Desktop Metal, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES (Tables)

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of components of loss before provision for income taxes

During the years ended December 31, 2022, 2021, and 2020, the Company recorded $1.5 million, $29.7 million and $0.9 million, respectively, of income tax benefit, which was primarily driven by book losses and a partial release of the valuation allowance related to the deferred tax liabilities acquired on various acquisitions during 2021. For financial reporting purposes, loss before provision for income taxes, includes the following components (in thousands):


	Years Ended December 31,
	2022		2021		2020
Domestic	$	(474,942)	$	(252,343)	$	(34,285)
Foreign		(266,899)		(17,659)		(670)
Loss before income taxes	$	(741,841)	$	(270,002)	$	(34,955)

Schedule of provision (benefit) for income taxes

The provision (benefit) for income taxes consists of the following (in thousands):


	Years Ended December 31,
	2022		2021		2020
Current:
Federal	$	—	$	(33)	$	—
Foreign		368		—		—
State		35		20		—
Total Current		403		(13)		—
Deferred:
Federal		196		(23,378)		(670)
State		16		(5,494)		(270)
Foreign		(2,113)		(783)		—
Total Deferred		(1,901)		(29,655)		(940)
Benefit for income taxes	$	(1,498)	$	(29,668)	$	(940)

Schedule of reconciliation of the expected income tax benefit computed using the federal statutory income tax rate


	Years Ended December 31,
	2022			2021			2020
Effective income tax rate:
Expected income tax benefit at the federal statutory rate		21	%		21	%		21	%
State taxes		2	%		(2)	%		6	%
Change in valuation allowance		(9)	%		(4)	%		(68)	%
Goodwill impairment		(15)	%		—	%		—	%
Research and development credit carryover		—	%		(1)	%		2	%
Stock-based compensation expense		(1)	%		3	%		—	%
Warrant Expense		—	%		(5)	%		—	%
Permanent differences		—	%		—	%		42	%
Other		2	%		(1)	%		—	%
Effective income tax rate		(0)	%		11	%		3	%

Schedule of deferred tax assets and liabilities

As of the years ended December 31, 2022 and 2021, deferred tax assets and liabilities consist of the following (in thousands):


	Years Ended December 31,
	2022		2021
Deferred tax assets:
Federal and state net operating carryforwards	$	185,842	$	148,946
Research and development and other credits		10,974		10,977
Start-up costs		11,854		12,904
Stock-based compensation		3,554		4,242
Capitalized research and development		20,793		—
Reserves and accruals		3,311		1,452
Deferred lease liability		7,581		4,856
Depreciation		—		3
Divisional foreign entity deferred		—		2,137
Other deferred tax assets		7,960		6,457
Total gross deferred tax asset		251,869		191,974
Valuation allowance		(195,309)		(127,150)
Net deferred tax asset		56,560		64,824
Deferred tax liabilities:
Right‑of‑use asset		(7,234)		(4,692)
Intangible assets		(56,794)		(68,504)
Depreciation		(962)		(1,527)
Other		—		(796)
Total deferred tax liabilities		(64,990)		(75,519)
Net deferred tax liability	$	(8,430)	$	(10,695)

Schedule of changes in the valuation allowance for deferred tax assets

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2022 and 2021 were as follows (in thousands):


	Years Ended December 31,
	2022		2021
Valuation allowance at beginning of the year	$	127,150	$	111,494
Increases recorded to income tax provision		68,159		45,139
Decreases recorded as a benefit to income tax provision		—		(29,483)
Valuation allowance at end of year	$	195,309	$	127,150

Schedule of reconciliation unrecognized tax liabilities


	Years Ended December 31,
	2022		2021
Unrecognized tax liability, beginning of year	$	997	$	—
Unrecognized tax liability acquired through purchase accounting		—		1,005
Gross decreases - foreign exchange translation adjustments		—		(8)
Unrecognized tax liability, end of year	$	997	$	997