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Table of Contents

june

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, 2024

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 October 29, 2024, there were 33,341,419 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 (unaudited)

3

Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023

3

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023

4

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023

8

Notes to Condensed Consolidated Financial Statements

10

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

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

48

Item 4. Controls and Procedures

49

Part II. Other Information

49

Item 1. Legal Proceedings

49

Item 1A. Risk Factors

50

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

82

Item 3. Defaults Upon Senior Securities

83

Item 4. Mine Safety Disclosures

83

Item 5. Other Information

83

Item 6. Exhibits

84

Exhibit Index

85

Signatures

86

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, 

2024

    

2023

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

30,617

$

83,845

Current portion of restricted cash

220

233

Short‑term investments

 

 

625

Accounts receivable

 

22,803

 

37,690

Inventory

 

80,853

 

82,639

Prepaid expenses and other current assets

 

8,946

 

11,105

Total current assets

 

143,439

 

216,137

Restricted cash, net of current portion

 

 

612

Property and equipment, net

 

27,184

 

35,840

Intangible assets, net

 

75,297

 

168,259

Other noncurrent assets

27,773

37,153

Total Assets

$

273,693

$

458,001

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

14,317

$

18,190

Customer deposits

 

4,403

 

5,356

Current portion of lease liability

 

7,936

 

7,404

Accrued expenses and other current liabilities

 

23,149

 

27,085

Current portion of deferred revenue

 

11,206

 

11,739

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

 

181

 

330

Total current liabilities

 

61,192

 

70,104

Long-term debt, net of current portion

89

Convertible notes

113,113

112,565

Lease liability, net of current portion

 

18,673

 

23,566

Deferred revenue, net of current portion

2,052

3,696

Deferred tax liability

3,609

3,523

Other noncurrent liabilities

2,706

2,806

Total liabilities

201,345

216,349

Commitments and Contingencies (Note 17)

 

  

 

Stockholders’ Equity

 

 

Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common Stock, $0.0001 par value—500,000,000 shares authorized; 33,310,041 and 32,527,742 shares issued at September 30, 2024 and December 31, 2023, respectively, 33,310,040 and 32,527,167 shares outstanding at September 30, 2024 and December 31, 2023, respectively

 

4

 

4

Additional paid‑in capital

 

1,929,669

 

1,908,533

Accumulated deficit

 

(1,823,211)

 

(1,632,225)

Accumulated other comprehensive loss

 

(34,114)

 

(34,660)

Total Stockholders’ Equity

 

72,348

 

241,652

Total Liabilities and Stockholders’ Equity

$

273,693

$

458,001

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, 

    

2024

    

2023

    

2024

    

2023

Revenues

 

  

 

  

Products

$

31,939

$

37,502

$

98,981

$

121,597

Services

4,466

5,248

 

16,956

 

15,755

Total revenues

36,405

 

42,750

 

115,937

 

137,352

Cost of sales

  

  

 

  

 

  

Products

29,962

37,175

 

136,190

 

119,290

Services

3,282

3,651

 

10,981

 

11,413

Total cost of sales

33,244

 

40,826

 

147,171

 

130,703

Gross profit (loss)

3,161

 

1,924

 

(31,234)

 

6,649

Operating expenses

  

  

 

  

 

  

Research and development

11,500

20,455

 

48,456

 

64,822

Sales and marketing

8,053

8,549

 

45,008

 

28,596

General and administrative

17,330

9,528

 

59,740

 

50,673

Impairment charges

6,062

6,062

Goodwill impairment

2,450

2,450

Total operating expenses

36,883

 

47,044

 

153,204

 

152,603

Loss from operations

(33,722)

(45,120)

 

(184,438)

(145,954)

Interest expense

(1,690)

(1,045)

 

(4,871)

(2,965)

Interest and other expense, net

228

 

(349)

 

(1,266)

 

(498)

Loss before income taxes

(35,184)

(46,514)

 

(190,575)

 

(149,417)

Income tax benefit (expense)

(264)

$

141

$

(411)

$

675

Net loss

$

(35,448)

$

(46,373)

$

(190,986)

$

(148,742)

Net loss per share—basic and diluted

(1.07)

(1.43)

(5.78)

