Filed Pursuant to Rule 424(b)(3)

Registration No. 333-251653

PROSPECTUS SUPPLEMENT

Graphic

Desktop Metal, Inc.

192,707,982 Shares of Class A Common Stock

25,010,494 Shares of Class A Common Stock Issuable Upon Exercise of Warrants

This prospectus supplement further supplements and updates the prospectus dated June 3, 2021, relating to the resale of up to 192,707,982 shares of our Class A common stock by the selling securityholders named in the prospectus (including their pledgees, donees, transferees or other successors-in-interest) and the issuance by us of up to 25,010,494 shares of Class A common stock upon the exercise of warrants, or the Final Prospectus.

This prospectus supplement incorporates into the Final Prospectus the information (other than information that is furnished and not deemed filed) contained in the attached:

Current Report on Form 8-K, which were filed with the Securities and Exchange Commission, or the Commission, on November 12, 2021; and
Quarterly Report on Form 10-Q, which was filed with the Commission on November 15, 2021, or the Quarterly Report.

Our Class A common stock is listed on the New York Stock Exchange, or the NYSE, under the symbol “DM”. On November 17, 2021, the closing sale price of our Class A common stock as reported on the NYSE was $7.09.

We are an “emerging growth company” under applicable Securities and Exchange Commission rules and, as such, have elected to comply with certain reduced public company disclosure requirements for our filings with the Securities and Exchange Commission.

Our business and investment in our Class A common stock involve significant risks. These risks are described in the section titled “Risk Factors” in the Quarterly Report.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

__________________________

The date of this prospectus supplement is November 18, 2021.


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) 
of the Securities Exchange Act of 1934

 

November 12, 2021

Date of Report (Date of earliest event reported)

 

DESKTOP METAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-38835

 

83-2044042

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

63 3rd Avenue

Burlington, Massachusetts 01803

(Address of principal executive offices) (Zip Code)

 

(978) 224-1244

(Registrant’s telephone number, including area code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Class A Common Stock, par value $0.0001 per share

 

DM

 

The New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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.

 


Item 2.01 Completion of Acquisition or Disposition of Assets

 

On November 12, 2021, Desktop Metal, Inc. (the “Company” or “Desktop Metal”) completed its previously announced acquisition of The ExOne Company (now known as ExOne Operating, LLC) (“ExOne”), pursuant to the Agreement and Plan of Merger, dated as of August 11, 2021 (the “Merger Agreement”), by and among Desktop Metal, Texas Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of Desktop Metal (“Merger Sub I”), Texas Merger Sub II, LLC., a Delaware limited liability company and wholly owned subsidiary of Desktop Metal (“Merger Sub II”), and ExOne, pursuant to which (i) Merger Sub I merged with and into ExOne, with ExOne as the surviving corporation and (ii) ExOne merged with and into Merger Sub II (the “Mergers”), with Merger Sub II surviving the Mergers as a wholly owned subsidiary of Desktop Metal. At the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of ExOne (“ExOne Shares”) issued and outstanding immediately prior to the Effective Time (other than the shares that are owned by Desktop Metal, ExOne, Merger Sub I or Merger Sub II), was converted into the right to receive (a) $8.50 in cash, without interest, and (b) 2.1416 shares of Desktop Metal Class A common stock, par value $0.0001 per share (“Desktop Metal Class A common stock”).

 

At the Effective Time, (a) each outstanding unvested option to purchase ExOne Shares was converted into an option to acquire a number of Desktop Metal Class A common stock equal to the product obtained by multiplying the number of shares of ExOne common stock subject to such option by 3.1416, with an exercise price per share of Desktop Metal Class A common stock equal to the quotient obtained by dividing the exercise price per share of ExOne common stock by 3.1416; (b) each outstanding vested option to purchase ExOne common stock was cancelled and the holder thereof became entitled to receive the excess of the merger consideration over the aggregate exercise price of such ExOne vested option, so long as such ExOne vested option’s exercise price was less than the merger consideration; (c) each award of restricted shares of ExOne subject to the ExOne Change of Control Severance Plan (“ExOne COC RSAs”) vested and were cancelled and the holder of such ExOne COC RSA received the merger consideration; (d) each award of restricted shares of ExOne common stock not subject to the ExOne Change of Control Severance Plan (“ExOne RSAs”) vested and were cancelled and the holder of such ExOne RSA received the merger consideration; and (e) each award granted under the 2021 Executive Stock Performance Program was converted into ExOne Shares (the “ESPP Award”), with the shares subject to such ESPP Award becoming vested and such vested shares were cancelled and the holder received the merger consideration.

 

In connection with the closing of the Mergers, Desktop Metal paid approximately $191.4 million in cash and issued approximately 48.2 million shares of Desktop Metal Class A common stock to former holders of ExOne Shares, including 0.6 million shares of Desktop Metal Class A common stock to former holders of ExOne vested options, ExOne COC RSAs, ExOne RSAs and ExOne ESPP Awards.

