UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
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As of May 13, 2021, there were
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
DESKTOP METAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
| March 31, |
| December 31, | |||
2021 |
| 2020 | ||||
Assets | ||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Short‑term investments |
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Restricted cash | | — | ||||
Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Capitalized software, net |
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Goodwill |
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Intangible assets, net |
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Other noncurrent assets | | | ||||
Total Assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Customer deposits |
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Current portion of lease liability |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Current portion of long‑term debt, net of deferred financing costs |
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Total current liabilities |
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Warrant liability | — | | ||||
Long‑term debt, net of deferred financing costs |
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Lease liability, net of current portion |
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Deferred tax liability | | — | ||||
Total liabilities | | | ||||
Commitments and Contingences (Note 15) |
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Stockholders’ Equity |
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Preferred Stock, $ | ||||||
Common Stock, $ |
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Additional paid‑in capital |
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Accumulated deficit |
| ( |
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Accumulated other comprehensive income (loss) |
| ( |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity | $ | | $ | |
See notes to condensed consolidated financial statements
3
DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
| Three Months Ended | |||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Revenues |
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Products | $ | | $ | | ||
Services |
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Total revenues |
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Cost of sales |
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Products |
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Services |
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Total cost of sales |
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Gross margin |
| ( |
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Operating expenses |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
| ( |
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Change in fair value of warrant liability | ( | — | ||||
Interest expense |
| ( | ( | |||
Interest and other income, net |
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Loss before income taxes |
| ( |
| ( | ||
Income tax benefit |
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| — | ||
Net loss | $ | ( | $ | ( | ||
Net loss per share—basic and diluted | $ | ( | $ | ( |
See notes to condensed consolidated financial statements.
4
DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(in thousands)
| Three Months Ended | |||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Net loss | $ | ( | $ | ( | ||
Other comprehensive (loss) income, net of taxes: |
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Unrealized gain (loss) on available-for-sale marketable securities, net |
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| ( | ||
Foreign currency translation adjustment | ( | — | ||||
Total comprehensive loss, net of taxes of $ | $ | ( | $ | ( |
See notes to condensed consolidated financial statements.
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DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share amounts)
Accumulated | |||||||||||||||||
Other | |||||||||||||||||
Common Stock | Additional | Comprehensive | Total | ||||||||||||||
Voting | Paid‑in | Accumulated | (Loss) | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Equity | ||||||
BALANCE—January 1, 2021 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Exercise of Common Stock options | |
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Vesting of restricted Common Stock |
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Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Repurchase of shares for employee tax withholdings | ( | — | ( | — | — | ( | |||||||||||
Issuance of Common Stock for acquisitions | | — | | — | — | | |||||||||||
Stock‑based compensation expense |
| — |
| — |
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Vesting of Trine Founder shares | | — | — | — | — | — | |||||||||||
Exercise of warrants |
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Net loss |
| — |
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| — |
| ( |
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| ( | |||||
Other comprehensive income (loss) |
| — |
| — |
| — |
| — |
| ( |
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BALANCE—March 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
Accumulated | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Legacy Convertible | Common Stock | Additional | Comprehensive | Total | |||||||||||||||||||
Preferred Stock | Voting | Paid‑in | Accumulated | (Loss) | Stockholders’ | ||||||||||||||||||
| Shares |
| Amount |
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| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Equity | |||||||
BALANCE—January 1, 2020 | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | |||||||||
Retroactive application of recapitalization (Note 1) | ( | ( | | | | — | — | | |||||||||||||||
Adjusted balance, beginning of period | — | — | | | | ( | | | |||||||||||||||
Exercise of Common Stock options |
| — | — | | — | | — | — |
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Vesting of restricted Common Stock |
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Stock‑based compensation expense |
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Common Stock warrants issued |
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Net loss |
| — | — | — | — | — | ( | — |
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Other comprehensive income (loss) |
| — | — | — | — | — | — | ( |
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BALANCE—March 31, 2020 |
| — | $ | — |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See notes to condensed consolidated financial statements.