(4.63)

Weighted average shares outstanding, basic and diluted

33,268,899

32,318,761

33,023,091

32,132,801

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, 

    

2024

    

2023

    

2024

    

2023

Net loss

$

(35,448)

$

(46,373)

$

(190,986)

$

(148,742)

Other comprehensive loss, net of taxes:

 

 

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

(211)

 

(451)

 

126

Foreign currency translation adjustment

2,264

(684)

997

(451)

Total comprehensive loss, net of taxes of $0

$

(33,184)

$

(47,268)

$

(190,440)

$

(149,067)

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, 2024

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

Capital

    

Deficit

    

Income

    

Equity

BALANCE— July 1, 2024

33,196,705

$

4

$

1,923,978

$

(1,787,763)

$

(36,378)

$

99,841

Vesting of restricted share units

119,423

Repurchase of shares for employee tax withholdings

(6,088)

(29)

(29)

Stock‑based compensation expense

 

5,720

5,720

Net loss

 

(35,448)

(35,448)

Other comprehensive income (loss)

 

2,264

2,264

BALANCE—September 30, 2024

 

33,310,040

4

$

1,929,669

$

(1,823,211)

$

(34,114)

$

72,348

Nine Months Ended September 30, 2024

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

Capital

    

Deficit

    

Income

    

Equity

BALANCE—January 1, 2024

32,527,167

4

1,908,533

(1,632,225)

(34,660)

241,652

Fractional shares redeemed for cash in lieu of reverse stock split

(1,338)

(7)

(7)

Vesting of restricted Common Stock

 

574

Vesting of restricted stock units

849,899

Repurchase of shares for employee tax withholdings

(66,262)

(403)

(403)

Issuance of common stock related to share-based liability awards

1,997

1,997

Stock‑based compensation expense

 

19,549

19,549

Net loss

 

(190,986)

(190,986)

Other comprehensive income (loss)

 

546

546

BALANCE—September 30, 2024

 

33,310,040

$

4

$

1,929,669

$

(1,823,211)

$

(34,114)

$

72,348

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Three Months Ended September 30, 2023

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—July 1, 2023

32,263,019

$

3

$

1,893,548

$

(1,411,323)

$

(37,798)

$

444,459

Exercise of Common Stock options

3,793

 

 

46

 

 

 

46

Vesting of restricted Common Stock

 

978

 

 

 

 

 

Vesting of restricted stock units

98,692

Repurchase of shares for employee tax withholdings

(2,236)

(39)

(39)

Stock‑based compensation expense

 

 

 

8,376

 

 

 

8,376

Net loss

 

 

 

 

(46,373)

 

 

(46,373)

Other comprehensive income (loss)

 

 

 

 

 

(895)

 

(895)

BALANCE—September 30, 2023

 

32,364,246

$

3

$

1,901,931

$

(1,457,696)

$

(38,693)

$

405,574

Nine Months Ended September 30, 2023

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—January 1, 2023

31,813,343

$

3

$

1,874,792

$

(1,308,954)

$

(38,368)

$

527,502

Exercise of Common Stock options

100,604

 

 

1,203

 

 

 

1,203

Vesting of restricted Common Stock

 

8,537

 

 

 

 

 

Vesting of restricted stock units

406,196

Repurchase of shares for employee tax withholdings

(8,913)

(147)

(147)

Issuance of Common Stock related to settlement of contingent consideration

44,479

797

797

Stock‑based compensation expense

 

 

 

25,286

 

 

 

25,286

Net loss

 

 

 

 

(148,742)

 

 

(148,742)

Other comprehensive income (loss)

 

 

 

 

 

(325)

 

(325)

BALANCE—September 30, 2023

 

32,364,246

$

3

$

1,901,931

$

(1,457,696)

$

(38,693)

$

405,574

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, 

    

2024

    

2023

Cash flows from operating activities:

Net loss

    

$

(190,986)

    

$

(148,742)

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

 

 

Depreciation and amortization

 

103,786

 

40,322

Stock‑based compensation

 

18,058

 

26,699

Goodwill impairment

2,450

Amortization (accretion) of discount on investments

(490)

