june
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
Commission file number:
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As of May 7, 2024, there were
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
DESKTOP METAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
| March 31, |
| December 31, | |||
2024 |
| 2023 | ||||
Assets | ||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Current portion of restricted cash | | | ||||
Short‑term investments |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Assets held for sale | | — | ||||
Total current assets |
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Restricted cash, net of current portion |
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Property and equipment, net |
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Intangible assets, net |
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Other noncurrent assets | | | ||||
Total Assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Customer deposits |
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Current portion of lease liability |
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Accrued expenses and other current liabilities |
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Current portion of deferred revenue |
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Current portion of long‑term debt, net of deferred financing costs |
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Total current liabilities |
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Long-term debt, net of current portion | | | ||||
Convertible notes | | | ||||
Lease liability, net of current portion |
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Deferred revenue, net of current portion | | | ||||
Deferred tax liability | | | ||||
Other noncurrent liabilities | | | ||||
Total liabilities | | | ||||
Commitments and Contingencies (Note 17) |
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Stockholders’ Equity |
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Preferred Stock, $ | ||||||
Common Stock, $ |
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Additional paid‑in capital |
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Accumulated deficit |
| ( |
| ( | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total Stockholders’ Equity |
| |
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Total Liabilities and Stockholders’ Equity | $ | | $ | |
See notes to condensed consolidated financial statements
3
DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
| Three Months Ended | |||||
March 31, | ||||||
| 2024 |
| 2023 | |||
Revenues |
| |||||
Products | $ | | $ | | ||
Services | | | ||||
Total revenues | |
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Cost of sales |
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Products | | | ||||
Services | | | ||||
Total cost of sales | |
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Gross loss | ( |
| ( | |||
Operating expenses |
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Research and development | | | ||||
Sales and marketing | | | ||||
General and administrative | | | ||||
Total operating expenses | |
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Loss from operations | ( | ( | ||||
Interest expense | ( | ( | ||||
Interest and other expense, net | ( |
| ( | |||
Loss before income taxes | ( | ( | ||||
Income tax benefit | | $ | | |||
Net loss | $ | ( | $ | ( | ||
Net loss per share—basic and diluted | ( | ( | ||||
Weighted average shares outstanding, basic and diluted | | |
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, | ||||||
| 2024 |
| 2023 | |||
Net loss | $ | ( | $ | ( | ||
Other comprehensive loss, net of taxes: | ||||||
Unrealized gain (loss) on available-for-sale marketable securities, net | ( | | ||||
Foreign currency translation adjustment | ( | | ||||
Total comprehensive loss, net of taxes of $ | $ | ( | $ | ( |
See notes to condensed consolidated financial statements.
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DESKTOP METAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share amounts)
Three Months Ended March 31, 2024 | |||||||||||||||||
Accumulated | |||||||||||||||||
Other | |||||||||||||||||
Common Stock | Additional | Comprehensive | Total | ||||||||||||||
Voting | Paid‑in | Accumulated | (Loss) | Stockholders’ | |||||||||||||
| Shares |
| Amount | Capital |
| Deficit |
| Income |
| Equity | |||||||
BALANCE—January 1, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Exercise of Common Stock options | — |
| — |
| — |
| — |
| — |
| — | ||||||
Vesting of restricted Common Stock |
| |
| — |
| — |
| — |
| — |
| — | |||||
Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Repurchase of shares for employee tax withholdings | ( | — | ( | — | — | ( | |||||||||||
Issuance of common stock related to share-based liability awards | — | — | | — | — | | |||||||||||
Stock‑based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Other comprehensive income (loss) |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
BALANCE—March 31, 2024 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
Three Months Ended March 31, 2023 | |||||||||||||||||
Accumulated | |||||||||||||||||
Other | |||||||||||||||||
Common Stock | Additional | Comprehensive | Total | ||||||||||||||
Voting | Paid‑in | Accumulated | (Loss) | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Equity | ||||||
BALANCE—January 1, 2023 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Exercise of Common Stock options | |
