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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 March 31, 2023

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

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

Name Of Each Exchange

Title of Each Class

Trading Symbol(s)

On Which Registered

Class A Common Stock, $0.0001 Par Value per Share

DM

New York Stock Exchange

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 (§232.405 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

As of May 5, 2023, there were 321,460,345 shares of the registrant’s Class A 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 March 31, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022

5

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

7

Notes to Condensed Consolidated Financial Statements

9

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

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

40

Item 4. Controls and Procedures

41

Part II. Other Information

41

Item 1. Legal Proceedings

41

Item 1A. Risk Factors

42

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

71

Item 3. Defaults Upon Senior Securities

71

Item 4. Mine Safety Disclosures

71

Item 5. Other Information

71

Item 6. Exhibits

71

Exhibit Index

72

Signatures

73

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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)

    

March 31, 

    

December 31, 

2023

    

2022

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

101,252

$

76,291

Current portion of restricted cash

4,595

4,510

Short‑term investments

 

48,554

 

108,243

Accounts receivable

 

35,603

 

38,481

Inventory

 

98,221

 

91,736

Prepaid expenses and other current assets

 

21,067

 

16,325

Assets held for sale

6,871

830

Total current assets

 

316,163

 

336,416

Restricted cash, net of current portion

 

612

 

1,112

Property and equipment, net

 

45,262

 

56,271

Goodwill

 

113,571

 

112,955

Intangible assets, net

 

210,117

 

219,830

Other noncurrent assets

28,461

27,763

Total Assets

$

714,186

$

754,347

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

21,988

$

25,105

Customer deposits

 

12,300

 

11,526

Current portion of lease liability

 

6,106

 

5,730

Accrued expenses and other current liabilities

 

28,026

 

26,723

Current portion of deferred revenue

 

14,639

 

13,719

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

 

403

 

584

Total current liabilities

 

83,462

 

83,387

Long-term debt, net of current portion

252

311

Convertible notes

112,017

111,834

Lease liability, net of current portion

 

17,679

 

17,860

Deferred revenue, net of current portion

3,965

3,664

Deferred tax liability

8,074

8,430

Other noncurrent liabilities

3,167

1,359

Total liabilities

228,616

226,845

Commitments and Contingencies (Note 17)

 

  

 

  

Stockholders’ Equity

 

 

Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common Stock, $0.0001 par value—500,000,000 shares authorized; 320,477,686 and 318,235,106 shares issued at March 31, 2023 and December 31, 2022, respectively, 320,401,389 and 318,133,434 shares outstanding at March 31, 2023 and December 31, 2022, respectively

 

32

 

32

Additional paid‑in capital

 

1,883,764

 

1,874,792

Accumulated deficit

 

(1,361,596)

 

(1,308,954)

Accumulated other comprehensive loss

 

(36,630)

 

(38,368)

Total Stockholders’ Equity

 

485,570

 

527,502

Total Liabilities and Stockholders’ Equity

$

714,186

$

754,347

See notes to condensed consolidated financial statements

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Table of Contents

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)

    

Three Months Ended

March 31, 

    

2023

    

2022

Revenues

 

Products

$

36,697

$

39,476

Services

4,619

4,230

Total revenues

41,316

 

43,706

Cost of sales

  

Products

38,891

41,902

Services

3,789

3,132

Total cost of sales

42,680

 

45,034

Gross profit (loss)

(1,364)

 

(1,328)

Operating expenses

  

Research and development

23,144

24,605

Sales and marketing

9,607

19,689

General and administrative

18,202

23,857

Total operating expenses

50,953

 

68,151

Loss from operations

(52,317)

 

(69,479)

Interest expense

(811)

32

Interest and other (expense) income, net

(71)

(1,753)

Loss before income taxes

(53,199)

 

(71,200)

Income tax benefit

557

1,256

Net loss

$

(52,642)

$

(69,944)

Net loss per share—basic and diluted

$

(0.16)

$

(0.22)

Weighted average shares outstanding, basic and diluted

319,095,656

312,016,627

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, 

    

2023

    

2022

Net loss

$

(52,642)

$

(69,944)

Other comprehensive (loss) income, net of taxes:

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

189

12

Foreign currency translation adjustment

1,549

(11,047)

Total comprehensive (loss) income, net of taxes of $0

$

(50,904)

$

(80,979)

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)

Three Months Ended March 31, 2023

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

Capital

    