 

The issuance of Desktop Metal Class A common stock in connection with the Merger Agreement was registered under the Securities Act of 1933 pursuant to Desktop Metal’s registration statement on Form S-4 (Registration No. 333-259564) declared effective by the Securities and Exchange Commission (the “SEC”) on October 8, 2021 (the “Registration Statement”). The proxy statement/prospectus in the Registration Statement contains additional information about the Mergers.

 

The ExOne Shares, which traded under the symbol “XONE,” will no longer trade on, and are being delisted from, the Nasdaq Stock Market.

 

The foregoing description of the Mergers contained in this Item 2.01 does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Reporting on Form 8-K and is incorporated by reference herein.

 

Item 7.01 Regulation FD Disclosure

 

On November 12, 2021, Desktop Metal issued a press release announcing the closing of the Mergers. A copy of the press release is attached as Exhibit 99.1 to the Current Report on Form 8-K.

 


 


Item 9.01 Financial Statements and Exhibits.

 

(a)            Financial Statements of Businesses Acquired.

 

The audited consolidated financial statements of ExOne, as of and for the years ended December 31, 2020 and 2019, including the independent auditor’s report thereon and the notes related thereto, are filed as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by reference.

 

The unaudited interim consolidated financial statements of ExOne, as of September 30, 2021, and for the nine months ended September 30, 2021 and 2020, and the notes related thereto, are filed as Exhibit 99.3 to this Current Report on Form 8-K and are incorporated herein by reference.

 

(b)            Pro Forma Financial Information.

 

The pro forma financial information required by this item will be filed by amendment to this Current Report on Form 8-K within 71 calendar days after the date on which this Current Report is required to be filed.

 

(d)            Exhibits.

 

The exhibits listed in the following Exhibit Index are filed as part of this Report.

 


 


EXHIBIT INDEX

 

2.1

Agreement and Plan of Merger, dated as of August 11, 2021, by and among Desktop Metal, Inc., Texas Merger Sub I, Inc., Texas Merger Sub II, Inc., and The ExOne Company (incorporated by reference to Exhibit 2.1 of the Form 8-K/A of Desktop Metal Inc. filed with the SEC on August 12, 2021).

 

23.1

Consent of Schneider Downs & Co., Inc., independent registered public accounting firm for ExOne.

 

99.1

Press release, dated November 9, 2021.

 

99.2

Audited consolidated financial statements of The ExOne Company as of and for the years ended December 31, 2020 and 2019, including the independent auditor’s report thereon, and the notes related thereto (incorporated by reference to ExOne’s Annual Report on Form 10-K (Part II, Item 8 therein) filed on March 11, 2021).

 

99.3

Unaudited interim consolidated financial statements of The ExOne Company as of September 30, 2021, and for the nine months ended September 30, 2021 and 2020, and the notes related thereto (incorporated by reference to ExOne’s Quarterly Report on Form 10-Q (Part I, Item 1 therein) filed on November 12, 2021).

 

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

3


 

 


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 12, 2021

DESKTOP METAL, INC.

 

 

 

 

By:

/s/ Meg Broderick

 

Name:

Meg Broderick

 

Title:

General Counsel and Corporate Secretary 

 

 

 


Table of Contents

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference Desktop Metal, Inc.’s Registration Statement on Form S-8 (File No. 333-256722) of our report dated March 11, 2021, relating to the consolidated financial statements of The ExOne Company and Subsidiaries appearing in the entity’s Annual Report on Form 10-K for the year ended December 31, 2020.

 

/s/ Schneider Downs & Co., Inc.

 

Pittsburgh, Pennsylvania

November 12, 2021

 

 

 

 

 


Table of Contents

Exhibit 99.1

 

Graphic 

CONFIDENTIAL INFORMATION

 

Desktop Metal Completes Acquisition of ExOne,

Cementing Its Leadership in Additive Manufacturing for Mass Production

 

November 12, 2021

 

BOSTON – Desktop Metal, Inc. (NYSE: DM) (“Desktop Metal”) today announced it has successfully completed its acquisition of The ExOne Company (NASDAQ: XONE) (“ExOne”) following approval by a majority of ExOne’s shareholders.

 

The acquisition reinforces Desktop Metal’s leadership in additive manufacturing (AM) for mass production. ExOne extends Desktop Metal’s product platforms with complementary solutions to create an unparalleled AM portfolio that offers industry-leading throughput, flexibility, and materials breadth, providing customers with a variety of options to address their specific application. Desktop Metal is committed to supporting ExOne’s existing customers around the world, as well as leveraging its global distribution network alongside ExOne’s direct sales force to provide businesses of all sizes with broader access to its AM 2.0 solutions and expanding materials library.

