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 June 30, 2023

☐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 August 1, 2023, there were 323,070,377 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 June 30, 2023 and December 31, 2022		3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022		4

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022		5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022		6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022		8

Notes to Condensed Consolidated Financial Statements		10

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk		45

Item 4. Controls and Procedures		46

Part II. Other Information		47

Item 1. Legal Proceedings		47

Item 1A. Risk Factors		48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities		80

Item 3. Defaults Upon Senior Securities		80

Item 4. Mine Safety Disclosures		80

Item 5. Other Information		81

Item 6. Exhibits		81

Exhibit Index		82

Signatures		83

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	121,660	$	76,291
Current portion of restricted cash		824		4,510
Short‑term investments		5,933		108,243
Accounts receivable		41,235		38,481
Inventory		100,330		91,736
Prepaid expenses and other current assets		17,041		16,325
Assets held for sale		—		830
Total current assets		287,023		336,416
Restricted cash, net of current portion		612		1,112
Property and equipment, net		42,307		56,271
Goodwill		112,741		112,955
Intangible assets, net		199,609		219,830
Other noncurrent assets		34,806		27,763
Total Assets	$	677,098	$	754,347
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	25,041	$	25,105
Customer deposits		9,275		11,526
Current portion of lease liability		5,931		5,730
Accrued expenses and other current liabilities		28,724		26,723
Current portion of deferred revenue		12,799		13,719
Current portion of long‑term debt		389		584
Total current liabilities		82,159		83,387
Long-term debt, net of current portion		187		311
Convertible notes		112,199		111,834
Lease liability, net of current portion		23,196		17,860
Deferred revenue, net of current portion		3,711		3,664
Deferred tax liability		8,060		8,430
Other noncurrent liabilities		3,127		1,359
Total liabilities		232,639		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 June 30, 2023 and December 31, 2022, respectively		—		—
Common Stock, $0.0001 par value—500,000,000 shares authorized; 322,656,280 and 318,235,106 shares issued at June 30, 2023 and December 31, 2022, respectively, 322,630,201 and 318,133,434 shares outstanding at June 30, 2023 and December 31, 2022, respectively		32		32
Additional paid‑in capital		1,893,548		1,874,792
Accumulated deficit		(1,411,323)		(1,308,954)
Accumulated other comprehensive loss		(37,798)		(38,368)
Total Stockholders’ Equity		444,459		527,502
Total Liabilities and Stockholders’ Equity	$	677,098	$	754,347

See notes to condensed consolidated financial statements

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenues
Products	$	47,398	$	52,672	$	84,095	$	92,148
Services		5,888		5,002		10,507		9,232
Total revenues		53,286		57,674		94,602		101,380
Cost of sales
Products		43,224		44,913		82,115		86,815
Services		3,973		4,364		7,762		7,496
Total cost of sales		47,197		49,277		89,877		94,311
Gross profit		6,089		8,397		4,725		7,069
Operating expenses
Research and development		21,223		31,370		44,367		55,975
Sales and marketing		10,440		20,406		20,047		40,070
General and administrative		22,944		19,691		41,145		43,573
Goodwill impairment		—		229,500		—		229,500
Total operating expenses		54,607		300,967		105,559		369,118
Loss from operations		(48,518)		(292,570)		(100,834)		(362,049)
Interest expense		(1,109)		(633)		(1,920)		(601)
Interest and other (expense) income, net		(78)		(5,013)		(149)		(6,766)
Loss before income taxes		(49,705)		(298,216)		(102,903)		(369,416)
Income tax benefit (expense)		(23)		944		534		2,200
Net loss	$	(49,728)	$	(297,272)	$	(102,369)	$	(367,216)
Net loss per share—basic and diluted	$	(0.15)	$	(0.95)	$	(0.32)	$	(1.17)
Weighted average shares outstanding, basic and diluted		321,655,818		313,556,886		320,382,809		312,798,328

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net loss	$	(49,728)	$	(297,272)	$	(102,369)	$	(367,216)
Other comprehensive loss, net of taxes:
Unrealized gain (loss) on available-for-sale marketable securities, net		148		(41)		337		(29)
Foreign currency translation adjustment		(1,316)		(27,411)		233		(38,458)
Total comprehensive loss, net of taxes of $0	$	(50,896)	$	(324,724)	$	(101,799)	$	(405,703)

