 30, 2024 and 2023. During these periods, the Company’s activities were limited to U.S. federal and state tax jurisdictions, as it does not have any significant foreign operations.
Due to the Company’s history of cumulative losses and after considering all the available objective evidence, management concluded that it is not more likely than not that all of the Company’s net deferred tax assets will be realized in the future. Accordingly, the Company’s deferred tax assets, which include net operating loss (“NOL”) carryforwards and tax credits related primarily to research and development, continue to be subject to a valuation allowance as of September 30, 2024. The Company expects to continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets.
Utilization of the NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more "5-percent stockholders" increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period, or beginning the day after the most recent ownership change, if shorter. The Company has determined that a Section 382 change in ownership occurred during 2023. As a result of this change in ownership, we expect that certain of the Company's NOLs may not be utilized in the future to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. However, due to the full valuation allowance recorded as of September 30, 2024 and December 31, 2023 the limitation does not affect the Company's results of operations for the periods presented.
NOTE 13. NET LOSS PER SHARE
Diluted earnings per share (“EPS”) includes the dilutive effect of Common Stock equivalents and is computed using the weighted-average number of Common Stock and Common Stock equivalents outstanding during the reporting period. Diluted EPS for the three and nine months ended September 30, 2024 and 2023 excluded Common Stock equivalents because the effect of their inclusion would be anti-dilutive or would decrease the reported loss per share. The following table sets forth securities outstanding that could potentially dilute the calculation of diluted earnings per share:
| | | | | | | | |
| | Nine Months Ended September 30, | |
| | 2024 | | | 2023 | |
Stock options outstanding | | | 185,642 | | | | 195,656 | |
Junior Note Warrants | | | 859,315 | | | | — | |
Public Warrants | | | 417,770 | | | | 417,770 | |
June 2023 Senior Note Warrants | | | 335,210 | | | | 335,211 | |
Pre-Funded Warrants | | | 837,116 | | | | — | |
August 2024 Warrants Issued with Junior Notes | | | 19,892 | | | | — | |
Unvested restricted stock units | | | 6,620 | | | | 23,901 | |
If-converted Common Stock from Series A Preferred Stock(1) | | | 119,445 | | | | 151,945 | |
If-converted Common Stock from convertible notes | | | 32,932,138 | | | | 335,661 | |
Total | | | 35,713,148 | | | | 1,460,144 | |
(1) Assumes that all shares of Series A Preferred Stock are converted into Common Stock at a conversion rate equal to $0.25 divided by $5.00 (as adjusted by the Reverse Stock Split), representing the maximum number of shares issuable to holders of Series A Preferred Stock.
NOTE 14. SECURITIES PURCHASE AGREEMENT
On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors pursuant to which such investors agreed to purchase from the Company $3,000,000 of newly issued shares (the “Shares”) of the Company’s Common Stock, at a per Share purchase price of $5.00 per Share, or 600,000 shares.
Only a portion of the purchase price ($644,936) has been advanced and the Company has issued a notice of default to the investors for failure to fully fund the purchase price.
NOTE 15. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS AND PREVIOUSLY ISSUED UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restatement Background
On October 21, 2024, the Board of Directors and management, upon the recommendation of the Audit Committee of the Board of Directors, concluded that the Company’s previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and unaudited condensed consolidated financial statements as of and for each of the interim quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 should no longer be relied upon due to errors that are described below and that such financial statements should be restated. The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections was material to each period discussed above. As a result, the Company has restated previously issued financial statements in accordance with ASC 250, Accounting Changes and Error Corrections, as reflected in Amendment No. 4 to the Annual Report on Form 10-K for the year ended December 31, 2023 filed on November 8, 2024 (the “Amended 10-K”), Amendment No. 1 to the Quarterly Report on Form 10-Q for the three months ended March 31, 2024 filed on November 14, 2024, and Amendment No. 1 to the Quarterly Report on Form 10-Q for the three months ended June 30, 2024 filed on November 14, 2024.
We have determined that these errors were the result of a material weakness in internal control over financial reporting that is reported in management’s report on internal control over financial reporting as of December 31, 2023 in Part II, Item9A, “Controls and Procedures” of the Amended 10-K and Item 4 of this report.