Deficit

    

Income

    

Equity

BALANCE—January 1, 2023

318,133,434

$

32

$

1,874,792

$

(1,308,954)

$

(38,368)

$

527,502

Exercise of Common Stock options

495,876

 

 

597

 

 

 

597

Vesting of restricted Common Stock

 

25,375

 

 

 

 

 

Vesting of restricted stock units

1,808,422

Repurchase of shares for employee tax withholdings

(61,718)

(99)

(99)

Stock‑based compensation expense

 

 

 

8,474

 

 

 

8,474

Net loss

 

 

 

 

(52,642)

 

 

(52,642)

Other comprehensive income (loss)

 

 

 

 

 

1,738

 

1,738

BALANCE—March 31, 2023

 

320,401,389

$

32

$

1,883,764

$

(1,361,596)

$

(36,630)

$

485,570

Three Months Ended March 31, 2022

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—January 1, 2022

311,473,950

$

31

$

1,823,344

$

(568,611)

$

(6,414)

$

1,248,350

Exercise of Common Stock options

786,693

 

 

900

 

 

 

900

Vesting of restricted Common Stock

 

84,384

 

 

 

 

 

Vesting of restricted stock units

520,265

Repurchase of shares for employee tax withholdings

(39,720)

(158)

(158)

Stock‑based compensation expense

 

 

 

9,912

 

 

 

9,912

Net loss

 

 

 

 

(69,944)

 

 

(69,944)

Other comprehensive income (loss)

 

 

 

 

 

(11,035)

 

(11,035)

BALANCE—March 31, 2022

 

312,825,572

$

31

$

1,833,998

$

(638,555)

$

(17,449)

$

1,178,025

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, 

    

2023

    

2022

Cash flows from operating activities:

Net loss

    

$

(52,642)

    

$

(69,944)

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

 

 

Depreciation and amortization

 

13,433

 

12,883

Stock‑based compensation

 

9,313

 

9,912

Amortization (accretion) of discount on investments

(382)

413

Amortization of deferred costs on convertible notes

183

Provision for bad debt

179

419

Loss on disposal of property and equipment

519

 

2

Net increase (decrease) in accrued interest related to marketable securities

(8)

949

Net unrealized (gain) loss on equity investment

402

1,700

Deferred tax benefit

(557)

(1,256)

Change in fair value of contingent consideration

(114)

Foreign currency transaction (gain) loss

(25)

195

Changes in operating assets and liabilities:

 

Accounts receivable

 

2,792

 

9,489

Inventory

 

(6,892)

 

(15,506)

Prepaid expenses and other current assets

 

(4,664)

 

(4,087)

Other assets

991

(210)

Accounts payable

 

(3,011)

 

(1,333)

Accrued expenses and other current liabilities

 

878

 

(3,391)

Customer deposits

 

705

 

2,980

Current portion of deferred revenue

 

1,127

 

721

Change in right of use assets and lease liabilities, net

 

(1,493)

 

(108)

Other liabilities

1,806

12

Net cash used in operating activities

 

(37,346)

 

(56,274)

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(1,011)

 

(4,074)

Proceeds from sale of property and equipment

3,071

6

Purchase of marketable securities

(4,973)

 

Proceeds from sales and maturities of marketable securities

 

64,840

 

98,625

Cash paid for acquisitions, net of cash acquired

 

(500)

 

(23)

Net cash provided by investing activities

 

61,427

 

94,534

Cash flows from financing activities:

 

 

  

Proceeds from the exercise of stock options

597

 

900

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

(99)

(158)

Repayment of loans

(250)

(43)

Net cash provided by financing activities

 

248

 

699

Effect of exchange rate changes on cash, cash equivalents and restricted cash

217

(349)

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

 

24,546

 

38,610

Cash, cash equivalents, and restricted cash at beginning of period

81,913

68,258

Cash, cash equivalents, and restricted cash at end of period

$

106,459

$

106,868

Supplemental disclosures of cash flow information

Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total shown in the condensed consolidated statements of cash flows:

Cash and cash equivalents

$

101,252

$

103,590

Restricted cash included in other current assets

4,595

2,166

Restricted cash included in other noncurrent assets

612

1,112

Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows

$

106,459

$

106,868

Supplemental cash flow information:

 

 

  

Interest paid

$

$

Taxes paid

$

$

7

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Noncash investing and financing activities:

 

 

  

Net unrealized (gain) loss on investments

$

(189)

$

(12)

Additions to right of use assets and lease liabilities

$

1,531

$

7,784

Purchase of property and equipment included in accounts payable

$

183

$

313

Purchase of property and equipment included in accrued expense

$

32

$

Transfers from property and equipment to inventory

$

275

$

1,721

Transfers from PP&E to Asset Held-For-Sale

$

6,040

$

Transfers from inventory to property and equipment

$

1,067

$

605

See notes to condensed consolidated financial statements.

