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, ~~2021~~2022

☐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 ☒


		~~Name Of Each Exchange~~
~~Title of Each Class~~	~~Trading Symbol(s)~~	~~On Which Registered~~
~~Common Stock, $0.0001 Par Value per Share~~	DM	~~New York Stock Exchange~~

As of November ~~12, 2021,~~7, 2022, there were ~~311,014,335~~317,577,105 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 September 30, ~~2021~~2022 and December 31, ~~2020~~2021		3

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021		4

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021		5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021		6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021		8

Notes to Condensed Consolidated Financial Statements		10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		4449

Item 3. Quantitative and Qualitative Disclosures About Market Risk		5965

Item 4. Controls and Procedures		6066

Part II. Other Information		6166

Item 1. Legal Proceedings		6166

Item 1A. Risk Factors		6167

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		8996

Item 3. Defaults Upon Senior Securities		9096

Item 4. Mine Safety Disclosures		9096

Item 5. Other Information		9096

Item 6. Exhibits		9097

Exhibit Index		9198

Signatures		9299

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,		September 30,		December 31,
	2021		2020		2022		2021
Assets
Current assets:
Cash and cash equivalents	$	131,676	$	483,525	$	66,987	$	65,017
Current portion of restricted cash						4,072		2,129
Short‑term investments		292,272		111,867		150,268		204,569
Accounts receivable		22,878		6,516		41,390		46,687
Inventory		32,730		9,708		91,223		65,399
Prepaid expenses and other current assets		7,250		976		18,781		18,208
Total current assets		486,806		612,592		372,721		402,009
Restricted cash		676		612
Restricted cash, net of current portion						1,112		1,112
Property and equipment, net		23,782		12,160		57,755		58,710
Capitalized software, net		179		312
Goodwill		262,343		2,252		365,253		639,301
Intangible assets, net		180,129		9,102		225,438		261,984
Other noncurrent assets		17,679		4,879		29,073		25,480
Total Assets	$	971,594	$	641,909	$	1,051,352	$	1,388,596
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	16,985	$	7,591	$	29,211	$	31,558
Customer deposits		2,876		1,480		15,491		14,137
Current portion of lease liability		2,677		868		5,421		5,527
Accrued expenses and other current liabilities		20,686		7,565		31,430		33,829
Deferred revenue		5,530		3,004
Current portion of deferred revenue						16,309		18,189
Current portion of long‑term debt, net of deferred financing costs		1,030		9,991		444		825
Total current liabilities		49,784		30,499		98,306		104,065
Long-term debt, net of current portion		680		—		343		548
Warrant liability		—		93,328
Convertible notes						111,657		—
Contingent consideration, net of current portion		4,528		—		1,088		4,183
Lease liability, net of current portion		7,802		2,157		18,788		13,077
Deferred revenue, net of current portion						3,778		4,508
Deferred tax liability		7,881		—		7,994		10,695
Other noncurrent liabilities		1,417		—		2,646		3,170
Total liabilities		72,092		125,984		244,600		140,246
Commitments and Contingences (Note 16)
Commitments and Contingencies (Note 17)
Stockholders’ Equity
Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		—		—
Common Stock, $0.0001 par value—500,000,000 shares authorized; 261,914,672 and 226,756,733 shares issued at September 30, 2021 and December 31, 2020, respectively, 261,567,100 and 224,626,597 shares outstanding at September 30, 2021 and December 31, 2020, respectively		26		23
Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						—		—
Common Stock, $0.0001 par value—500,000,000 shares authorized; 317,193,388 and 311,737,858 shares issued at September 30, 2022 and December 31, 2021, respectively, 317,069,926 and 311,473,950 shares outstanding at September 30, 2022 and December 31, 2021, respectively						32		31
Additional paid‑in capital		1,398,039		844,188		1,864,477		1,823,344
Accumulated deficit		(497,444)		(328,277)		(996,601)		(568,611)
Accumulated other comprehensive income (loss)		(1,119)		(9)
Accumulated other comprehensive loss						(61,156)		(6,414)
Total Stockholders’ Equity		899,502		515,925		806,752		1,248,350
Total Liabilities and Stockholders’ Equity	$	971,594	$	641,909	$	1,051,352	$	1,388,596

See notes to condensed consolidated financial statements

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,


2021

2020

2021

2020
Revenues




Products

$
23,949

$
1,888

$
51,820

$
6,113
Services

1,489

639

3,908

1,988
Total revenues

25,438

2,527

55,728

8,101
Cost of sales






Products

20,450

3,732

46,427

18,145
Services

1,033

1,096

3,561

3,365
Total cost of sales

21,483

4,828

49,988

21,510
Gross profit/(loss)