The Company has not filed, and does not intend to file, amendments to the previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September, 2023, but instead has restated its unaudited interim condensed consolidated financial statements in the Amended 10-K filed November 8, 2024.
The restatements of the Company's previously issued financial statements include the (i) reclassification of convertible preferred stock that is redeemable at a future point in time from permanent equity to mezzanine equity and (ii) increase in the carrying value of such preferred stock to reflect the redemption value of the outstanding preferred stock. Additionally, the impact of the loss recorded during the year ended December 31, 2022 related to the accounting for the Legacy Nuburu Convertible Notes (as described in Note 8) at fair value is reflected as an adjustment to accumulated deficit for the restated periods.
The restatement had no impact on total net cash flows from operating, investing or financing activities.
NOTE 16. SUBSEQUENT EVENTS
On October 1, 2024, the Company entered into a master transaction terms agreement (the “Master Agreement”) with Liqueous LP, (the “Investor”) pursuant to which, the Company and the Investor established a strategic financing framework for short-term and long-term financing for the Company. The Master Agreement provides for: (i) an immediate capital infusion from the Investor of $3.0 million at current market price, (ii) subsequent weekly capital infusions of $1,250,000 at market price until an additional $10.0 million has been invested; (iii) the acquisition and conversion of certain outstanding notes, with each $1.00 of debt converted into $2.00 of common stock at market price; (iv) an adjustment to current market price of certain outstanding pre-funded warrants held by the Investor having a current cash value of approximately $2.2 million; and (v) the implementation of a $50 million equity line of credit (the “ELOC”) pursuant to which the Company may require the Investor to purchase common stock from time-to-time in the amounts and for the prices determined in accordance with the terms of the ELOC. Before the ELOC may be fully utilized, shares subject to the ELOC must be registered for resale and the Company must obtain consent from stockholders to issue shares in excess of 19.99% of the Company’s common stock as of the date of the ELOC. The Investor was also required to engage in good faith best efforts to prepay or otherwise acquire outstanding notes held by Esousa, given among other things the failure to achieve quorum at the special meeting called to approve the Esousa transaction and the restrictions on the issuance of additional shares until after such time as such stockholder approval is obtained. The full initial amounts due under the Master Agreement were not yet paid to the Company and Esousa’s notes remained outstanding, when the Company received claims from certain existing investors alleging that the Master Agreement violated the terms of their existing investments and Esousa enjoined us from issuing future securities, with certain exceptions, during the Restricted Period. The Company called a special stockholder meeting to approve the securities issuable upon conversion of the Esousa notes, which had been scheduled to take place on September 27, 2024. The proxy statement relating to such meeting requested approval of securities issuances in other capital raising transactions as well, which would have facilitated certain transactions under the Master Agreement. However, the Company was unable to achieve quorum and was forced to adjourn, and then ultimately cancel, the special meeting. The Company timely filed a registration statement, which it anticipates will be effective during the fourth quarter of 2024 and has filed a proxy statement for a second stockholder meeting to approve, among other things, the issuances of shares in connection with the Esousa and Liqueous transactions, which is scheduled to take place on December 27, 2024. The Company has negotiated financing transactions that would provide capital necessary to continue its path to commercialization; however, if the Company is unable to obtain the required stockholder approval to issue additional securities (and consent from certain investors with additional contractual rights to the extent required) or the counter parties do not perform under the terms of such financing agreements, the Company will not be able to sustain operations and will need to consider alternatives, which could include a sale, liquidation, or dissolution of the business or a foreclosure by its senior secured creditors.
Nuburu, Inc.