| — |
| |
| — |
| — |
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Vesting of restricted Common Stock |
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| — |
| — |
| — |
| — |
| — | |||||
Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Repurchase of shares for employee tax withholdings | ( | — | ( | — | — | ( | |||||||||||
Stock‑based compensation expense |
| — |
| — |
| |
| — |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Other comprehensive income (loss) |
| — |
| — |
| — |
| — |
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BALANCE—March 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
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, | ||||||
| 2024 |
| 2023 | |||
Cash flows from operating activities: | ||||||
Net loss |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock‑based compensation |
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Amortization (accretion) of discount on investments | — | ( | ||||
Amortization of deferred costs on convertible notes | | | ||||
Provision for bad debt | | | ||||
Loss on disposal of property and equipment | |
| | |||
Net decrease in accrued interest related to marketable securities | — | ( | ||||
Net unrealized loss on equity investment | | | ||||
Deferred tax benefit | ( | ( | ||||
Foreign currency transaction loss (gain) | | ( | ||||
Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
| ( |
| ( | ||
Prepaid expenses and other current assets |
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| ( | ||
Other assets | | | ||||
Accounts payable |
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| ( | ||
Accrued expenses and other current liabilities |
| ( |
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Customer deposits |
| ( |
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Current portion of deferred revenue |
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Change in right of use assets and lease liabilities, net |
| ( |
| ( | ||
Other liabilities | | | ||||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: |
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Purchases of property and equipment |
| ( |
| ( | ||
Proceeds from sale of property and equipment | — | | ||||
Purchase of marketable securities | — |
| ( | |||
Proceeds from sales and maturities of marketable securities |
| — |
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Cash paid for acquisitions, net of cash acquired |
| — |
| ( | ||
Net cash (used in) provided by investing activities |
| ( |
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Cash flows from financing activities: |
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Proceeds from the exercise of stock options | — |
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Payment of taxes related to net share settlement upon vesting of restricted stock units | ( | ( | ||||
Repayment of loans | ( | ( | ||||
Net cash (used in) provided by financing activities |
| ( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | | ||||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
| ( |
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Cash, cash equivalents, and restricted cash at beginning of period | | | ||||
Cash, cash equivalents, and restricted cash at end of period | $ | | $ | | ||
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 | $ | | $ | | ||
Restricted cash included in other current assets | | | ||||
Restricted cash included in other noncurrent assets | | | ||||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | | $ | | ||
Supplemental cash flow information: |
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Interest paid | $ | — | $ | — | ||
Taxes paid | $ | — | $ | — | ||
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Non‑cash investing and financing activities: |
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Net unrealized gain on investments | $ | — | $ | ( | ||
Additions to right of use assets and lease liabilities | $ | | $ | | ||
Purchase of property and equipment included in accounts payable | $ | | $ | | ||
Purchase of property and equipment included in accrued expense | $ | — | $ | | ||
Transfers from property and equipment to inventory | $ | — | $ | | ||
Transfers from PP&E to Asset Held-For-Sale | $ | | | |||
Transfers from inventory to property and equipment | $ | | $ | |
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.
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, 2024 will be sufficient to fund operating and capital expenditure requirements through at least
Recent Developments
Termination of 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 was to merge with and into the Company, with the Company surviving the merger as a direct wholly owned subsidiary of Stratasys (the “Merger”).
The Merger was subject to approval by shareholders of Stratasys and Desktop Metal. At an extraordinary general meeting of shareholders of Stratasys held on September 28, 2023, Stratasys shareholders did not approve the proposal related to the Merger Agreement. Accordingly, on September 28, 2023, Stratasys sent Desktop Metal a notice of termination of the Merger Agreement. As a result, and under the terms of the Merger Agreement, Stratasys paid $
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
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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. In the unaudited condensed consolidated financial statements, certain balances have been reclassified to conform to the current year presentation.
