UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

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

Commission file number: 001-38835

DESKTOP METAL, INC.

(Exact name of registrant as specified in its charter)


Delaware	83-2044042
(State of Other Jurisdiction of incorporation or Organization)	(I.R.S. Employer Identification No.)

63 3rd Avenue, Burlington, MA	01803
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (978) 224-1244

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically; every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

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


		Name Of Each Exchange
Title of Each Class	Trading Symbol(s)	On Which Registered
Common Stock, $0.0001 Par Value per Share	DM	New York Stock Exchange

As of May 13, 2021, there were 255,775,107 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS


		Page
PART I

Part I. Financial Information		3

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020		3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020		4

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020		5

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020		6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020		7

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3. Quantitative and Qualitative Disclosures About Market Risk		41

Item 4. Controls and Procedures		42

Part II. Other Information		43

Item 1. Legal Proceedings		43

Item 1A. Risk Factors		43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		69

Item 3. Defaults Upon Senior Securities		70

Item 4. Mine Safety Disclosures		70

Item 5. Other Information		70

Item 6. Exhibits		70

Exhibit Index		71

Signatures		72

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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:
Cash and cash equivalents	$	416,379	$	483,525
Short‑term investments		155,847		111,867
Restricted cash		1,021		—
Accounts receivable		9,234		6,516
Inventory		20,837		9,708
Prepaid expenses and other current assets		18,657		976
Total current assets		621,975		612,592
Restricted cash		776		612
Property and equipment, net		12,331		12,160
Capitalized software, net		268		312
Goodwill		201,308		2,252
Intangible assets, net		144,103		9,102
Other noncurrent assets		6,826		4,879
Total Assets	$	987,587	$	641,909
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,227	$	7,591
Customer deposits		2,792		1,480
Current portion of lease liability		1,639		868
Accrued expenses and other current liabilities		15,324		7,565
Deferred revenue		3,405		3,004
Current portion of long‑term debt, net of deferred financing costs		11,019		9,991
Total current liabilities		39,406		30,499
Warrant liability		—		93,328
Long‑term debt, net of deferred financing costs		163		—
Lease liability, net of current portion		3,248		2,157
Deferred tax liability		5,206		—
Total liabilities		48,023		125,984
Commitments and Contingences (Note 15)
Stockholders’ Equity
Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		—		—
Common Stock, $0.0001 par value—500,000,000 shares authorized; 252,660,102 and 226,756,733 shares issued at March 31, 2021 and December 31, 2020, respectively, 252,436,919 and 224,626,597 shares outstanding at March 31, 2021 and December 31, 2020, respectively		25		23
Additional paid‑in capital		1,326,945		844,188
Accumulated deficit		(387,385)		(328,277)
Accumulated other comprehensive income (loss)		(21)		(9)
Total Stockholders’ Equity		939,564		515,925
Total Liabilities and Stockholders’ Equity	$	987,587	$	641,909

See notes to condensed consolidated financial statements

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended
	March 31,
	2021		2020
Revenues
Products	$	10,311	$	2,694
Services		1,002		691
Total revenues		11,313		3,385
Cost of sales
Products		10,487		5,041
Services		1,413		1,163
Total cost of sales		11,900		6,204
Gross margin		(587)		(2,819)
Operating expenses
Research and development		10,858		12,340
Sales and marketing		5,449		4,494
General and administrative		13,846		2,625
Total operating expenses		30,153		19,459
Loss from operations		(30,740)		(22,278)
Change in fair value of warrant liability		(56,576)		—
Interest expense		(73)		(104)
Interest and other income, net		361		578
Loss before income taxes		(87,028)		(21,804)
Income tax benefit		27,920		—
Net loss	$	(59,108)	$	(21,804)
Net loss per share—basic and diluted	$	(0.25)	$	(0.14)

See notes to condensed consolidated financial statements.

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands)


	Three Months Ended
	March 31,
	2021		2020
Net loss	$	(59,108)	$	(21,804)
Other comprehensive (loss) income, net of taxes:
Unrealized gain (loss) on available-for-sale marketable securities, net		1		(159)
Foreign currency translation adjustment		(13)		—
Total comprehensive loss, net of taxes of $0	$	(59,120)	$	(21,963)

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	224,626,597	$	23	$	844,188	$	(328,277)	$	(9)	$	515,925
Exercise of Common Stock options	163,228		—		180		—		—		180
Vesting of restricted Common Stock	56,015		—		—		—		—		—
Vesting of restricted stock units	15,265		—		—		—		—		—
Repurchase of shares for employee tax withholdings	(2,241)		—		(54)		—		—		(54)
Issuance of Common Stock for acquisitions	5,036,142		—		159,847		—		—		159,847
Stock‑based compensation expense	—		—		2,217		—		—		2,217
Vesting of Trine Founder shares	1,850,938		—		—		—		—		—
Exercise of warrants	20,690,975		2		320,567		—		—		320,569
Net loss	—		—		—		(59,108)		—		(59,108)
Other comprehensive income (loss)	—		—		—		—		(12)		(12)
BALANCE—March 31, 2021	252,436,919	$	25	$	1,326,945	$	(387,385)	$	(21)	$	939,564