 

“This acquisition is a landmark moment for the additive manufacturing industry and creates an unmatched portfolio that strengthens Desktop Metal’s ability to accelerate the adoption of AM 2.0,” said Ric Fulop, Founder and CEO of Desktop Metal. “We are proud to welcome ExOne’s talented team to Desktop Metal and to move forward as one company focused on the mass production of end-use parts through AM. We’ve begun the process of careful integration with the goal of driving outsized growth for the combined company in the years to come. We believe Desktop Metal is uniquely positioned to provide the widest range of end-use applications, and we are excited about the value creation opportunity for our customers, partners, shareholders, and employees."

 

Under the terms of the agreement, ExOne shareholders received $8.50 in cash and $16.43 in shares of Desktop Metal common stock for each share of ExOne common stock, for a total purchase price of approximately $24.93 per share, representing a transaction value of $561.3 million, including ExOne cash and cash equivalents, based on the 20-day volume weighted average price (VWAP) of Desktop Metal common stock on November 9, 2021. Desktop Metal and ExOne notified NASDAQ of the completion of the acquisition and requested that NASDAQ file a notification of delisting with the Securities and Exchange Commission (“SEC”) on ExOne’s behalf. Desktop Metal expects that the delisting of ExOne’s common stock from the NASDAQ stock exchange will formally become effective by 5:30pm EST on November 12, 2021.

 

ExOne will continue to operate as a wholly owned subsidiary of Desktop Metal and will remain headquartered in North Huntingdon, Pennsylvania.

 

 

 

 

 

 


Table of Contents

About Desktop Metal

 

Desktop Metal, Inc., based in Burlington, Massachusetts, is accelerating the transformation of manufacturing with an expansive portfolio of 3D printing solutions, from rapid prototyping to mass production. Founded in 2015 by leaders in advanced manufacturing, metallurgy, and robotics, the company is addressing the unmet challenges of speed, cost, and quality to make additive manufacturing an essential tool for engineers and manufacturers around the world. Desktop Metal was selected as one of the world’s 30 most promising Technology Pioneers by the World Economic Forum, named to MIT Technology Review’s list of 50 Smartest Companies, and the 2021 winner of Fast Company’s Innovation by Design Award in materials.

 

For more information, visit www.desktopmetal.com.

 

Forward-looking Statements

 

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this press release, including statements regarding the anticipated benefits of the described transaction, the anticipated impact of the transaction on Desktop Metal’s future results of operations and financial position, the amount and timing of synergies from the proposed transaction, and other aspects of Desktop Metal’s operations or results, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed in or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this press release are only predictions. Desktop Metal has based these forward-looking statements on current information and management’s current expectations and beliefs. These forward-looking statements speak only as of the date of this press release and are subject to a number risks and uncertainties, including, without limitation, the following: the effect of the transaction on the ability of Desktop Metal to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom they do business; risks that the transaction disrupts current plans and operations; the successful integration of Desktop Metal’s and ExOne’s businesses and realization of synergies and benefits; the ability of Desktop Metal to implement business plans, forecasts and other expectations following the completion of the transaction; the risk that actual performance and financial results following completion of the transaction differ from projected performance and results; and business disruption following the transaction. For additional information about other risks and uncertainties that could cause actual results of the transaction to differ materially from those described in or implied by the forward-looking statements in this proxy statement/prospectus of Desktop Metal’s business, financial condition, results of operations and prospects generally, please refer to Desktop Metal’s reports filed with the SEC, including without limitation the “Risk Factors” and/or other information included in the Form 8-K filed by Desktop Metal in connection with the closing of the transaction, the Form 10-Q filed with the SEC on August 11, 2021 and such other reports as Desktop Metal has filed or may file with the SEC from time to time. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Except as required by applicable law, Desktop Metal will not update any forward-looking statements to reflect new information, future events, changed circumstances or otherwise.

 

 

 

 

 

 


Table of Contents

Investor Relations:
Jay Gentzkow
jaygentzkow@desktopmetal.com
(781) 730-2110

 

Media Relations:

Lynda McKinney

lyndamckinney@desktopmetal.com

(978) 224-1282

 

 

 

 


Table of Contents

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 September 30, 2021

OR

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 November 12, 2021, there were 311,014,335 shares of the registrant’s common stock outstanding.