Up to 1,905,904 Shares of Common Stock Issuable
PROSPECTUS
January 21, 2025
Part II
Information Not Required In Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be borne by the registrant in connection with the issuance and distribution of the Securities being registered.
| | |
SEC registration fees | $ | 537.30 |
Legal fees and expenses | $ | 50,000.00 |
Accounting fees and expenses | $ | 30,000.00 |
Financial printing and miscellaneous expenses | $ | 0.00 |
Total | $ | 80,537.30 |
Item 14. Indemnification of Directors and Officers
Our Certificate of Incorporation provides that all of our directors, officers, employees and agents shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the DGCL. We are incorporated under the laws of the State of Delaware. Under Delaware law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to an action (other than an action by or in the right of the corporation) by reason of his or her service as a director or officer of the corporation, or his or her service, at the corporation’s request, as a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys’ fees) that are actually and reasonably incurred by him or her (“Expenses”), and judgments, fines and amounts paid in settlement that are actually and reasonably incurred by him or her, in connection with the defense or settlement of such action, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. Although Delaware law permits a corporation to indemnify any person referred to above against Expenses in connection with the defense or settlement of an action by or in the right of the corporation, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, if such person has been judged liable to the corporation, indemnification is only permitted to the extent that the Court of Chancery (or the court in which the action was brought) determines that, despite the adjudication of liability, such person is entitled to indemnity for such Expenses as the court deems proper. The Delaware General Corporation Law (the “DGCL”) also provides for mandatory indemnification of any director, officer, employee or agent against Expenses to the extent such person has been successful in any proceeding covered by the statute. In addition, the DGCL provides the general authorization of advancement of a director’s or officer’s litigation expenses in lieu of requiring the authorization of such advancement by the board of directors in specific cases, and that indemnification and advancement of expenses provided by the statute shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement or otherwise.
Our amended and restated bylaws and restated certificate of incorporation provide for indemnification of our directors and officers and for advancement of litigation expenses to the fullest extent permitted by current Delaware law.
We maintain a policy of directors and officers liability insurance which reimburses us for expenses which we may incur in connection with the foregoing indemnity provisions and which may provide direct indemnification to directors and officers where we are unable to do so.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the above, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities
June 2023 Issuances. On June 12, and June 16, 2023, the Company entered into Note and Warrant Purchase Agreements (the “June 2023 Purchase Agreements”) primarily with certain existing investors for the sale of (i) convertible promissory notes (the “Senior Convertible Notes”) in the aggregate principal amount of $9.225 million, and (ii) warrants to purchase up to 335,211 shares of the Company’s common stock (“Common Stock”), par value $0.0001 per share.
November 2023 Issuance. On November 13, 2023, the Company entered into a Note and Warrant Purchase Agreement ("the November 2023 Purchase Agreement") with the lenders identified therein (the "Lenders") providing for a loan with an aggregate principal amount of $5.5 million (the “Loan”). Following acceptance by the NYSE of the Company’s supplemental listing application, the Company also issued to the holders of Notes warrants exercisable for an amount of the Company’s Common Stock equal to 100% of the Note principal, which will be exercisable for $5.00 per share of Common Stock, have a 5-year term, and may be repurchased by the Company when the trading price of its Common Stock exceeds $60.00 for 20 out of any 30 consecutive trading days. The parties to the November Purchase Agreement also entered into an intercreditor and subordination agreement with the holders of the Company’s Senior Convertible Notes, which notes will now be secured pursuant to the Security Agreement and rank senior in priority to the Notes.
April 2024 Issuance. On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors named therein pursuant to which the investors agreed to purchase from the Company $3,000,000 of newly issued shares (the “Shares”) of the Company’s Common Stock, at a per Share purchase price of $5.00 per Share. Full payment of the purchase price has been subject to delay, which the Company understands is primarily related to the transfer of funds from foreign jurisdictions, including satisfying outbound and inbound banking and regulatory compliance requirements. Upon the closing of the SPA, the Company will issue to the investors warrants exercisable for an amount of Common Stock equal to 100% of the Shares, which will be exercisable for $6.50 per share of Common
Stock and have a 5-year term. The investors will also have the right to nominate two out of seven directors for election to the Company’s board of directors and the Company has agreed to propose certain transactions recommended by the investors for approval by the Company’s stockholders in the future.