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DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended March 31, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities: | ||||||
Net loss |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock‑based compensation |
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Change in fair value of warrant liability | | — | ||||
Expense related to Common Stock warrants issued |
| — |
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Amortization (accretion) of discount on investments | | ( | ||||
Amortization of debt financing cost | | |||||
Provision for bad debt | | — | ||||
Net increase in accrued interest related to marketable securities | ( | ( | ||||
Net unrealized (gain) loss on marketable securities | ( | — | ||||
Deferred tax benefit | ( | — | ||||
Changes in operating assets and liabilities: |
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Accounts receivable |
| ( |
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Inventory |
| ( |
| ( | ||
Prepaid expenses and other current assets |
| ( |
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Other assets | ( | — | ||||
Accounts payable |
| ( |
| ( | ||
Accrued expenses and other current liabilities |
| ( |
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Customer deposits |
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Deferred revenue |
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Change in right of use assets and lease liabilities, net |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Purchase of marketable securities |
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Proceeds from sales and maturities of marketable securities |
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Cash paid for acquisition, net of cash acquired |
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Net cash (used in) provided by investing activities |
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Cash flows from financing activities: |
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Payment of issuance costs related to reverse recapitalization | ( | — | ||||
Proceeds from the exercise of stock warrants | | — | ||||
Payment of taxes related to net share settlement of upon vesting of restricted stock units | ( | — | ||||
Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net (decrease) increase in cash, cash equivalents, and restricted cash |
| ( |
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Effect of exchange rate changes | | — | ||||
Cash and cash equivalents at beginning of period |
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Restricted cash | | | ||||
Cash, cash equivalents, and restricted cash at end of period | $ | | $ | | ||
Supplemental cash flow information: |
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Interest paid | $ | | $ | | ||
Non‑cash investing and financing activities: |
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Net unrealized (gain) loss on investments | $ | ( | $ | | ||
Exercise of private placement warrants | $ | | $ | — | ||
Common Stock issued for acquisitions | $ | | $ | — | ||
Additions to right of use assets and lease liabilities | $ | | $ | — | ||
Purchase of property and equipment included in accounts payable | $ | | $ | — | ||
Receivable for warrants exercised | $ | | $ | — |
See notes to condensed consolidated financial statements.
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1. ORGANIZATION, NATURE OF BUSINESS, AND RISK AND UNCERTAINTIES
Organization and Nature of Business
Desktop Metal, Inc. is a Delaware corporation headquartered in Burlington, Massachusetts. The company was founded in 2015 with the mission of accelerating the transformation of manufacturing with an expansive portfolio of 3D printing solutions focused on the production of end-use parts. The Company designs, produces and distributes additive manufacturing solutions comprising hardware, software, materials, and services to businesses across a variety of end markets.
On December 9, 2020 (the “Closing Date”), Trine Acquisition Corp. (“Trine”) consummated the previously announced merger pursuant to the Agreement and Plan of Merger, dated August 26, 2020, by and among Trine, Desktop Metal, Inc. and Sparrow Merger Sub, Inc., pursuant to which Sparrow Merger Sub, Inc. merged with and into Desktop Metal, Inc., with Desktop Metal, Inc. becoming our wholly owned subsidiary (the “Business Combination”). Upon the closing of the Business Combination, Trine changed its name to Desktop Metal, Inc. and Desktop Metal, Inc. changed its name to Desktop Metal Operating, Inc.
Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company” and “Desktop Metal” refer to the consolidated operations of Desktop Metal, Inc. and its subsidiaries. References to “Trine” refer to the company prior to the consummation of the Business Combination and references to “Legacy Desktop Metal” refer to Desktop Metal Operating, Inc. prior to the consummation of the Business Combination.