Table of Contents

TABLE OF CONTENTS

    

Page

PART I

Part I. Financial Information

3

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

4

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

8

Notes to Condensed Consolidated Financial Statements

10

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

44

Item 3. Quantitative and Qualitative Disclosures About Market Risk

59

Item 4. Controls and Procedures

60

Part II. Other Information

61

Item 1. Legal Proceedings

61

Item 1A. Risk Factors

61

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

89

Item 3. Defaults Upon Senior Securities

90

Item 4. Mine Safety Disclosures

90

Item 5. Other Information

90

Item 6. Exhibits

90

Exhibit Index

91

Signatures

92

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)

    

September 30, 

    

December 31, 

2021

    

2020

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

131,676

$

483,525

Short‑term investments

 

292,272

 

111,867

Accounts receivable

 

22,878

 

6,516

Inventory

 

32,730

 

9,708

Prepaid expenses and other current assets

 

7,250

 

976

Total current assets

 

486,806

 

612,592

Restricted cash

 

676

 

612

Property and equipment, net

 

23,782

 

12,160

Capitalized software, net

 

179

 

312

Goodwill

 

262,343

 

2,252

Intangible assets, net

 

180,129

 

9,102

Other noncurrent assets

17,679

4,879

Total Assets

$

971,594

$

641,909

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

16,985

$

7,591

Customer deposits

 

2,876

 

1,480

Current portion of lease liability

 

2,677

 

868

Accrued expenses and other current liabilities

 

20,686

 

7,565

Deferred revenue

 

5,530

 

3,004

Current portion of long‑term debt, net of deferred financing costs

 

1,030

 

9,991

Total current liabilities

 

49,784

 

30,499

Long-term debt, net of current portion

680

Warrant liability

93,328

Contingent consideration, net of current portion

4,528

Lease liability, net of current portion

 

7,802

 

2,157

Deferred tax liability

7,881

Other noncurrent liabilities

1,417

Total liabilities

72,092

125,984

Commitments and Contingences (Note 16)

 

  

 

  

Stockholders’ Equity

 

 

Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common Stock, $0.0001 par value—500,000,000 shares authorized; 261,914,672 and 226,756,733 shares issued at September 30, 2021 and December 31, 2020, respectively, 261,567,100 and 224,626,597 shares outstanding at September 30, 2021 and December 31, 2020, respectively

 

26

 

23

Additional paid‑in capital

 

1,398,039

 

844,188

Accumulated deficit

 

(497,444)

 

(328,277)

Accumulated other comprehensive income (loss)

 

(1,119)

 

(9)

Total Stockholders’ Equity

 

899,502

 

515,925

Total Liabilities and Stockholders’ Equity

$

971,594

$

641,909

See notes to condensed consolidated financial statements

3


Table of Contents

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)

    

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

Revenues

 

  

 

  

Products

$

23,949

$

1,888

$

51,820

$

6,113

Services

1,489

639

 

3,908

 

1,988

Total revenues

25,438

 

2,527

 

55,728

 

8,101

Cost of sales

  

 

  

 

  

Products

20,450

3,732

 

46,427

 

18,145

Services

1,033

1,096

 

3,561

 

3,365

Total cost of sales

21,483

 

4,828

 

49,988

 

21,510

Gross profit/(loss)

3,955

 

(2,301)

 

5,740

 

(13,409)

Operating expenses

  

 

  

 

  

Research and development

19,311

9,195

 

45,820

 

31,362

Sales and marketing

13,224

2,542

 

29,567

 

9,994

General and administrative

19,833

5,415

 

46,821

 

11,004

In-process research and development assets acquired

15,181

25,581

Total operating expenses

67,549

 

17,152

 

147,789

 

52,360

Loss from operations

(63,594)

 

(19,453)

 

(142,049)

 

(65,769)

Change in fair value of warrant liability

(56,576)

Interest expense

(12)

(98)

 

(137)

(253)

Interest and other (expense) income, net

(3,796)

94

 

(3,166)

995

Loss before income taxes

(67,402)

 

(19,457)

 

(201,928)

 

(65,027)

Income tax benefit

523

 

32,761

 

Net loss

$

(66,879)

$

(19,457)

$

(169,167)

$

(65,027)

Net loss per share—basic and diluted

$

(0.26)

$

(0.12)

$

(0.67)

$

(0.41)

Weighted average shares outstanding, basic and diluted

260,555,655

159,968,300

251,467,644

158,120,826

See notes to condensed consolidated financial statements.

4


Table of Contents

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands)

    

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

 

Net loss

(66,879)

(19,457)

$

(169,167)

$

(65,027)

Other comprehensive (loss) income, net of taxes:

 

 

Unrealized gain (loss) on available-for-sale marketable securities, net

(7)

(43)

 

(11)

 

(70)

Foreign currency translation adjustment

(1,216)

(1,099)

Total comprehensive loss, net of taxes of $0

(68,102)

(19,500)

$

(170,277)

$

(65,097)

See notes to condensed consolidated financial statements.