											Accumulated
											Other
	Legacy Convertible			Common Stock			Additional				Comprehensive		Total
	Preferred Stock			Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—January 1, 2020	100,038,109	$	436,533	26,813,113	$	3	$	16,722	$	(294,262)	$	75	$	(277,462)
Retroactive application of recapitalization (Note 1)	(100,038,109)		(436,533)	128,100,821		13		436,520		—		—		436,533
Adjusted balance, beginning of period	—		—	154,913,934		16		453,242		(294,262)		75		159,071
Exercise of Common Stock options	—		—	286,636		—		132		—		—		132
Vesting of restricted Common Stock	—		—	1,750,555		—		2		—		—		2
Stock‑based compensation expense	—		—	—		—		1,259		—		—		1,259
Common Stock warrants issued	—		—	—		—		124		—		—		124
Net loss	—		—	—		—		—		(21,804)		—		(21,804)
Other comprehensive income (loss)	—		—	—		—		—		—		(159)		(159)
BALANCE—March 31, 2020	—	$	—	156,951,125	$	16	$	454,759	$	(316,066)	$	(84)	$	138,625

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	$	(59,108)	$	(21,804)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,892		2,321
Stock‑based compensation		2,217		1,259
Change in fair value of warrant liability		56,576		—
Expense related to Common Stock warrants issued		—		124
Amortization (accretion) of discount on investments		406		(22)
Amortization of debt financing cost		4		4
Provision for bad debt		72		—
Net increase in accrued interest related to marketable securities		(240)		(124)
Net unrealized (gain) loss on marketable securities		(25)		—
Deferred tax benefit		(27,921)		—
Changes in operating assets and liabilities:
Accounts receivable		(61)		752
Inventory		(2,381)		(3,238)
Prepaid expenses and other current assets		(4,276)		393
Other assets		(30)		—
Accounts payable		(3,856)		(989)
Accrued expenses and other current liabilities		(5,247)		(976)
Customer deposits		(1,234)		285
Deferred revenue		105		(339)
Change in right of use assets and lease liabilities, net		(22)		(80)
Net cash used in operating activities		(41,129)		(22,434)
Cash flows from investing activities:
Purchases of property and equipment		(262)		(1,004)
Purchase of marketable securities		(92,386)		(17,616)
Proceeds from sales and maturities of marketable securities		48,241		49,300
Cash paid for acquisition, net of cash acquired		(137,646)		—
Net cash (used in) provided by investing activities		(182,053)		30,680
Cash flows from financing activities:
Payment of issuance costs related to reverse recapitalization		(1,239)		—
Proceeds from the exercise of stock warrants		158,308		—
Payment of taxes related to net share settlement of upon vesting of restricted stock units		(54)		—
Proceeds from exercise of stock options		180		132
Net cash provided by financing activities		157,195		132
Net (decrease) increase in cash, cash equivalents, and restricted cash		(65,987)		8,378
Effect of exchange rate changes		26		—
Cash and cash equivalents at beginning of period		483,525		66,161
Restricted cash		612		612
Cash, cash equivalents, and restricted cash at end of period	$	418,176	$	75,151

Supplemental cash flow information:
Interest paid	$	73	$	107

Non‑cash investing and financing activities:
Net unrealized (gain) loss on investments	$	(1)	$	159
Exercise of private placement warrants	$	149,904	$	—
Common Stock issued for acquisitions	$	159,847	$	—
Additions to right of use assets and lease liabilities	$	364	$	—
Purchase of property and equipment included in accounts payable	$	50	$	—
Receivable for warrants exercised	$	12,357	$	—

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, $0.0001 par value per share, issued to Legacy Desktop Metal’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Desktop Metal convertible preferred stock and Legacy Desktop Metal common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 1.22122 established in the Business Combination. Legacy Desktop Metal’s convertible preferred stock previously classified as mezzanine was retroactively adjusted, converted into Common Stock, and reclassified to permanent as a result of the reverse recapitalization.

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 twelve months from the date of issuance of these consolidated financial statements.

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 one-year annual contracts and such revenue is recognized ratably over the term of the agreement. Service revenue from installation and training is recognized as performed.

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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 one year.

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 one year within the United States and 13 months internationally, and estimated warranty obligations are recorded as an expense at the time or revenue recognition. In the event of a failure of hardware product or software covered by this warranty, the Company will repair or replace the software or hardware product. For certain products, the Company offers customers an optional extended warranty after the initial warranty period. The optional extended warranty is accounted for as a service-type warranty; therefore, costs are recognized as incurred and revenue is recognized over the service-type warranty period.