Legacy Desktop Metal was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805. This determination was primarily based on Legacy Desktop Metal’s stockholders prior to the Business Combination having a majority of the voting power in the combined company, Legacy Desktop Metal having the ability to appoint a majority of the Board of Directors of the combined company, Legacy Desktop Metal’s existing management comprising the senior management of the combined company, Legacy Desktop Metal comprising the ongoing operations of the combined company, Legacy Desktop Metal being the larger entity based on historical revenues and business operations, and the combined company assuming Legacy Desktop Metal’s name. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Desktop Metal issuing stock for the net assets of Trine, accompanied by a recapitalization. The net assets of Trine are stated at historical cost, with no goodwill or other intangible assets recorded.
While Trine was the legal acquirer in the Business Combination, because Legacy Desktop Metal was deemed the accounting acquirer, the historical financial statements of Legacy Desktop Metal became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Desktop Metal prior to the Business Combination; (ii) the combined results of Trine and Legacy Desktop Metal following the close of the Business Combination; (iii) the assets and liabilities of Legacy Desktop Metal at their historical cost; and (iv) the Company’s equity structure for all periods presented.
In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date to reflect the number of shares of the Company’s common stock, $
Risks and Uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional funding, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology. The Company has financed its operations to date primarily with proceeds from the sale of preferred stock and the Business Combination. The Company’s long-term success is dependent upon its ability to successfully market its products and services; generate revenue; maintain or reduce its operating costs and expenses; meet its obligations; obtain additional capital when needed; and, ultimately, achieve profitable operations. Management believes that existing cash and
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investments as of March 31, 2021 will be sufficient to fund operating and capital expenditure requirements through at least
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the regulations of the U.S Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed consolidated financial statements include the Company’s accounts and those of its subsidiaries. In the opinion of the Company’s management, the financial information for the interim periods presented reflects all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (“COVID-19”) to be a pandemic. As of March 31, 2021, the impact of the COVID-19 pandemic continues to unfold and there has been uncertainty and disruption in the global economy and financial markets. The Company has considered the COVID-19 pandemic related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods.
The COVID-19 pandemic, as well as the response to mitigate the spread and effects of COVID-19, may impact the Company and its customers, as well as the demand for its products and services. The impact of COVID-19 on the Company’s operational results in subsequent periods will largely depend on future developments, and cannot be accurately predicted. These developments may include, but are not limited to, new information concerning the severity of COVID-19, the degree of success of actions taken to contain or treat COVID-19 and the reactions by consumers, companies, governmental entities, and capital markets to such actions.
Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2 to the financial statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020. See the discussion of changes to certain of the Company’s accounting policies due to the acquisition of EnvisionTEC below. There have been no other changes to the Company’s significant accounting policies during the first three months of fiscal year 2021.
Foreign Currency Translation
The Company translates assets and liabilities of its foreign subsidiaries from their respective functional currencies to U.S. Dollars at the appropriate spot rates as of the balance sheet date. The functional currency of all wholly owned subsidiaries is U.S. Dollars, except for EnvisionTEC GmbH, for which it is Euros. The functional currency of the Company's operations outside the United States is generally the local currency of the country where the operations are located or U.S. Dollars. The results of operations are translated into U.S. Dollars at a monthly average rate, calculated using daily exchange rates.
Differences arising from the translation of opening balance sheets of these entities to the rate at the end of the fiscal period are recognized in Accumulated other comprehensive (loss) income. The differences arising from the translation of foreign results at the
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average rate are also recognized in Accumulated other comprehensive (loss) income. Such translation differences are recognized as income or expense in the period in which the Company disposes of the operations.
Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. All such differences are recorded in Interest and other income, net in the Consolidated Statements of Operations.
Product Revenue and Service Revenue
Product revenue include sales of the Company’s additive manufacturing systems as well as sale of related accessories and consumables. These consumables are primarily comprised of materials, which are used by the 3D printers during the printing process to produce parts, as well as replacement parts for items consumed during system operations. Certain on-device software is embedded with the hardware and sold with the product bundle and is included within product revenue. Revenue from products is recognized upon transfer of control, which is generally at the point of shipment.