5


Table of Contents

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share amounts)

Three Months Ended September 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

Capital

    

Deficit

    

Income

    

Equity

BALANCE—July 1, 2021

259,545,731

$

26

$

1,387,779

$

(430,565)

$

104

$

957,344

Exercise of Common Stock options

1,615,484

 

 

1,576

 

 

 

1,576

Vesting of restricted Common Stock

 

295,599

 

 

 

 

 

Vesting of restricted stock units

259,735

Net share settlement related to employee tax withholdings upon vesting of restricted stock units

(40,299)

(309)

(309)

Issuance of Common Stock for acquisitions

Issuance of common stock for acquired in-process research and development

Net share settlement related to employee tax withholdings upon vesting of restricted stock awards

(109,150)

(958)

(958)

Stock‑based compensation expense

 

 

 

9,951

 

 

 

9,951

Net loss

 

 

 

 

(66,879)

 

 

(66,879)

Other comprehensive income (loss)

 

 

 

 

 

(1,223)

 

(1,223)

BALANCE—September 30, 2021

 

261,567,100

$

26

$

1,398,039

$

(497,444)

$

(1,119)

$

899,502

Nine Months Ended September 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

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

4,462,218

 

 

5,241

 

 

 

5,241

Vesting of restricted Common Stock

 

407,629

 

 

 

 

 

Vesting of restricted stock units

303,656

Net settlement of shares related to employee tax withholdings upon vesting of restricted stock units

(49,471)

(454)

(454)

Issuance of Common Stock for acquisitions

9,049,338

1

208,988

208,989

Issuance of common stock for acquired in-process research and development

334,370

4,300

4,300

Net share settlement related to employee tax withholdings upon vesting of restricted stock awards

(109,150)

(958)

(958)

Stock‑based compensation expense

 

 

 

16,167

 

 

 

16,167

Vesting of Trine Founder shares

1,850,938

Exercise of warrants

 

20,690,975

 

2

 

320,567

 

 

 

320,569

Net loss

 

 

 

 

(169,167)

 

 

(169,167)

Other comprehensive income (loss)

 

 

 

 

 

(1,110)

 

(1,110)

BALANCE—September 30, 2021

 

261,567,100

$

26

$

1,398,039

$

(497,444)

$

(1,119)

$

899,502

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Three Months Ended September 30, 2020

Accumulated

Other

Legacy Convertible

Common Stock

Additional

Comprehensive

Total

Preferred Stock

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—July 1, 2020

100,038,109

$

436,533

29,937,631

$

3

$

21,254

$

(339,832)

$

48

$

(318,527)

Retroactive application of recapitalization (Note 1)

(100,038,109)

(436,533)

128,792,027

13

434,672

434,685

Adjusted balance, beginning of period

158,729,658

16

455,926

(339,832)

48

116,158

Exercise of Common Stock options

 

184,447

131

 

131

Vesting of restricted Common Stock

 

1,751,364

2

 

2

Stock‑based compensation expense

 

1,895

 

1,895

Common Stock warrants issued

 

 

Net loss

 

(19,457)

 

(19,457)

Other comprehensive income (loss)

 

(43)

 

(43)

BALANCE—September 30, 2020

 

$

 

160,665,469

$

16

$

457,954

$

(359,289)

$

5

$

98,686

Nine Months Ended September 30, 2020

Accumulated

Other

Legacy Convertible

Common Stock

Additional

Comprehensive

Total

Preferred Stock

Voting

Paidin

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

 

499,256

267

 

267

Vesting of restricted Common Stock

 

5,252,279

6

 

6

Stock‑based compensation expense

 

4,228

 

4,228

Common Stock warrants issued

 

211

 

211

Net loss

 

(65,027)

 

(65,027)

Other comprehensive income (loss)

 

(70)

 

(70)

BALANCE—September 30, 2020

 

$

 

160,665,469

$

16

$

457,954

$

(359,289)

$

5

$

98,686

See notes to condensed consolidated financial statements.

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Nine Months Ended September 30, 

    

2021

    

2020

Cash flows from operating activities:

Net loss

    

$

(169,167)

    

$

(65,027)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation and amortization

 

15,576

 

6,525

Stock‑based compensation

 

16,167

 

4,228

Change in fair value of warrant liability

56,576

Change in fair value of subscription agreement liability

2,920

Expense related to Common Stock warrants issued

 

 

43

Amortization (accretion) of discount on investments

2,189

34

Amortization of debt financing cost

9

14

Provision for bad debt

316

333

Acquired in-process research and development

25,581

(Gain) loss on disposal of property and equipment

19

 

10

Net increase in accrued interest related to marketable securities

(414)

162

Net unrealized loss on equity investment

1,880

Net unrealized gain on other investments

(639)

Deferred tax benefit

(32,761)

Change in fair value of contingent consideration

(166)

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(8,476)

 

2,881

Inventory

 

(11,067)

 

(1,958)

Prepaid expenses and other current assets

 

(3,096)

 

1,082

Other assets

(118)

Accounts payable

 

4,243

 

(5,800)

Accrued expenses and other current liabilities

 