May 2024 Issuances. On May 1, 2024, the Company entered into a Pre-Funded Warrant Purchase Program (the “Program”) with strategic investors, pursuant to which from time-to-time the Company may sell and the investors may acquire pre-funded warrants, up to a total purchase price to the Company equal to $15 million. The exercise price for the pre-funded warrants is substantially paid by the purchaser at closing and, as a result, such warrants may be exercised in the future with a nominal exercise price payment. Investors will also receive a warrant to acquire the same number of shares covered by the pre-funded warrant for a purchase price equal to 150% of the relevant pre-funded warrant purchase price exercisable for a period of 5 years. Each specific transaction will be entered into on terms agreed by the parties; provided however, that in no case will the purchase price per share be less than 110% of the closing price per share of the Company’s common stock on the trading day immediately preceding the date of purchase. The investors have been issued pre-funded warrants for a total of 171,706 shares of Common Stock upon exercise. Contemporaneously with the acquisition of pre-funded warrants, the investors may also voluntarily convert outstanding notes previously issued by the Company; provided that such transactions, as a whole, may not result in an effective direct or indirect discount to market price to the investors of greater than 30%. In connection, through December 31, 2024, the investors have been issued 18,580,508 shares to convert approximately $5.4 million of debt principal.
Additional Debt Extinguishments. During the fourth quarter of 2024, Esousa Group Holdings LLC was issued 654,350 to extinguish approximately $0.1 million of debt principal.
Common Stock Issued for Services. During the three months ended September 30, 2024, the Company paid for certain services through the issuance of 12,500 fully vested Common Stock.
The above transactions were conducted as private placements exempt from registration pursuant to Section 4(a)(2).
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
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| | | | Incorporated by Reference | |
Exhibit No. |
| Description | | Form | | File No. | | Exhibit No. | | Filing Date | |
| | | | | | | | | | | |
2.1† | | Business Combination Agreement, dated as of August 5, 2022, by and among Tailwind Acquisition Corp., Compass Merger Sub, Inc. and Nuburu, Inc. | | 8-K | | 001-39489 | | 2.1 | | August 8, 2022 | |
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2.2 | | Securities Purchase Agreement, dated as of April 3, 2024, by and between Nuburu, Inc. and the parties thereto | | 10-K | | 001-39489 | | 2.2 | | April 15, 2024 | |
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2.3 | | Pre-Funded Warrant Purchase Program, dated as of May 1, 2024, by and between Nuburu, Inc. and the parties thereto. | | 10-Q | | 001-39489 | | 2.2 | | August 14, 2024 | |
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3.1 | | Amended and Restated Bylaws of the Company. | | 8-K | | 001-39489 | | 3.2 | | September 9, 2020 | |
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3.2 | | Amended and Restated Certificate of Incorporation of the Company. | | 8-K | | 001-39489 | | 3.1 | | February 6, 2023 | |
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3.3 | | Certificate of Designations of the Company. | | 8-K | | 001-39489 | | 3.3 | | February 6, 2023 | |
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3.4 | | Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company. | | 8-K | | 001-39489 | | 3.1 | | June 13, 2024 | |
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3.5 | | Amendment to the Amended and Restated By Laws of the Company, dated November 12, 2024. | | 8-K | | 001-39489 | | 3.1 | | November 12, 2024 | |
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4.1 | | Specimen Common Stock Certificate . | | 8-K | | 001-39489 | | 4.1 | | February 6, 2023 | |
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4.2 | | Specimen Preferred Stock Certificate . | | 8-K | | 001-39489 | | 4.2 | | February 6, 2023 | |
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4.3 | | Specimen Warrant Certificate. | | S-1 | | 333-248113 | | 4.3 | | August 26, 2020 | |
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4.4 | | Warrant Agreement, dated as of September 9, 2020, by and between the Company and Continental Stock Transfer & Trust Company. | | 8-K | | 001-39489 | | 4.1 | | September 9, 2020 | |
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4.5 | | Description of Registrant’s Securities. | | 10-K | | 001-39489 | | 4.5 | | April 15, 2024 | |
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5.1* | | Opinion of Holland and Hart, LLP. | | | | | | | | | |