8

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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 and is accelerating the transformation of manufacturing with 3D printing solutions for engineers, designers, and manufacturers. The Company designs, produces and markets 3D printing systems and services to a variety of end customers.

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.

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, the Business Combination, and the sale of convertible senior notes due in 2027 (the “2027 Notes”) in May 2022. 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 short-term investments as of March 31, 2023 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. The functional currency of all wholly owned subsidiaries is U.S. Dollars. All intercompany transactions and balances have been eliminated in consolidation.

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Table of Contents

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 for the year ended December 31, 2022. See the below discussion of changes to the Company’s policies for assets held for sale. There have been no other changes to the Company’s significant accounting policies during the first three months of fiscal year 2023.

Assets Held for Sale

We classify long-lived assets or asset groups we plan to sell as held for sale on our consolidated balance sheets only after certain criteria have been met including: (i) management has the authority and commits to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and the plan to sell the asset have been initiated, (iv) the sale of the asset is probable within 12 months, (v) the asset is being actively marketed at a reasonable sales price relative to its current fair value, and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. We record assets or asset groups held for sale at the lower of their carrying value or fair value less costs to sell.

3. REVENUE RECOGNITION

Contract Balances

The Company’s deferred revenue balance was $18.6 million and $17.4 million as of March 31, 2023, and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company recognized $3.4 million of existing deferred revenue from 2022. During the year ended December 31, 2022, the Company recognized $14.3 million of existing deferred revenue from 2021. The deferred revenue consists of billed post-installation customer support and maintenance, cloud-based software licenses that are recognized ratably over the term of the agreement, and contracts that have outstanding performance obligations or contracts that have acceptance terms that have not yet been fulfilled.

Contract assets were not significant during the three months ended March 31, 2023 and 2022.

Remaining Performance Obligations

At March 31, 2023, the Company had $18.6 million of remaining performance obligations, of which approximately $14.6 million is expected to be fulfilled over the next 12 months, notwithstanding uncertainty related to customer site readiness and unanticipated economic events, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. In addition, the Company also had customer deposits of $12.3 million at March 31, 2023.

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, 2023

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Money market funds

$

43,944

$

$

$

43,944

Total cash equivalents

43,944

43,944

Commercial paper

4,994

4,994

Corporate bonds

18,213

(73)

18,140

U.S. Treasury securities

9,937

(37)

9,900

Government bonds

14,874

(40)

14,834

Total short-term investments

48,018

(150)

47,868

Total cash equivalents and short-term investments

$

91,962

$

$

(150)

$

91,812

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December 31, 2022

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Money market funds

$

51,274

$

$

$

51,274

Total cash equivalents

51,274

51,274

Commercial paper

39,781

39,781

Corporate bonds

28,970

(156)

28,814

U.S. Treasury securities

19,896

(78)

19,818

Government bonds

14,846

(102)

14,744

Asset-backed securities

4,000

(2)

3,998

Total short-term investments

107,493

(338)

107,155

Total cash equivalents and short-term investments

$

158,767

$

$

(338)

$

158,429

During the year ended December 31, 2021, the Company made a $20.0 million investment in equity securities of a publicly-traded company. The Company records this investment at fair value within short-term investments, which was $0.7 million as of March 31, 2023. During the three months ended March 31, 2023, the Company recorded an unrealized loss due to the change in fair value of the equity securities of $0.4 million, respectively, in interest and other (expense) income, net in the consolidated statements of operations.

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.