(9,294)

 

430

Customer deposits

 

(1,298)

 

(547)

Deferred revenue

 

1,295

 

(1,094)

Change in right of use assets and lease liabilities, net

 

(340)

 

(243)

Other liabilities

6

Net cash used in operating activities

 

(110,059)

 

(58,927)

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(4,145)

 

(1,039)

Purchase of other investments

 

(3,620)

Purchase of equity investment

(20,000)

Purchase of marketable securities

(330,873)

 

(62,810)

Proceeds from sales and maturities of marketable securities

 

163,882

 

94,116

Cash paid to acquire in-process research and development

(21,220)

Cash paid for acquisitions, net of cash acquired

 

(191,146)

 

Net cash (used in) provided by investing activities

 

(407,122)

 

30,267

Cash flows from financing activities:

 

 

Proceeds from the exercise of stock options

5,241

 

255

Proceeds from the exercise of stock warrants

170,665

Payment of taxes related to net share settlement upon vesting of restricted stock units

(454)

Proceeds from PPP loan

5,379

Repayment of PPP loan

 

(5,379)

Repayment of term loan

(10,000)

 

Deferred financing costs paid

(400)

Net cash provided by (used in) financing activities

 

165,452

 

(145)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(351,729)

 

(28,805)

Effect of exchange rate changes

(56)

Cash and cash equivalents at beginning of period

 

483,525

 

66,161

Restricted cash at beginning of period

612

612

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Nine Months Ended September 30, 

    

2021

    

2020

Cash and cash equivalents at end of period

131,676

37,356

Restricted cash at end of period

676

612

Total cash, cash equivalents and restricted cash, end of period

$

132,352

$

37,968

Supplemental cash flow information:

 

 

Interest paid

$

137

$

253

Taxes paid

$

150

$

Noncash investing and financing activities:

 

 

Net unrealized loss on investments

$

11

$

Exercise of private placement warrants

$

149,904

$

Common Stock issued for acquisitions

$

208,989

$

Common Stock issued for acquisition of in-process research and development

$

4,300

$

Cash held back in acquisitions

$

50

$

Additions to right of use assets and lease liabilities

$

891

$

Purchase of property and equipment included in accounts payable

$

77

$

Purchase of property and equipment included in accrued expense

$

33

$

79

Contingent consideration in connection with acquisitions

$

6,083

$

Taxes related to net share settlement upon vesting of restricted stock awards in accrued expense

$

958

$

Forgiveness of PPP Loan

$

3,376

$

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, parts, 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.

ExOne Business Combination

On November 12, 2021, the Company acquired The ExOne Company and its affiliates (“ExOne”) pursuant to an Agreement and Plan of Merger dated August 12, 2021. The acquisition of ExOne extends the Company’s product platforms with complementary solutions to create a comprehensive portfolio combining throughput, flexibility, and materials breadth while allowing customers to optimize production based on their specific application needs. The Company acquired all of ExOne’s outstanding common stock for an aggregate purchase price of $601.2 million, consisting of $191.4 paid in cash and 48,218,063 shares of Common Stock with a fair value of $409.8 million as of the close of business on the transaction date. The Company also granted 86,020 incentive stock options with a weighted-average exercise price of $4.47 to certain employees of ExOne in exchange for unvested ExOne stock options. The

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acquisition will be accounted for as a business combination using the acquisition method of accounting. The Company is currently finalizing the allocation of the purchase price and expects the purchase price to be allocated primarily to goodwill and intangible assets.

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 investments as of September 30, 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 September 30, 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, has impacted 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 below discussion of changes to the Company’s policies for foreign currency translation, products revenue and services revenue, warranty reserve, intangible assets, asset

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acquisitions, and contingent consideration, due to 2021 business combinations and asset acquisitions. There have been no other changes to the Company’s significant accounting policies during the first nine 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 and Aerosint, 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 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 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 condensed consolidated statements of operations.

Products Revenue and Services Revenue

Products revenue include sales of the Company’s additive manufacturing systems, along with the sale of related accessories and consumables, as well as parts produced by the Company’s direct manufacturing solutions. 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, various software solutions the Company offers to facilitate the operation of the Company’s products, and research and development services. The Company offers multiple software products, which are licensed through either a cloud-based solution and/or local software, depending on the product. For the cloud-based solution, which the customer does not have the right to take possession of, the Company provides an annual subscription for customer access which 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 local software subscriptions, the Company recognizes revenue once the customer has been given access to the software.

Revenue under research and development service contracts is generally recognized over time where progress is measured in a manner that reflects the transfer of control of the promised goods or services to the customer. Depending on the facts and circumstances surrounding each research and development service contract, revenue is recognized over time using either an input measure (based on the entity’s direct costs incurred in an effort to satisfy the performance obligations) or an output measure (specifically units or parts delivered, based upon certain customer acceptance and delivery requirements).