Services revenue consists of installation, training, and post-installation hardware and software support, as well as various software solutions the Company offers to facilitate the operation of the Company’s products. The Company offers multiple software products, which are licensed through either a cloud-based solution and/or an on-device software subscription, depending on the product. For the cloud-based solution, the Company typically provides an annual subscription that the customer does not have the right to take possession of and is renewable at expiration. The revenue from the cloud-based solution is recognized ratably over the annual term as the Company considers the services provided under the cloud-based solution to be a series of distinct performance obligations, as the Company provides continuous daily access to the cloud solution. For on-device software subscriptions, the Company typically recognizes revenue once the customer has been given access to the software. When the Company enters into development contracts, control of the development service is transferred over time, and the related revenue is recognized as services are performed.
For certain products, the Company offers customers an optional extended warranty beyond the initial warranty period. The optional extended warranty is accounted for as a service-type warranty. Extended warranty revenue is deferred and recognized on a straight-line basis over the service-type warranty period of the contract and the associated costs are recognized as incurred.
Revenue Recognition
Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. The amount of consideration is typically a fixed price at the contract inception. Consideration from shipping and handling is recorded on a gross basis within product revenue.
The Company determines revenue recognition through 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
•Recognition of revenue when, or as, the Company satisfies a performance obligation
Nature of Products and Services
The Company sells its products primarily through authorized resellers, independent sales agents, and its own sales force. Revenue from hardware and consumables is recognized upon transfer of control, which is generally at the point of shipment.
The Company’s post-installation support is primarily sold through
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The Company’s terms of sale generally provide payment terms that are customary in the countries where the Company transacts business. To reduce credit risk in connection with certain sales, the Company may, depending upon the circumstances, require significant deposits or payment in full prior to shipment.
Due to the short-term nature of the Company’s contracts, substantially all of the outstanding performance obligations are recognized within
Shipping and handling activities that occur after control over a product has transferred to a customer are accounted for as fulfillment activities rather than performance obligations, as allowed under a practical expedient provided by ASC 606. The shipping and handling fees charged to customers are recognized as revenue and the related costs are included in cost of revenue at the point in time when ownership of the product is transferred to the customer. Sales taxes and value added taxes collected concurrently with revenue generating activities are excluded from revenue.
Significant Judgements
The Company enters into contracts with customers that can include various combinations of hardware products, software licenses, and services, which are distinct and accounted for as separate performance obligations. Products or services that are promised to a customer can be considered distinct if both of the following criteria are met: (i) the customer can benefit from the products or services either on its own or together with other readily available resources and (ii) the Company’s promise to transfer the products, software, or services to the customer is separately identifiable from other promises in the contract. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Judgement is required to determine the standalone selling price (“SSP”). The transaction price is allocated to each distinct performance obligation on a relative standalone selling price basis and revenue is recognized for each performance obligation when control has passed. In most cases, the Company is able to establish SSP based on historical transaction data of the observable prices of hardware products sold separately in comparable circumstances to similar customers, observable renewal rates for software and post-installation support, and the Company’s best estimate of the selling price at which the Company would have sold the product regularly on a stand-alone basis for training and installation. The Company reassesses the SSP on a periodic basis or when facts and circumstances change.
Warranty Reserve
Substantially all of the Company’s hardware and software products are covered by a standard assurance warranty of
The Company’s warranty reserve reflects estimated material and labor costs for potential or actual product issues in its installed base for which the Company expects to incur an obligation. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. If the data used to calculate the adequacy of the warranty reserve is not indicative of future requirements, additional or reduced warranty reserves may be required.
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Property and Equipment
Property and equipment is stated at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is included in the determination of net income or loss.