Amortization of deferred costs on convertible notes

548

548

Provision for bad debt

1,756

640

Provision for slow-moving, obsolete, and lower of cost or net realizable value inventories, net

(45)

Loss (gain) on disposal of property and equipment

(35)

 

501

Foreign exchange (gains) losses on intercompany transactions, net

(4)

Net decrease in accrued interest related to marketable securities

238

Net unrealized loss on equity investment

625

286

Deferred tax benefit

305

(675)

Foreign currency transaction loss

486

392

Impairment charges

6,062

Changes in operating assets and liabilities:

 

Accounts receivable

 

13,267

 

(2,446)

Inventory

 

(694)

 

(16,052)

Prepaid expenses and other current assets

 

2,264

 

(8,716)

Other assets

9,967

2,425

Accounts payable

 

(4,055)

 

7,397

Accrued expenses and other current liabilities

 

(415)

 

1,009

Customer deposits

 

(1,000)

 

(4,542)

Deferred revenue

(2,202)

3,590

Change in right of use assets and lease liabilities, net

 

(5,033)

 

(4,456)

Other liabilities

8

1,706

Net cash used in operating activities

 

(53,399)

 

(91,854)

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(810)

 

(2,709)

Proceeds from sale of property and equipment

1,694

9,942

Purchase of marketable securities

 

(4,973)

Proceeds from sales and maturities of marketable securities

 

 

112,719

Proceeds from disposal of subsidiaries

4,089

Cash paid for acquisitions, net of cash acquired

 

 

(500)

Net cash provided by investing activities

 

884

 

118,568

Cash flows from financing activities:

 

 

  

Proceeds from the exercise of stock options

 

1,203

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

(403)

(147)

Repayment of loans

(237)

(337)

Net cash (used in) provided by financing activities

 

(640)

 

719

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

(698)

(461)

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

(53,853)

26,972

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

84,690

81,913

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

30,837

108,885

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

$

30,617

$

107,432

Restricted cash included in other current assets

220

841

Restricted cash included in other noncurrent assets

612

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

$

30,837

$

108,885

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Supplemental cash flow information:

 

 

  

Interest paid

$

3,488

$

Taxes paid

$

$

Noncash investing and financing activities:

 

 

  

Net unrealized gain on investments

$

$

(339)

Common Stock issued for settlement of contingent consideration

$

$

797

Additions to right of use assets and lease liabilities

$

1,600

$

11,443

Purchase of property and equipment included in accounts payable

$

160

$

326

Purchase of property and equipment included in accrued expense

$

$

90

Transfers from inventory to property and equipment

$

2,725

$

1,370

Transfers from property and equipment to inventory

$

$

1,647

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.

Recent Developments

Proposed Merger with Nano Dimension Ltd.

On July 2, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Nano Dimension Ltd., an Israeli company (“Nano”), and Nano US I, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Nano (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the merger as an indirect wholly owned subsidiary of Nano (the “Merger”). Following the closing of the Merger, the Company’s Common Stock (as defined below), will be delisted from the New York Stock Exchange and will be deregistered under the Exchange Act of 1934, as amended.

Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of Class A common stock, par value $0.0001 per share, of the Company (“Common Stock”) (other than (i) shares of preferred stock, par value $0.0001 per share (“Preferred Stock”), (ii) shares held by the Company as treasury stock or held directly by a subsidiary of the Company, Nano or Merger Sub and (iii) shares of Common Stock held by stockholders that are entitled to, and have properly demanded appraisal for such shares, in accordance with, and have complied in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Dissenting Shares”)) will be converted automatically into the right to receive an amount in cash equal to $5.50 (the “Per Share Merger Consideration”), without interest, subject to downward adjustment, by an amount (the “Consideration Adjustment Amount”) equal to the sum of (x) the product of (A) the aggregate principal amount outstanding under the Bridge Loan Facility (as defined below) together with accrued and unpaid interest, as of the closing of the Merger divided by $2.5 million, and (B) $0.10 (provided that in no event will the adjustment pursuant to (x) hereunder be greater than $0.80), plus (y) the product of (A) all unpaid Company Transaction Expenses (as defined in the Merger Agreement) as of the closing of the Merger divided by $2.5 million, and (B) $0.10 (provided that in no event will the adjustment pursuant to (y) hereunder be greater than $0.60), plus (z) $0.0325 if certain executives of the Company do not execute severance letter agreements prior to the closing, in each of the following cases (x), (y) and (z), subject further to any tax withholding. Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each share of Preferred Stock, each Dissenting Share and, when converted into the right to receive the Per Share Merger Consideration, each share of Common Stock, will be cancelled and shall cease to exist, and each certificate formerly representing such shares of Common Stock will thereafter represent only the right to receive the Per Share

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Merger Consideration.