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.

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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, consumables, and produced parts 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.

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 judgement.

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 and consumables 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.

Grants

The Company recognizes grants or subsidies from governments and other organizations when there is reasonable assurance that the Company will comply with any conditions attached to the grant arrangement and the grant will be received. The Company evaluates the conditions of the grant as of each reporting period to ensure that the Company has reached reasonable assurance of

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meeting the conditions of each grant arrangement and that it is expected that the grant will be received as a result of meeting the necessary conditions. Grants are recognized in the consolidated statements of operations on a systematic basis over the periods in which the Company recognized the related costs for which the grant is intended to compensate. Specifically, when government grants are related to reimbursements for cost operating expenses, the grants are recognized as a reduction of the related expense in the consolidated statements of operations.

The Company records grant receivables in the consolidated balance sheets in prepaid expenses and other current assets or other non-current assets, depending on when the amounts are expected to be received from the government agency. Proceeds received from grants prior to expenditures being incurred are recorded as restricted cash as well as other current liabilities or other long-term liabilities, depending on when the Company expects to use the proceeds.

The Company classifies in the consolidated statements of cash flows grant proceeds received in advance of spending for qualified expenditures as a cash flow from financing activities, as the proceeds are used to assist in funding future expenditures. Grant proceeds received as reimbursements for operating expenditures previously incurred are classified in cash flows from operating activities.

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 of 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.

Substantially all of the Company’s produced parts are covered by standard warranties of one to five years, depending on the product. In the event a product does not meet the requested specifications or has a defect in materials or workmanship, the Company will remake or adjust the product at no additional cost within the specified warranty period. The Company’s produced parts warranty reserve is accounted for based on historical cost of rework.

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

 

2-20 years

Buildings

15 years

Automobiles

2-7 years

Furniture and fixtures

 

3-10 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

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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.

Asset Acquisitions

Acquisitions of assets or a group of assets that do not meet the definition of a business are accounted for as asset acquisitions using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. No goodwill is recognized in an asset acquisition. Intangible assets that are acquired in an asset acquisition for use in research and development activities which have an alternative future use are capitalized as in-process research and development (“IPR&D”). Acquired IPR&D which has no alternative future use is recorded as research and development expense at acquisition.

Contingent Consideration

Contingent consideration represents potential future payments that the Company may be required to pay in the event negotiated milestones are met in connection with a business acquisition. Contingent consideration is recorded as a liability at the date of acquisition at fair value. The fair value of contingent consideration related to revenue metrics is estimated using a Monte Carlo simulation in a risk-neutral framework. Under this approach, the value of contingent consideration related to revenue metrics is calculated as the average present value of contingent consideration payments over all simulated paths. The fair value of contingent consideration related to technical developments is estimated using a scenario-based approach, which is a special case of the income approach that uses several possible future scenarios. Under this approach, the value of the technical milestone payment is calculated as the probability-weighted payment across all scenarios. Significant increases or decreases in any of the probabilities of success or changes in expected timelines for achievement of any of the revenue or technical milestones could result in a significantly higher or lower fair value of the contingent consideration liability. The fair value of the contingent consideration at each reporting date is updated by reflecting the changes in fair value reflected within research and development expenses in the Company’s condensed consolidated statements of operations.

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

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Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2022. 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 amended, these changes become effective for the Company on January 1, 2022. The Company is currently evaluating the potential impact of these changes on the condensed consolidated financial statements.

3. ACQUISITIONS

2021 Acquisitions

Acquisition of EnvisionTEC

On February 16, 2021, the Company acquired EnvisionTEC, Inc. and its subsidiaries (“EnvisionTEC”) pursuant to a Purchase Agreement and Plan of Merger dated January 15, 2021. This acquisition adds 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 acquisition date fair value of the consideration transferred is as follows (in thousands):

Total Acquisition Date Fair Value

Cash consideration

$

143,788

Equity consideration

159,847

Total consideration transferred

$

303,635

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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

2,982

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

$

159,604

Liabilities assumed:

Accounts payable

$

1,443

Customer deposits

2,461

Current portion of lease liability

605

Accrued expenses and other current liabilities

13,711

Liability for income taxes

480

Deferred revenue

300

Current portion of long-term debt

898

Long-term debt

285

Deferred tax liability

32,966

Lease liability, net of current portion

1,189

Total liabilities assumed

$

54,338

Net assets acquired

$

105,266

Goodwill

$

198,369

Total net assets acquired

$

303,635

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 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 $4.8 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the condensed consolidated statements of operations.

EnvisionTEC’s results are included in the Company’s consolidated results for the period from February 16, 2021 to September 30, 2021. For this period, EnvisionTEC’s net revenues were approximately $24.2 million and net loss was approximately $8.2 million.