Depreciation is expensed using the straight-line method over the estimated useful lives of the assets as follows:
Asset Classification |
| Useful Life |
Equipment |
| |
Furniture and fixtures |
| -5 years |
Computer equipment |
| |
Tooling |
| |
Software |
| |
Leasehold improvements |
| Shorter of asset’s useful life or remaining life of the lease |
Intangible Assets
Intangible assets consist of identifiable intangible assets, including developed technology, trade names, and customer relationships, resulting from the Company’s acquisitions. The Company evaluates definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If indicators of impairment are present, the Company then compares the estimated undiscounted cash flows that the specific asset is expected to generate to its carrying value. If such assets are impaired, the impairment recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. To date, there have been
Recently Issued Accounting Standards
Recently Adopted Accounting Guidance
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Accounting Standards Codification 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application. This standard is effective for calendar-year public business entities in 2021 and interim periods within that year, and early adoption is permitted. The Company adopted the ASU as of January 1, 2021, which did not have a material effect on the Company’s condensed consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact of these changes on the condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as
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amended, these changes become effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact of these changes on the condensed consolidated financial statements.
3. ACQUISITIONS
Acquisition of EnvisionTEC
On February 16, 2021, the Company acquired EnvisionTEC US, LLC and its subsidiaries (“EnvisionTEC”) pursuant to a Purchase Agreement and Plan of Merger dated January 15, 2021. The Company expects this acquisition to create a comprehensive portfolio in additive manufacturing across metals, polymers and composites and grow distribution channels both in quantity and through the addition of a vertically-focused channel. The Company paid consideration of $
The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the Company’s preliminary estimates of their fair values on the acquisition date. The fair values assigned to EnvisionTEC’s tangible and intangible assets and liabilities assumed, and the related deferred tax assets and liabilities, are considered preliminary and are based on the information available at the date of the acquisition. The Company is in the process of finalizing its purchase price allocation, and the tax basis of the assets and liabilities acquired. This may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. Adjustments that impact the deferred tax liability recorded in the business combination, could result in an increase or decrease in the Company’s recorded valuation allowance, that will be recognized in the accompanying statement of operations.
The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):
At February 16, 2021 | |||
Assets acquired: | |||
Cash and cash equivalents | $ | | |
Restricted cash | | ||
Accounts receivable | | ||
Inventory | | ||
Prepaid expenses and other current assets | | ||
Restricted cash - noncurrent | | ||
Property and equipment | | ||
Intangible assets | | ||
Other noncurrent assets | | ||
Total assets acquired | $ | | |
Liabilities assumed: | |||
Accounts payable | $ | | |
Customer deposits | | ||
Current portion of lease liability | | ||
Accrued expenses and other current liabilities | | ||
Liability for income taxes | | ||
Deferred revenue | | ||
Current portion of long-term debt | | ||
Long-term debt | | ||
Deferred tax liability | | ||
Lease liability, net of current portion | | ||
Total liabilities assumed | $ | | |
Net assets acquired | $ | | |
Goodwill | $ | |
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The estimated useful lives of the identifiable intangible assets acquired is as follows:
Gross Value | Estimated Life | ||||
Acquired technology | $ | | |||
Trade name | | ||||
Customer relationships | | ||||
Total intangible assets | $ | |
The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. $
EnvisionTEC’s results are included in the Company’s consolidated results for the period from February 16, 2021 to March 31, 2021. For this period, EnvisionTEC’s net revenues were approximately $
The following pro forma financial information is based on the historical financial statements of the Company and presents the Company’s results as if the acquisition had occurred on January 1, 2020 (in thousands):
Three Months Ended March 31, | ||||||
2021 |
| 2020 | ||||
Net revenues | $ | | $ | | ||
Net income | $ | ( | $ | ( |
The pro forma financial information was computed by combining the historical financial information of the Company and EnvisionTEC along with the effects of the acquisition method of accounting for business combinations as though the companies were combined on January 1, 2020. The pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does not represent what the actual net revenues and net income (loss) would have been had the companies been combined as of this date.
Business Combination
On December 9, 2020, the Company and Trine consummated the Business Combination, with Legacy Desktop Metal surviving the merger as a wholly-owned subsidiary of Trine. Upon the consummation of the Business Combination, each share of Legacy Desktop Metal capital stock issued and outstanding was converted into the right to receive
Upon the closing of the Business Combination, Trine’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to
In connection with the execution of the definitive agreement for the Business Combination, Trine entered into separate subscription agreements (each, a “Subscription Agreement”) with a number of investors (each, a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and Trine agreed to sell to the Subscribers, an aggregate of
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Trine was treated as the “acquired” company for financial reporting purposes. See Note 1 “Organization and Nature of Business” for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of
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Desktop Metal issuing stock for the net assets of Trine, accompanied by a recapitalization. The net assets of Trine are stated at historical cost, with no goodwill or other intangible assets recorded.