11

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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, 2023

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

$

43,944

$

$

$

43,944

Commercial paper

4,994

4,994

Corporate bonds

 

 

18,140

 

18,140

U.S. Treasury securities

9,900

9,900

Government bonds

14,834

14,834

Equity securities

686

686

Other investments

2,000

2,000

Total assets

$

44,630

$

47,868

$

2,000

$

94,498

Liabilities:

Contingent consideration

$

$

$

1,754

$

1,754

Total liabilities

$

$

$

1,754

$

1,754

December 31, 2022

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

$

51,274

$

$

$

51,274

Commercial paper

39,781

39,781

Corporate bonds

 

 

28,814

 

28,814

U.S. Treasury securities

19,818

19,818

Government bonds

14,744

14,744

Asset-backed securities

3,988

3,998

Equity securities

1,088

1,088

Other investments

2,000

2,000

Total assets

$

52,362

$

107,145

$

2,000

$

161,517

Liabilities:

Contingent consideration

$

$

$

2,587

$

2,587

Total liabilities

$

$

$

2,587

$

2,587

The Company has determined that the estimated fair value of its corporate bonds and commercial paper are reported as Level 2 financial assets as they are based on model-driven valuations in which all significant inputs are observable, or can be derived from or corroborated by observable market data for substantially the full term of the asset.

Equity securities include investments made via publicly-traded securities. The Company has determined that the estimated fair value of its equity securities is reported as Level 1 financial assets as they are based on quoted market prices in active markets for identical assets. During the three months ended March 31, 2023, the Company recorded an unrealized loss due to the change in fair value of the equity securities of $0.4 million in interest and other (expense) income, net in the consolidated statements of operations.

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Other investments include investments made via convertible debt instruments totaling $2.0 million. The other investments are reported as a Level 3 financial asset because the methodology used to develop the estimated fair values includes significant unobservable inputs reflecting management’s own assumptions. Assumptions used in fair valuing convertible debt instruments include the rights and obligations of the notes the Company holds as well as the probability of a qualified financing event, acquisition, or change in control. During the three months ended March 31, 2022 and 2023, the Company did not recognize any gains or losses on convertible debt instruments.

The Aerosint acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of $6.1 million as of the date of acquisition and a fair value of $1.8 million as of March 31, 2023. The contingent consideration liability was valued using a Monte Carlo simulation in a risk-neutral framework as well as a scenario-based approach (both special cases of the income approach), based on key inputs that are not all observable in the market and is classified as a Level 3 liability. The Company assesses the fair value of the contingent consideration liability at each reporting period, with any subsequent changes to the fair value of the liability reflected in the condensed consolidated statement of operations until the liability is settled. During the three months ended March 31, 2023, the Company did not recognize a gain or loss in fair value of contingent consideration. During the three months ended March 31, 2022, the Company recognized loss in fair value of contingent consideration of $0.1 million. During the three months ended March 31, 2023, the Company paid $0.8 million of contingent consideration in connection with the achievement of technical milestones. As of March 31, 2023, the $1.8 million balance of contingent consideration is recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

The 2027 Notes are valued as a single liability measured at amortized cost, as no other features require bifurcation and recognition as derivatives.

There were no transfers between fair value measure levels during the three months ended March 31, 2023 and 2022. The following table presents information about the Company’s movement in Level 3 assets measured at fair value (in thousands):

Three Months Ended March 31, 

2023

    

2022

Balance at beginning of period

$

2,000

$

6,750

Balance at end of period

$

2,000

$

6,750

The following table presents information about the Company’s movement in Level 3 liabilities measured at fair value (in thousands):

Three Months Ended March 31, 

2023

    

2022

Balance at beginning of period

$

2,587

$

5,654

Payment of contingent consideration liability

(833)

Changes in fair value

(114)

Balance at end of period

$

1,754

$

5,540

6. ACCOUNTS RECEIVABLE

The components of accounts receivable are as follows (in thousands):

March 31, 

December 31, 

2023

2022

Trade receivables

$

37,422

$

40,121

Allowance for doubtful accounts

(1,819)

(1,640)

Total accounts receivable

$

35,603

$

38,481

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The following table summarizes activity in the allowance for doubtful accounts (in thousands):

March 31, 

December 31, 

2023

2022

Balance at beginning of period

$

1,640

$

665

Provision for uncollectible accounts, net of recoveries

179

1,393

Uncollectible accounts written off

(418)

Balance at end of period

$

1,819

$

1,640

7. INVENTORY

Inventory consists of the following (in thousands):

    

March 31, 

December 31, 

    

2023

2022

Raw materials

$

46,763

$

41,971

Work in process

13,531

11,936

Finished goods:

 

 

Deferred cost of sales

6,885

3,602

Manufactured finished goods

31,042

34,227

Total finished goods

37,927

37,829

Total inventory

$