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10.1 | | Investment Management Trust Agreement, dated as of September 9, 2020, by and between the Company and Continental Stock Transfer & Trust Company. | | 8-K | | 001-39489 | | 10.2 | | September 9, 2020 | |
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10.2 | | Registration and Stockholder Rights Agreement, dated as of September 9, 2020, by and between the Company and the Sponsor. | | 8-K | | 001-39489 | | 10.3 | | September 9, 2020 | |
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10.3 | | Letter Agreement, dated as of September 3, 2020, among the Company, the Sponsor and the Company’s then current officers and directors. | | 8-K | | 001-39489 | | 10.4 | | September 9, 2020 | |
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10.4 | | Amendment to Letter Agreement, dated November 22, 2022, by and among the Company, the Sponsor, and the Company’s then current officers and directors. | | 8-K | | 001-39489 | | 10.4 | | November 22, 2022 | |
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10.5 | | Amended and Restated Letter Agreement, dated January 31, 2023, by and among the Company, the Sponsor , and the other parties set forth on the signature pages thereto. | | 8-K | | 001-39489 | | 10.4 | | January 31, 2023 | |
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10.6 | | Administrative Services Agreement, dated as of September 9, 2020, by and between the Company and the Sponsor. | | 8-K | | 001-39489 | | 10.5 | | September 9, 2020 | |
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10.7 | | Sponsor Support and Forfeiture Agreement, dated as of August 5, 2022, by and among the Sponsor, the Company and Legacy Nuburu. | | 8-K | | 001-39489 | | 10.1 | | August 8, 2022 | |
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10.8 | | Amendment to Sponsor Support and Forfeiture Agreement, dated November 22, 2022, by and among the Company, Legacy Nuburu, and the Sponsor. | | 8-K | | 001-39489 | | 10.1 | | November 22, 2022 | |
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10.9 | | Amended and Restated Sponsor Support and Forfeiture Agreement, dated January 31, 2023, by and among the Company, the Sponsor and Legacy Nuburu. | | 8-K | | 001-39489 | | 10.3 | | January 31, 2023 | |
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10.10 | | Stockholder Support Agreement, dated as of August 5, 2022, by and among the Company and certain stockholders of Legacy Nuburu. | | 8-K | | 001-39489 | | 10.2 | | August 8, 2022 | |
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10.11 | | Amended and Restated Registration Rights and Lock-Up Agreement, dated August 5, 2022, by and among the Company and the parties listed on the signature pages thereto. | | 8-K | | 001-39489 | | 10.3 | | August 8, 2022 | |
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10.12 | | Amendment to Amended and Restated Registration Rights Lock-Up Agreement, dated November 22, 2022, by and among the Company and the Holders (defined therein). | | 8-K | | 001-39489 | | 10.2 | | November 22, 2022 | |
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10.13 | | Second Amendment to Amended and Restated Registration Rights Lock-up Agreement, dated January 31, 2023, by and among the Company and the Holders (defined therein). | | 8-K | | 001-39489 | | 10.2 | | January 31, 2023 | |
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10.14 | | Third Amendment to Amended and Restated Registration Rights Lock-up Agreement, dated January 31, 2023, by and among the Company and the Holders(defined therein) (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2023). | | 8-K | | 001-39489 | | 10.14 | | February 6, 2023 | |
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10.15 | | Fourth Amendment to Amended and Restated Registration Rights Lock-up Agreement, dated March 10, 2023, by and among the Company and the Holders(defined therein) (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed with the SEC on February 10, 2023). | | 8-K | | 001-39489 | | 10.1 | | March 10, 2023 | |
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10.16 | | Preferred Stock Sale Option Agreement, dated August 5, 2022, by and among the Company and the parties listed on Schedule A thereto. | | 8-K | | 001-39489 | | 10.4 | | August 8, 2022 | |
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10.17 | | Amendment to Preferred Stock Sale Option Agreement, dated November 22, 2022, by and among the Company and the Holders (as defined therein). | | 8-K | | 001-39489 | | 10.3 | | November 22, 2022 | |
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10.18 | | Second Amendment to Preferred Stock Sale Option Agreement, dated November 28, 2022 by and among the Company and the Holders (as defined therein). | | 8-K | | 001-39489 | | 10.1 | | November 29, 2022 | |