Prior to the Business Combination, Legacy Desktop Metal and Trine filed separate standalone federal, state and local income tax returns. As a result of the Business Combination, structured as a reverse recapitalization for tax purposes, Desktop Metal, Inc. (f/k/a Trine Acquisition Corp.), became the parent of the consolidated filing group, with Desktop Metal Operating, Inc. (f/k/a Desktop Metal, Inc.) as a subsidiary.
The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended December 31, 2020:
Recapitalization | |||
Cash – Trine's trust and cash (net of redemptions) | $ | | |
Cash – PIPE financing |
| | |
Less: transaction costs and advisory fees paid |
| ( | |
Net proceeds from reverse recapitalization |
| | |
Plus: non-cash net liabilities assumed1 |
| ( | |
Less: accrued transaction costs and advisory fees |
| ( | |
Net contributions from reverse recapitalization | $ | |
(1)Includes $
The number of shares of common stock issued immediately following the consummation of the Business Combination:
Number of Shares | |||
Common stock, outstanding prior to Business Combination | | ||
Less: redemption of Trine shares |
| ( | |
Common stock of Trine |
| | |
Trine Founder Shares |
| | |
Trine Director Shares |
| | |
Shares issued in PIPE financing | | ||
Business Combination and PIPE financing shares | | ||
Legacy Desktop Metal shares (1) |
| | |
Total shares of common stock immediately after Business Combination |
| |
(1) The number of Legacy Desktop Metal shares was determined from the shares of Legacy Desktop Metal shares outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of
In connection with the Business Combination,
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4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company’s cash equivalents and short-term investments are invested in the following (in thousands):
March 31, 2021 |
| Amortized Cost |
| Unrealized Gains |
| Unrealized Losses |
| Fair Value | ||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Total cash equivalents | | — | — | | ||||||||
U.S Treasury securities | | — | — | | ||||||||
Commercial paper | | — | — | | ||||||||
Corporate bonds | | | ( | | ||||||||
Total short-term investments | | | ( | | ||||||||
Total cash equivalents and short-term investments | $ | | $ | | $ | ( | $ | |
December 31, 2020 |
| Amortized Cost |
| Unrealized Gains |
| Unrealized Losses |
| Fair Value | ||||
Commercial paper | $ | | $ | — | $ | — | $ | | ||||
Money market funds | | — | — | | ||||||||
Total cash equivalents | | — | — | | ||||||||
U.S. Treasury securities | | | — | | ||||||||
Commercial paper | | — | — | | ||||||||
Corporate bonds | | — | ( | | ||||||||
Total short-term investments | | | ( | | ||||||||
Total cash equivalents and short-term investments | $ | | $ | | $ | ( | $ | |
5. FAIR VALUE MEASUREMENTS
The Company uses the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values for certain of its assets and liabilities:
Level 1 is based on observable inputs, such as quoted prices in active markets;
Level 2 is based on inputs other than the quoted prices in active markets that are observable either directly or indirectly; and
Level 3 is based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Items measured at fair value on a recurring basis include money market funds.
The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):
March 31, 2021 | ||||||||||||
Quoted Prices in | Significant | |||||||||||
Active Markets | Other | Significant |
| |||||||||
for Identical | Observable | Unobservable |
| |||||||||
Items | Inputs | Inputs |
| |||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | |||||
Assets: | ||||||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Commercial paper | — | | — | | ||||||||
Corporate bonds |
| — |
| |
| — | | |||||
U.S. Treasury securities | | — | — | | ||||||||
Other investments | — | — | | | ||||||||
Total assets | $ | | $ | | $ | | $ | |
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