The Company’s stockholders approved the Merger at a special meeting of stockholders held on October 2, 2024. The Merger is subject to the receipt of required regulatory approvals and other customary closing conditions.

For further information about 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 July 3, 2024.

Reverse Stock Split

On June 10, 2024 after obtaining stockholder approval, the Company effected a 1-for-10 reverse stock split, and the Company’s Class A common stock began trading on the post-split adjusted basis on June 11, 2024. All shares of the Company’s common stock, stock-based instruments and per-share data included in these condensed consolidated financial statements have been retroactively adjusted as though the stock split has been effected prior to all periods presented.

Termination of Merger with Stratasys Ltd.

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

The Stratasys 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 Stratasys Merger Agreement. Accordingly, on September 28, 2023, Stratasys sent Desktop Metal a notice of termination of the Stratasys Merger Agreement. As a result, and under the terms of the Stratasys Merger Agreement, Stratasys paid $10.0 million to Desktop Metal for reimbursement of expenses, which is included in general and administrative expenses in the condensed consolidated statements of operations. The termination fee was paid on October 6, 2023.

Going concern

Pursuant to the Financial Accounting Standards Board (the “FASB”) codification Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements, the Company is required to assess its ability to continue as a going concern for a period of one year from the date of the issuance of the condensed consolidated financial statements.

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the date the condensed consolidated financial statements are available to be issued.

These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company has incurred net losses since inception and has an accumulated deficit of $1.8 billion as of September 30, 2024. The Company expects to continue to incur additional losses and negative cash flows from operations in the near term. The Company will require additional capital investment to fund operating and capital expenditure requirements. The Company may seek additional capital through arrangements with Nano or from other sources, including, but not limited to, equity and debt financings.

Additional equity financing may not be available, and if it is available, it may not be on terms favorable to the Company and could be dilutive to current stockholders. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments. Similarly, arrangements with Nano or from other sources may not be on terms favorable to the Company, and could be dilutive to current stockholders.

The Company’s ability to access capital when needed is not assured. If the merger is not completed and if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back or abandon some or all its

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operations, which could materially harm the Company’s business, financial condition, and results of operations. Because of this uncertainty, there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these condensed consolidated financial statements are available to be issued. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, nor do they include adjustments to reflect the future effects of the recoverability or classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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. In the unaudited condensed consolidated financial statements, certain balances have been reclassified to conform to the current year presentation. Certain prior year amounts have been reclassified to conform to the current year presentation related to the reverse stock split.

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 nine months of fiscal year 2024.

3. REVENUE RECOGNITION

Contract Balances

The Company’s deferred revenue balance was $13.3 million and $15.4 million as of September 30, 2024 and December 31, 2023, respectively. During the three and nine months ended September 30, 2024, the Company recognized $2.0 million and $8.0 million of existing deferred revenue from 2023. During the three and nine months ended September 30, 2023, the Company recognized $3.6 million and $14.0 million of existing deferred revenue from 2022. 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 material as of September 30, 2024 and December 31, 2023.

Remaining Performance Obligations

At September 30, 2024, the Company had $13.3 million of remaining performance obligations, of which approximately $11.2 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

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services to customers. In addition, the Company also had customer deposits of $4.4 million and $6.9 million at September 30, 2024 and 2023, respectively.

4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company’s cash equivalents and short-term investments are invested in the following (in thousands):

    

September 30, 2024

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Money market funds

$

9,043

$

$

$

9,043

Total cash equivalents

9,043

9,043

Total cash equivalents and short-term investments

$

9,043

$

$

$

9,043

    

December 31, 2023

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Money market funds

$

40,799

$

$

$

40,799

Total cash equivalents

40,799