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 June 30, 2023
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—April 1, 2023	320,401,389	$	32	$	1,883,764	$	(1,361,595)	$	(36,630)	$	485,571
Exercise of Common Stock options	472,235		—		560		—		—		560
Vesting of restricted Common Stock	50,218		—		—		—		—		—
Vesting of restricted stock units	1,266,620		—		—		—		—		—
Repurchase of shares for employee tax withholdings	(5,054)		—		(11)		—		—		(11)
Issuance of Common Stock related to settlement of contingent consideration	444,793		—		797		—		—		797
Stock‑based compensation expense	—		—		8,438		—		—		8,438
Net loss	—		—		—		(49,728)		—		(49,728)
Other comprehensive income (loss)	—		—		—		—		(1,168)		(1,168)
BALANCE—June 30, 2023	322,630,201	$	32	$	1,893,548	$	(1,411,323)	$	(37,798)	$	444,459


	Six Months Ended June 30, 2023
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		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	968,111		—		1,157		—		—		1,157
Vesting of restricted Common Stock	75,593		—		—		—		—		—
Vesting of restricted stock units	3,075,042		—		—		—		—		—
Repurchase of shares for employee tax withholdings	(66,772)		—		(109)		—		—		(109)
Issuance of Common Stock related to settlement of contingent consideration	444,793		—		797		—		—		797
Stock‑based compensation expense	—		—		16,911		—		—		16,911
Net loss	—		—		—		(102,369)		—		(102,369)
Other comprehensive income (loss)	—		—		—		—		570		570
BALANCE—June 30, 2023	322,630,201	$	32	$	1,893,548	$	(1,411,323)	$	(37,798)	$	444,459

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	Three Months Ended June 30, 2022
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—April 1, 2022	312,825,572	$	31	$	1,833,998	$	(638,555)	$	(17,449)	$	1,178,025
Exercise of Common Stock options	234,307		—		364		—		—		364
Vesting of restricted Common Stock	29,171		—		—		—		—		—
Vesting of restricted stock units	1,962,846		1		—		—		—		1
Net share settlement related to employee tax withholdings upon vesting of restricted stock units	(16,421)		—		(31)		—		—		(31)
Issuance of Common Stock related to settlement of contingent consideration	112,202		—		500		—		—		500
Stock‑based compensation expense	—		—		17,005		—		—		17,005
Net loss	—		—		—		(297,272)		—		(297,272)
Other comprehensive income (loss)	—		—		—		—		(27,452)		(27,452)
BALANCE—June 30, 2022	315,147,677	$	32	$	1,851,836	$	(935,827)	$	(44,901)	$	871,140


	Six Months Ended June 30, 2022
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		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	1,021,000		—		1,264		—		—		1,264
Vesting of restricted Common Stock	113,555		—		—		—		—		—
Vesting of restricted stock units	2,483,111		1		—		—		—		1
Repurchase of shares for employee tax withholdings	(56,141)		—		(189)		—		—		(189)
Issuance of Common Stock related to settlement of contingent consideration	112,202		—		500		—		—		500
Stock‑based compensation expense	—		—		26,917		—		—		26,917
Net loss	—		—		—		(367,216)		—		(367,216)
Other comprehensive income (loss)	—		—		—		—		(38,487)		(38,487)
BALANCE—June 30, 2022	315,147,677	$	32	$	1,851,836	$	(935,827)	$	(44,901)	$	871,140

See notes to condensed consolidated financial statements.

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(102,369)	$	(367,216)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		26,965		25,602
Stock‑based compensation		19,016		26,917
Goodwill impairment		—		229,500
Amortization (accretion) of discount on investments		(484)		390
Amortization of deferred costs on convertible notes		365		39
Provision for bad debt		962		554
Provision for slow-moving, obsolete, and lower of cost or net realizable value inventories, net		—		—
Loss on disposal of property and equipment		496		156
Net increase (decrease) in accrued interest related to marketable securities		238		917
Net unrealized (gain) loss on equity investment		148		5,080
Net unrealized (gain) loss on other investments		—		800
Deferred tax benefit		(534)		(2,188)
Change in fair value of contingent consideration		—		4
Foreign currency transaction (gain) loss		97		430
Changes in operating assets and liabilities:
Accounts receivable		(3,661)		8,250
Inventory		(8,760)		(25,384)
Prepaid expenses and other current assets		(675)		(2,994)
Other assets		1,595		1,117
Accounts payable		(407)		(2,767)
Accrued expenses and other current liabilities		1,097		(7,337)
Customer deposits		(2,322)		(1,412)
Deferred revenue		(918)		(70)
Change in right of use assets and lease liabilities, net		(3,110)		(1,467)
Other liabilities		1,767		30
Net cash used in operating activities		(70,494)		(111,049)
Cash flows from investing activities:
Purchases of property and equipment		(1,305)		(6,747)
Proceeds from sale of property and equipment		9,942		6
Purchase of marketable securities		(4,973)		(126,771)
Proceeds from sales and maturities of marketable securities		107,719		177,150
Cash paid for acquisitions, net of cash acquired		(500)		(23)
Net cash provided by investing activities		110,883		43,615
Cash flows from financing activities:
Proceeds from the exercise of stock options		1,157		1,266
Payment of taxes related to net share settlement upon vesting of restricted stock units		(108)		(191)
Repayment of loans		(328)		(231)
Proceeds from issuance of convertible notes		—		115,000
Costs incurred in connection with the issuance of convertible notes		—		(3,619)
Net cash provided by financing activities		721		112,225
Effect of exchange rate changes on cash, cash equivalents and restricted cash		73		(819)
Net increase (decrease) in cash, cash equivalents, and restricted cash		41,183		43,972
Cash, cash equivalents, and restricted cash at beginning of period		81,913		68,258
Cash, cash equivalents, and restricted cash at end of period	$	123,096	$	112,230