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10.19 | | Third Amendment to Preferred Stock Sale Option Agreement, dated November 28, 2022 by and among the Company and the Holders (as defined therein). | | 8-K | | 001-39489 | | 10.2 | | March 10, 2023 | |
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10.20 | | Purchase Agreement, dated August 5, 2022, by and among the Company, Legacy Nuburu and Lincoln Park. | | 8-K | | 001-39489 | | 10.5 | | August 8, 2022 | |
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10.21 | | Registration Rights Agreement, dated August 5, 2022, by and among the Company, Legacy Nuburu and Lincoln Park. | | 8-K | | 001-39489 | | 10.6 | | August 8, 2022 | |
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10.22# | | Nuburu, Inc. 2022 Equity Incentive Plan. | | 8-K | | 001-39489 | | 10.20 | | February 6, 2023 | |
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10.23# | | Nuburu, Inc. 2022 Employee Stock Purchase Plan and forms of agreement thereunder. | | 8-K | | 001-39489 | | 10.21 | | February 6, 2023 | |
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10.24# | | Nuburu, Inc. Executive Incentive Compensation Plan. | | 8-K | | 001-39489 | | 10.22 | | February 6, 2023 | |
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10.25#† | | Amended and Restated Employment Agreement, effective December 3, 2022, by and between Mark Zediker and Legacy Nuburu. | | S-4/A | | 333-267403 | | 10.18 | | November 29, 2022 | |
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10.26# | | Employment Agreement, effective December 2, 2022, by and between Brian Knaley and Legacy Nuburu. | | S-4/A | | 333-267403 | | 10.19 | | November 29, 2022 | |
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10.27#† | | Amended and Restated Employment Agreement, effective December 2, 2022, by and between Brian Faircloth and Legacy Nuburu. | | S-4/A | | 333-267403 | | 10.20 | | November 29, 2022 | |
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10.28# | | Form of Director Letter Agreement. | | S-4/A | | 333-267403 | | 10.22 | | November 29, 2022 | |
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10.29# | | Form of Nuburu, Inc. Indemnification Agreement. | | 8-K | | 001-39489 | | 10.27 | | February 6, 2023 | |
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10.30† | | Amended and Restated Lease Agreement between CSM Equities, L.L.C. and Legacy Nuburu, dated September 26, 2019. | | S-4/A | | 333-267403 | | 10.13 | | November 7, 2022 | |
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10.31 | | Share Transfer Agreement, dated January 25, 2023, by and between the Sponsor and the party set forth on the signature pages thereto. | | 8-K | | 001-39489 | | 10.1 | | January 31, 2023 | |
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10.32 | | Letter Agreement, dated November 28, 2022, by and among Tailwind Acquisition Corp. and the other parties set forth on the signature pages thereto. | | 8-K | | 001-39489 | | 10.2 | | November 28, 2022 | |
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10.33 | | Form of Convertible Promissory Note. | | 8-K | | 001-39489 | | 4.1 | | June 13, 2023 | |
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10.34 | | Form of Warrant to Purchase Shares of Common Stock. | | 8-K | | 001-39489 | | 4.2 | | June 13, 2023 | |
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10.35 | | Note and Warrant Purchase Agreement dated June 12, 2023. | | 8-K | | 001-39489 | | 10.1 | | June 13, 2023 | |
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10.36 | | Registration Rights and Lock-up Agreement. | | 8-K | | 001-39489 | | 10.2 | | June 13, 2023 | |
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10.37 | | Director Letter Agreement, dated August 31, 2023, by and between Nuburu, Inc. and John Bolton. | | 10-Q | | 001-39489 | | 10.3 | | November 9, 2023 | |
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10.38 | | Confidential Separation and Release Agreement, dated November 1, 2023, by and between Nuburu, Inc. and Dr. Mark Zediker. | | 10-Q | | 001-39489 | | 10.4 | | November 9, 2023 | |
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10.39 | | Note and Warrant Purchase Agreement, dated November 13, 2023, by and between Nuburu, Inc. and the lenders party thereto. | | 10-K | | 001-39489 | | 10.39 | | April 15, 2024 | |
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10.40 | | Form of Promissory Note. | | 10-K | | 001-39489 | | 10.40 | | April 15, 2024 | |
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10.41 | | Form of Warrant to Purchase Shares of Common Stock. | | 10-K | | 001-39489 | | 10.41 | | April 15, 2024 | |
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10.42 | | Registration Rights Agreement, dated November 13, 2023, by and between Nuburu, Inc. | | 10-K | | 001-39489 | | 10.42 | | April 15, 2024 | |