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, 2023. There have been no other changes to the Company’s significant accounting policies during the first three months of fiscal year 2024.
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 $
Contract assets were not significant during the three months ended March 31, 2024 and 2023.
Remaining Performance Obligations
At March 31, 2024, the Company had $
10
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, 2024 | |||||||||||
| Amortized Cost |
| Unrealized Gains |
| Unrealized Losses |
| Fair Value | |||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Total cash equivalents | | — | — | | ||||||||
Total cash equivalents and short-term investments | $ | | $ | — | $ | — | $ | |
| December 31, 2023 | |||||||||||
| Amortized Cost |
| Unrealized Gains |
| Unrealized Losses |
| Fair Value | |||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Total cash equivalents | | — | — | | ||||||||
Total cash equivalents and short-term investments | $ | | $ | — | $ | — | $ | |
5. FAIR VALUE MEASUREMENTS
The Company uses the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values for certain of its assets and liabilities:
Level 1 is based on observable inputs, such as quoted prices in active markets;
Level 2 is based on inputs other than the quoted prices in active markets that are observable either directly or indirectly; and
Level 3 is based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Items measured at fair value on a recurring basis include money market funds.
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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, 2024 | ||||||||||||
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 | $ | | $ | — | $ | — | $ | | ||||
Equity securities | | — | — | | ||||||||
Other investments | — | — | | | ||||||||
Total assets | $ | | $ | — | $ | | $ | |
December 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: |
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Money market funds | $ | | $ | — | $ | — | $ | | ||||
Equity securities | | — | — | | ||||||||
Other investments | — | — | | | ||||||||
Total assets | $ | | $ | — | $ | | $ | |
The Company has determined that the estimated fair value of its commercial paper, corporate bonds, U.S. Treasury securities, government bonds, and asset-backed securities 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 year ended December 31, 2021, the Company made a $
Other investments include investments made via convertible debt instruments totaling $
The Aerosint acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of $
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technical milestones. During the year ended December 31, 2023, the Company derecognized the remaining contingent consideration of $
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
Three Months Ended March 31, | ||||||
2024 |
| 2023 | ||||
Balance at beginning of period | $ | | $ | | ||
Balance at end of period | $ | | $ | |
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, | ||||||
2024 |
| 2023 | ||||
Balance at beginning of period | $ | — | $ | | ||
Payment of contingent consideration liability | — | ( | ||||
Balance at end of period | $ | — | $ | |
6. ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows (in thousands):
March 31, | December 31, | |||||
2024 | 2023 | |||||
Trade receivables | $ | | $ | | ||
Allowance for doubtful accounts | ( | ( | ||||
Total accounts receivable | $ | | $ | |
The following table summarizes activity in the allowance for doubtful accounts (in thousands):
March 31, | December 31, | |||||
2024 | 2023 | |||||
Balance at beginning of period | $ | | $ | | ||
Provision for uncollectible accounts, net of recoveries | | | ||||
Uncollectible accounts written off | ( | ( | ||||
Balance at end of period | $ | | $ | |
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7. INVENTORY
Inventory consists of the following (in thousands):
| March 31, | December 31, | ||||
| 2024 | 2023 | ||||
Raw materials | $ | | $ | | ||
Work in process | | | ||||
Finished goods: |
|
| ||||
Deferred cost of sales | | | ||||
Manufactured finished goods | | | ||||
Total finished goods | | | ||||
Total inventory | $ | | $ | |
8. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consists of the following (in thousands):
March 31, | December 31, | |||||
2024 | 2023 | |||||
Prepaid operating expenses | $ | | $ | | ||
Prepaid dues and subscriptions | | | ||||
Prepaid insurance | | — | ||||
Prepaid taxes | | | ||||
Prepaid rent | | — | ||||
Government grants receivable | — | | ||||
Termination fee receivable | — | | ||||
Other | | | ||||
Total prepaid expenses and other current assets | $ | | $ | |
9. DIVESTITURES
