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Form 10-Q Desktop Metal, Inc. For: Jun 30

August 8, 2022 4:09 PM EDT

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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, 2022

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 (§232.0405 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 5, 2022, there were 315,570,246 shares of the registrant’s Class A common stock outstanding.

TABLE OF CONTENTS

    

Page

PART I

Part I. Financial Information

3

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

4

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

8

Notes to Condensed Consolidated Financial Statements

10

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

49

Item 3. Quantitative and Qualitative Disclosures About Market Risk

65

Item 4. Controls and Procedures

65

Part II. Other Information

66

Item 1. Legal Proceedings

66

Item 1A. Risk Factors

67

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

96

Item 3. Defaults Upon Senior Securities

96

Item 4. Mine Safety Disclosures

96

Item 5. Other Information

96

Item 6. Exhibits

96

Exhibit Index

98

Signatures

99

2

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, 

2022

    

2021

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

107,966

$

65,017

Current portion of restricted cash

3,152

2,129

Short‑term investments

 

147,774

 

204,569

Accounts receivable

 

37,291

 

46,687

Inventory

 

88,609

 

65,399

Prepaid expenses and other current assets

 

21,086

 

18,208

Total current assets

 

405,878

 

402,009

Restricted cash, net of current portion

 

1,112

 

1,112

Property and equipment, net

 

57,667

 

58,710

Goodwill

 

377,710

 

639,301

Intangible assets, net

 

238,069

 

261,984

Other noncurrent assets

30,713

25,480

Total Assets

$

1,111,149

$

1,388,596

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

29,309

$

31,558

Customer deposits

 

12,050

 

14,137

Current portion of lease liability

 

5,169

 

5,527

Accrued expenses and other current liabilities

 

29,154

 

33,829

Current portion of deferred revenue

 

17,746

 

18,189

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

 

587

 

825

Total current liabilities

 

94,015

 

104,065

Long-term debt, net of current portion

430

548

Convertible notes

111,420

Contingent consideration, net of current portion

1,160

4,183

Lease liability, net of current portion

 

18,040

 

13,077

Deferred revenue, net of current portion

4,326

4,508

Deferred tax liability

7,961

10,695

Other noncurrent liabilities

2,657

3,170

Total liabilities

240,009

140,246

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, 2022 and December 31, 2021, respectively

Common Stock, $0.0001 par value—500,000,000 shares authorized; 315,292,925 and 311,737,858 shares issued at June 30, 2022 and December 31, 2021, respectively, 315,147,677 and 311,473,950 shares outstanding at June 30, 2022 and December 31, 2021, respectively

 

32

 

31

Additional paid‑in capital

 

1,851,836

 

1,823,344

Accumulated deficit

 

(935,827)

 

(568,611)

Accumulated other comprehensive loss

 

(44,901)

 

(6,414)

Total Stockholders’ Equity

 

871,140

 

1,248,350

Total Liabilities and Stockholders’ Equity

$

1,111,149

$

1,388,596

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

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

    

Revenues

 

  

 

  

Products

$

52,672

$

17,560

$

92,148

$

27,871

Services

5,002

1,417

 

9,232

 

2,419

Total revenues

57,674

 

18,977

 

101,380

 

30,290

Cost of sales

  

 

  

 

  

Products

44,913

15,490

 

86,815

 

25,977

Services

4,364

1,115

 

7,496

 

2,528

Total cost of sales

49,277

 

16,605

 

94,311

 

28,505

Gross profit

8,397

 

2,372

 

7,069

 

1,785

Operating expenses

  

 

  

 

  

Research and development

31,370

15,651

 

55,975

 

26,509

Sales and marketing

20,406

10,894

 

40,070

 

16,343

General and administrative

19,691

13,142

 

43,573

 

26,988

In-process research and development assets acquired

10,400

10,400

Goodwill impairment

229,500

229,500

Total operating expenses

300,967

 

50,087

 

369,118

 