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	$	121,660	$	107,966
Restricted cash included in other current assets		824		3,152
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	$	123,096	$	112,230

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Supplemental cash flow information:
Interest paid	$	—	$	—
Taxes paid	$	—	$	—

Non‑cash investing and financing activities:
Net unrealized (gain) loss on investments	$	(337)	$	29
Common Stock issued for settlement of contingent consideration	$	797	$	500
Deferred contract costs	$	—	$	1,341
Additions to right of use assets and lease liabilities	$	8,489	$	7,784
Purchase of property and equipment included in accounts payable	$	365	$	1,022
Purchase of property and equipment included in accrued expense	$	32	$	—
Transfers from property and equipment to inventory	$	841	$	1,954
Transfers from PP&E to Asset Held-For-Sale	$	—	$	—
Transfers from inventory to property and equipment	$	1,345	$	1,531

See notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2023 will be sufficient to fund operating and capital expenditure requirements through at least twelve months from the date of issuance of these condensed consolidated financial statements.

Proposed Merger with Stratasys Ltd.

On May 25, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Stratasys Ltd. (“Stratasys”), Tetris Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Stratasys (“Merger Sub”), and the Company, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the merger as a direct wholly owned subsidiary of Stratasys (the “Merger”).

Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Class A common stock, par value $0.0001 per share, of Desktop Metal (“Common Stock”) issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock owned or held (x) in treasury or otherwise owned by Desktop Metal or any of its subsidiaries or (y) by Stratasys or any of its subsidiaries), will be converted into the right to receive 0.123 (the “Exchange Ratio”) ordinary shares, 0.01 New Israeli Shekels par value, of Stratasys (“Ordinary Shares”).

Pursuant to the Merger Agreement, following the closing of the transaction, the Board of Directors of the combined company will consist of 11 members, five of whom will be selected by current directors of Stratasys and five of whom will be selected by current directors of the Company, as well as Dr. Yoav Zeif, who will continue to serve as the combined company’s Chief Executive Officer. The Merger Agreement provides that Mr. Ric Fulop, the Chief Executive Officer of the Company, will serve as Chairman of the combined company’s Board of Directors and Stratasys Chairman Mr. Dov Ofer will serve as lead independent director of the combined company’s Board of Directors.

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The Company recognized costs of $6.0 million primarily related to legal and consulting fees incurred in connection with the Merger and $0.3 million for Merger bonuses for the three and six months ended June 30, 2023, included in general and administrative expenses in the consolidated statements of operations. The Merger is subject to approval by shareholders of Stratasys and Desktop Metal, the receipt of required regulatory approvals, and other customary closing conditions.

For further information on the Merger Agreement, refer to the Merger Agreement, a copy of which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2023.

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 condensed 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.

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 six months of fiscal year 2023.

Assets Held for Sale

The Company classifies long-lived assets or asset groups the Company plans 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. The Company records 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 $16.5 million and $17.4 million as of June 30, 2023 and December 31, 2022, respectively. During the three and six months ended June 30, 2023, the Company recognized $0.4 million and $3.8 million of existing deferred revenue from 2022. During the three and six months ended June 30, 2022, the Company recognized $3.5 million and $10.4 million of existing deferred revenue from 2021. The deferred revenue consists of billed post-installation customer support and

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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 six months ended June 30, 2023 and 2022.