On September 29, 2023, the Company entered into a Stock Purchase Agreement with Industriewerk Shaeffler INA-Ingenieurdienst-, Gesellshaft mit beschrankter Haftung. (“Shaeffler”) related to the sale of Aerosint SA (“Aerosint”), a wholly owned subsidiary of the Company, for a $
Before measuring the fair value less costs to sell of the disposal group as a whole, the Company first reviewed individual assets and liabilities to determine if any fair value adjustments were required and concluded no individual asset impairments were required. Then, based on the purchase and sale agreement entered into by the Company and the Buyer, the Company determined the fair value of the disposal group to be equal to the selling price, less costs to sell. Based on this review, the Company recorded a non-cash goodwill impairment charge of $
In connection with the Company’s 2024 Initiative, as discussed in Note 24. Restructuring Charges, the Company approved a plan to sell a facility in St. Clairesville, Ohio as well as related equipment in the facility. The Company ceased recording depreciation on these assets upon meeting the held for sale criteria. As of March 31, 2024, the total carrying value of assets held for sale was $
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10. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following (in thousands):
| March 31, | December 31, | ||||
| 2024 | 2023 | ||||
Equipment | $ | | $ | | ||
Leasehold improvements |
| |
| | ||
Land and buildings | | | ||||
Construction in process |
| |
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Furniture and fixtures |
| |
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Software |
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| | ||
Tooling |
| |
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Computer equipment |
| |
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Automobiles | | | ||||
Property and equipment, gross |
| |
| | ||
Less: accumulated depreciation |
| ( |
| ( | ||
Total property and equipment, net | $ | | $ | |
Depreciation expense was $
11. GOODWILL & INTANGIBLE ASSETS
There was
March 31, | December 31, | ||||
2024 | 2023 | ||||
Balance, beginning of year | $ | — | $ | | |
Goodwill impairment | — | ( | |||
Foreign currency translation adjustment | — | ( | |||
Balance, end of period | $ | — | $ | — |
Goodwill was fully impaired as of December 31, 2023.
The Company performed a quantitative assessment during its annual impairment review for 2023 as of October 1, 2023 and concluded that the fair value of the Company’s single reporting unit was not less than its carrying amount. Due to sustained declines in Company’s stock price and the stock prices of comparable companies, we performed a quantitative assessment as of December 31, 2023, utilizing a combination of the income and market approaches. The results of the quantitative analysis performed indicated that the carrying value of the reporting unit exceeded the fair value. As such, a goodwill impairment charge of $
The Company estimated the fair value using a weighted average of the income and market approaches. Specifically, the discounted cash flow method was used under the income approach and the guideline public company and guideline merged and acquired company methods were used under the market approach. The significant assumptions used under the income approach include management’s forecasts of future revenues and EBITDA margins used to calculate projected future cash flows, discount rates, and the terminal growth rate. The terminal value is based on an exit revenue multiple which requires significant assumptions regarding the selections of appropriate multiples that consider relevant market trading data. The Company bases its estimates and assumptions on its knowledge of the additive manufacturing industry, recent performance, expectations of future performance and other assumptions the Company believes to be reasonable. The significant assumptions used under the market approach include the control
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premium and selection of comparable companies and comparable transactions. Comparable companies and transactions are chosen based on factors including industry classification, geographic region, product offerings, earnings growth and profitability.
Intangible assets consisted of the following (in thousands):
March 31, 2024 |
| December 31, 2023 | ||||||||||||||||||
Weighted Average | Gross | Net |
| Gross | Net | |||||||||||||||
Remaining Useful | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||
| Lives (in years) |
| Amount |
| Amortization |
| Amount |
| Amount |
| Amortization |
| Amount | |||||||
Acquired technology | $ | | $ | | $ | |
| $ | | $ | | $ | | |||||||
Trade name | | | | | | | ||||||||||||||
Customer relationships | | | | | |