80,240

Loss from operations

(292,570)

 

(47,715)

 

(362,049)

 

(78,455)

Change in fair value of warrant liability

(56,576)

Interest expense

(633)

(51)

 

(601)

(125)

Interest and other (expense) income, net

(5,013)

268

 

(6,766)

630

Loss before income taxes

(298,216)

 

(47,498)

 

(369,416)

 

(134,526)

Income tax benefit

944

4,318

 

2,200

 

32,238

Net loss

$

(297,272)

$

(43,180)

$

(367,216)

$

(102,288)

Net loss per share—basic and diluted

$

(0.95)

$

(0.17)

$

(1.17)

$

(0.41)

Weighted average shares outstanding, basic and diluted

313,556,886

255,097,905

312,798,328

246,717,400

See notes to condensed consolidated financial statements.

4

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands)

    

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Net loss

$

(297,272)

$

(43,180)

$

(367,216)

$

(102,288)

Other comprehensive (loss) income, net of taxes:

 

 

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

(41)

(5)

 

(29)

 

(4)

Foreign currency translation adjustment

(27,411)

130

(38,458)

117

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

$

(324,724)

$

(43,055)

$

(405,703)

$

(102,175)

See notes to condensed consolidated financial statements.

5

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share amounts)

Three Months Ended June 30, 2022

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

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 settlement of shares for 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

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

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

6

Three Months Ended June 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—April 1, 2021

252,436,919

$

25

$

1,326,945

$

(387,385)

$

(21)

$

939,564

Exercise of Common Stock options

 

2,683,506

3,485

 

3,485

Vesting of restricted Common Stock

 

56,015

 

Vesting of restricted stock units

28,656

Repurchase of shares for employee tax withholdings

(6,931)

(91)

(91)

Issuance of Common Stock for acquisitions

4,013,196

1

49,141

49,142

Issuance of common stock for acquired in-process research and development

334,370

4,300

4,300

Stock‑based compensation expense

 

3,999

 

3,999

Net loss

 

(43,180)

 

(43,180)

Other comprehensive income (loss)

 

125

 

125

BALANCE—June 30, 2021

 

259,545,731

$

26

$

1,387,779

$

(430,565)

$

104

$

957,344

Six Months Ended June 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paidin

Accumulated

(Loss)

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

BALANCE—January 1, 2021

224,626,597

$

23

$

844,188

$

(328,277)

$

(9)

$

515,925

Exercise of Common Stock options

 

2,846,734

3,665

 

3,665

Vesting of restricted Common Stock

 

112,030

 

Vesting of restricted stock units

43,921

Repurchase of shares for employee tax withholdings

(9,172)

(145)

(145)

Issuance of Common Stock for acquisitions

9,049,338

1

208,988

208,989

Issuance of common stock for acquired in-process research and development

334,370

4,300

4,300

Stock‑based compensation expense

 

6,216

 

6,216

Vesting of Trine Founder shares

 

1,850,938

 

Exercise of warrants

20,690,975

2

320,567

320,569

Net loss

 

(102,288)

 

(102,288)

Other comprehensive income (loss)

 

113

 

113

BALANCE—June 30, 2021

 

259,545,731

$

26

$

1,387,779

$

(430,565)

$

104

$

957,344

See notes to condensed consolidated financial statements.

7

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Six Months Ended June 30, 

    

2022

    

2021

Cash flows from operating activities:

Net loss

    

$

(367,216)

    

$

(102,288)

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

 

 

Depreciation and amortization

 

25,602

 

9,524

Stock‑based compensation

 

26,917

 

6,216

Goodwill impairment

229,500

Change in fair value of warrant liability

56,576

Change in fair value of subscription agreement

474

Amortization (accretion) of discount on investments

390

1,304

Amortization of debt financing cost

9

Amortization of deferred costs on convertible notes

39

Provision for bad debt

554

164

Acquired in-process research and development

10,400

Loss (gain) on disposal of property and equipment

156