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10.43 | | Intercreditor and Subordination Agreement, dated November 13, 2023, by and between Nuburu, Inc. and the parties thereto. | | 10-K | | 001-39489 | | 10.43 | | April 15, 2024 | |
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10.44 | | Note Exchange Agreement, by and between Nuburu, Inc. and the parties thereto. | | 10-K | | 001-39489 | | 10.44 | | April 15, 2024 | |
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10.45 | | Form of Senior Secured Convertible Promissory Note. | | 10-K | | 001-39489 | | 10.45 | | April 15, 2024 | |
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10.46 | | Form of Warrant to Purchase Shares of Common Stock | | 10-K | | 001-39489 | | 10.46 | | April 15, 2024 | |
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10.47 | | Board of Directors Compensation Policy | | 10-K | | 001-39489 | | 10.47 | | April 15, 2024 | |
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10.48 | | Amendment to Employment Agreement, effective November 1, 2023, by and between Nuburu, Inc. and Brian Knaley. | | 10-K/A | | 001-39489 | | 10.48 | | April 29, 2024 | |
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10.49 | | Amendment to Employment Agreement, effective January 1, 2024, by and between Nuburu, Inc. and Brian Faircloth. | | 10-K/A | | 001-39489 | | 10.49 | | April 29, 2024 | |
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10.50 | | Securities Purchase Agreement, dated August 6, 2024, by and between Nuburu, Inc. and Esousa Group Holdings, LLC. | | 8-K | | 001-39489 | | 10.1 | | August 12, 2024 | |
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10.51 | | Exchange Agreement, dated August 6, 2024, by and between Nuburu, Inc. and Esousa Group Holdings, LLC. | | 8-K | | 001-39489 | | 10.2 | | August 12,2024 | |
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21.1 | | List of Subsidiaries of Nuburu, Inc. | | 8-K | | 001-39489 | | 21.1 | | February 6, 2023 | |
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23.1** | | Consent of WithumSmith+Brown, PC, Independent Registered Public Accounting Firm for the Company. | | | | | | | | | |
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23.2* | | Consent of Holland & Hart LLP (included in Exhibit 5.1). | | | | | | | | | |
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24.1** | | Powers of Attorney (included on the signature page of the initial filing of this registration statement). | | | | | | | | | |
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97 | | Nuburu, Inc. Clawback Policy | | 10-K | | 001-39489 | | 97 | | April 15, 2024 | |
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107* | | Calculation of Filing Fee Table. | | | | | | | | | |
† Certain of the exhibits and schedules to these exhibits have been omitted in accordance with Regulation S-K Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
# Indicates management contract or compensatory plan or arrangement.
* Filed herewith.
** Filed previously in prior amendment to Form S-1.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Centennial, State of Colorado, on January 21, 2025.
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NUBURU, INC. |
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By: | /s/ Brian Knaley |
Name: | Brian Knaley |
Title: | Chief Executive Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Brian Knaley as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and any registration statement relating to the offering covered by this registration statement filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might, or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any substitute therefor, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
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Name | | Position | | Date |
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/s/ Alessandro Zamboni * | | Executive Chairman | | January 21, 2025 |
Alessandro Zamboni | | (Principal Executive Officer) | | |
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/s/ Brian Knaley | | Chief Executive Officer | | January 21, 2025 |
Brian Knaley | | (Principal Financial and Accounting Officer) | | |
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/s/ Daniel Hirsch * | | Director | | January 21, 2025 |
Daniel Hirsch | | | | |
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/s/ Elizabeth Mora * | | Director | | January 21, 2025 |
Elizabeth Mora | |
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/s/ Matteo Ricchebuono * | | Director | | January 21, 2025 |
Matteo Ricchebuono | | | | |
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*By: /s/ Brian Knaley | |
Name: | Brian Knaley | |
Title: | Attorney-in-fact | |