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		2-12 years
Furniture and fixtures		3-5 years
Computer equipment		3 years
Tooling		3 years
Software		2-3 years
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 no impairments of intangible assets. Intangible assets are amortized over their useful life.

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 $143.8 million in cash and issued 5,036,142 shares of the Company’s Common Stock with a fair value of $159.8 million as of the close of business on the transaction date.

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	$	859
Restricted cash		5,004
Accounts receivable		2,740
Inventory		8,852
Prepaid expenses and other current assets		1,081
Restricted cash - noncurrent		285
Property and equipment		1,440
Intangible assets		137,300
Other noncurrent assets		1,801
Total assets acquired	$	159,362
Liabilities assumed:
Accounts payable	$	1,443
Customer deposits		2,590
Current portion of lease liability		600
Accrued expenses and other current liabilities		13,645
Liability for income taxes		480
Deferred revenue		300
Current portion of long-term debt		898
Long-term debt		285
Deferred tax liability		33,348
Lease liability, net of current portion		1,189
Total liabilities assumed	$	54,778
Net assets acquired	$	104,584

Goodwill	$	199,056

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The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Acquired technology	$	77,800	7 – 12 years
Trade name		8,600	13 years
Customer relationships		50,900	10 years
Total intangible assets	$	137,300

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. $36.6 million of the goodwill recognized is deductible for income tax purposes. The Company incurred $3.9 million of transaction costs related to this acquisition, which are included in general and administrative expenses on the unaudited condensed consolidated statements of operations.

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 $5.4 million and net loss was approximately $1.8 million.

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	$	14,825	$	10,697
Net income	$	(28,676)	$	(30,943)

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 1.22122 shares (the “Exchange Ratio”) of the Company’s common stock (the “Per Share Merger Consideration”).

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 550,000,000 shares, of which 500,000,000 shares were designated common stock; $0.0001 par value per share, and of which 50,000,000 shares were designated preferred stock, $0.0001 par value per share.

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 27,497,500 shares of the Company’s Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $275 million, in a private placement pursuant to the subscription agreements (the “PIPE financing”). The PIPE financing closed simultaneously with the consummation of the Business Combination.

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)	$	305,084,695
Cash – PIPE financing		274,975,000
Less: transaction costs and advisory fees paid		(45,463,074)
Net proceeds from reverse recapitalization		534,596,621
Plus: non-cash net liabilities assumed¹		(152,394,714)
Less: accrued transaction costs and advisory fees		(1,900,793)
Net contributions from reverse recapitalization	$	380,301,114

⁽¹⁾Includes $149.7 million of non-cash warrant liability assumed.

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		30,015,000
Less: redemption of Trine shares		(26,049)
Common stock of Trine		29,988,951
Trine Founder Shares		5,552,812
Trine Director Shares		100,000
Shares issued in PIPE financing		27,497,500
Business Combination and PIPE financing shares		63,139,263
Legacy Desktop Metal shares ⁽¹⁾		161,487,334
Total shares of common stock immediately after Business Combination		224,626,597

⁽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 1.22122. All fractional shares were rounded down.

In connection with the Business Combination, 7,403,750 Trine Founder Shares were issued. Pursuant to the Business Combination agreement, 75% of the Founder shares, or 5,552,812 shares, vested at the close of the Business Combination, with the remaining 25%, or 1,850,938 shares, vesting if the Company trades at $12.50 per share or higher for any 20 trading days within a 30-day window by the fifth anniversary of the Business Combination. The vesting criteria was met on January 8, 2021.

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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	$	413,089	$	—	$	—	$	413,089
Total cash equivalents		413,089		—		—		413,089
U.S Treasury securities		5,000		—		—		5,000
Commercial paper		89,835		—		—		89,835
Corporate bonds		61,020		13		(21)		61,012
Total short-term investments		155,855		13		(21)		155,847
Total cash equivalents and short-term investments	$	568,944	$	13	$	(21)	$	568,936


December 31, 2020	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	75,374	$	—	$	—	$	75,374
Money market funds		407,512		—		—		407,512
Total cash equivalents		482,886		—		—		482,886
U.S. Treasury securities		19,995		2		—		19,997
Commercial paper		43,911		—		—		43,911
Corporate bonds		47,970		—		(11)		47,959
Total short-term investments		111,876		2		(11)		111,867
Total cash equivalents and short-term investments	$	594,762	$	2	$	(11)	$	594,753

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	$	413,089	$	—	$	—	$	413,089
Commercial paper		—		89,835		—		89,835
Corporate bonds		—		61,012		—		61,012
U.S. Treasury securities		5,000		—		—		5,000
Other investments		—		—		3,025		3,025
Total assets	$	418,089	$	150,847	$	3,025	$	571,961

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December 31, 2020

Quoted Prices in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Items

Inputs

(Level 1)

(Level 2)

(Level 3)

Total

Assets:

Money market funds

407,512

—

407,512

Commercial paper

—

119,285

—