Acquisition of Adaptive 3D

On May 7, 2021, the Company acquired Adaptive 3D Holdings, Inc. and its affiliates (“Adaptive 3D”) pursuant to a Purchase Agreement and Plan of Merger dated as of May 7, 2021. This acquisition expands the Company’s materials library to include

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photopolymer elastomers. The total purchase price is $61.8 million, consisting of $24.1 million paid in cash and 3,133,276 shares of the Company’s Common Stock with a fair value of $37.7 million as of the close of business on the transaction date.

The acquisition is accounted for as a business combination using the acquisition method of accounting. 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 Adaptive 3D’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 acquisition date fair value of the consideration transferred is as follows (in thousands):

Total Acquisition Date Fair Value

Cash consideration

$

24,083

Equity consideration

37,693

Total consideration transferred

$

61,776

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 May 7, 2021

Assets acquired:

Cash and cash equivalents

$

2,852

Restricted cash

4,046

Accounts receivable

504

Inventory

305

Prepaid expenses and other current assets

462

Property and equipment

558

Intangible assets

27,300

Other noncurrent assets

654

Total assets acquired

$

36,681

Liabilities assumed:

Accounts payable

$

280

Customer deposits

Current portion of lease liability

151

Accrued expenses and other current liabilities

4,146

PPP loan payable

311

Deferred revenue

12

Lease liability, net of current portion

502

Deferred tax liability

4,768

Total liabilities assumed

$

10,170

Net assets acquired

$

26,511

Goodwill

$

35,265

Total net assets acquired

$

61,776

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

Gross Value

Estimated Life

Acquired technology

$

27,000

14 years

Trade name

300

5 years

Total intangible assets

$

27,300

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The 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. The goodwill recognized is not deductible for income tax purposes. The Company incurred $0.3 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the condensed consolidated statements of operations.

Adaptive 3D’s results are included in the Company’s consolidated results for the period from May 7, 2021 to September 30, 2021. For this period, Adaptive 3D’s revenues were approximately $0.6 million, and its net loss was approximately $2.8 million.

Acquisition of Aerosint

On June 24, 2021, the Company entered into a Share Purchase Agreement with DM Belgium BV/SRL, Aerosint SA, the sellers named therein and representatives of such sellers (collectively “Aerosint”), pursuant to which the Company acquired all outstanding securities of Aerosint. Through this acquisition, the Company expands its portfolio of technologies with the addition of multi-material printing capabilities. The total purchase price is $23.8 million, consisting of $6.2 million paid in cash, 879,922 shares of the Company’s Common Stock with a fair value of $11.5 million as of the close of business on the transaction date, and contingent consideration with a fair value of $6.1 million as of the acquisition date. The Company may be required to pay this contingent consideration based on the achievement of revenue metrics and technical milestones over the three-year period following the transaction date.

The acquisition is accounted for as a business combination using the acquisition method of accounting. 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 Aerosint’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 Aerosint Acquisition included contingent consideration related to revenue metrics and technical milestones, of which $1.4 million is expected to be paid out over the next twelve months and is therefore classified as a current liability. The Company will pay up to $5.5 million of contingent consideration based on stated revenue metrics, which had a fair value of $4.6 million as of the date of acquisition, and a fair value of $4.5 million as of September 30, 2021. If Aerosint reaches certain product mass production technical milestones, the Company will pay out a maximum of $2.0 million in contingent consideration, which had a fair value of $1.5 million as of the date of acquisition, and a fair value of $1.4 million as of September 30, 2021. As of the date of acquisition, the fair value of the short-term liability was $1.4 million, and the long-term liability was $4.7 million, which the Company recorded in accrued expenses and other current liabilities and contingent consideration, net of current portion, on the condensed consolidated balance sheets. As of September 30, 2021, $1.4 million of contingent consideration is recorded in accrued expenses and other current liabilities and $4.5 million is recorded in contingent consideration, net of current portion, in the condensed consolidated balance sheets.

The acquisition date fair value of the consideration transferred is as follows (in thousands):

Total Acquisition Date Fair Value

Cash consideration

$

6,220

Equity consideration

11,448

Contingent consideration

6,083

Total consideration transferred

$

23,751

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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 June 24, 2021

Assets acquired:

Cash and cash equivalents

$

419

Accounts receivable

34

Inventory

166

Prepaid expenses and other current assets

697

Property and equipment

369

Intangible assets

11,726

Other noncurrent assets

336

Total assets acquired

$

13,747

Liabilities assumed:

Accounts payable

$

58

Customer deposits

283

Current portion of lease liability

100

Accrued expenses and other current liabilities

169

Deferred revenue

810

Lease liability, net of current portion

226

Deferred tax liability

2,931

Total liabilities assumed

$

4,577

Net assets acquired

$

9,170

Goodwill

$

14,581

Total net assets acquired