3,955

(2,301)

5,740

(13,409)
Operating expenses






Research and development

19,311

9,195

45,820

31,362
Sales and marketing

13,224

2,542

29,567

9,994
General and administrative

19,833

5,415

46,821

11,004
In-process research and development assets acquired

15,181

—

25,581

—
Total operating expenses

67,549

17,152

147,789

52,360
Loss from operations

(63,594)

(19,453)

(142,049)

(65,769)
Change in fair value of warrant liability

—

—

(56,576)

—
Interest expense

(12)

(98)

(137)

(253)
Interest and other (expense) income, net

(3,796)

94

(3,166)

995
Loss before income taxes

(67,402)

(19,457)

(201,928)

(65,027)
Income tax benefit

523

—

32,761

—
Net loss

$
(66,879)

$
(19,457)

$
(169,167)

$
(65,027)
Net loss per share—basic and diluted

$
(0.26)

$
(0.12)

$
(0.67)

$
(0.41)
Weighted average shares outstanding, basic and diluted

260,555,655

159,968,300

251,467,644

158,120,826


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenues
Products	$	42,937	$	23,949	$	135,085	$	51,820
Services		4,149		1,489		13,381		3,908
Total revenues		47,086		25,438		148,466		55,728
Cost of sales
Products		43,639		20,450		130,454		46,427
Services		3,756		1,033		11,252		3,561
Total cost of sales		47,395		21,483		141,706		49,988
Gross profit		(309)		3,955		6,760		5,740
Operating expenses
Research and development		22,382		19,311		78,357		45,820
Sales and marketing		16,204		13,224		56,299		29,567
General and administrative		18,924		19,833		62,472		46,821
In-process research and development assets acquired		—		15,181		—		25,581
Goodwill impairment		—		—		229,500		—
Total operating expenses		57,510		67,549		426,628		147,789
Loss from operations		(57,819)		(63,594)		(419,868)		(142,049)
Change in fair value of warrant liability		—		—		—		(56,576)
Interest expense		(680)		(12)		(1,281)		(137)
Interest and other (expense) income, net		(1,677)		(3,796)		(8,443)		(3,166)
Loss before income taxes		(60,176)		(67,402)		(429,592)		(201,928)
Income tax (expense) benefit		(598)		523		1,602		32,761
Net loss	$	(60,774)	$	(66,879)	$	(427,990)	$	(169,167)
Net loss per share—basic and diluted	$	(0.19)	$	(0.26)	$	(1.36)	$	(0.67)
Weighted average shares outstanding, basic and diluted		316,007,716		260,555,655		313,901,704		251,467,644

See notes to condensed consolidated financial statements.

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,


2021

2020

2021

2020

Net loss

(66,879)

(19,457)

$
(169,167)

$
(65,027)

Other comprehensive (loss) income, net of taxes:

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

(7)

(43)

(11)

(70)

Foreign currency translation adjustment

(1,216)

—

(1,099)

—

Total comprehensive loss, net of taxes of $0

(68,102)

(19,500)

$
(170,277)

$
(65,097)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net loss	$	(60,774)	$	(66,879)	$	(427,990)	$	(169,167)
Other comprehensive (loss) income, net of taxes:
Unrealized gain (loss) on available-for-sale marketable securities, net		(389)		(7)		(418)		(11)
Foreign currency translation adjustment		(15,866)		(1,216)		(54,324)		(1,099)
Total comprehensive (loss) income, net of taxes of $0	$	(77,029)	$	(68,102)	$	(482,732)	$	(170,277)

See notes to condensed consolidated financial statements.

Table of Contents

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share amounts)


	Three Months Ended September 30, 2022
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—July 1, 2022	315,147,677	$	32	$	1,851,836	$	(935,827)	$	(44,901)	$	871,140
Exercise of Common Stock options	1,147,289		—		1,771		—		—		1,771
Vesting of restricted Common Stock	21,786		—		—		—		—		—
Vesting of restricted stock units	765,093		—		—		—		—		—
Net settlement of shares for employee tax withholdings upon vesting of restricted stock units	(11,919)		—		(39)		—		—		(39)
Issuance of Common Stock related to settlement of contingent consideration	—		—		—		—		—		—
Stock‑based compensation expense	—		—		10,909		—		—		10,909
Net loss	—		—		—		(60,774)		—		(60,774)
Other comprehensive income (loss)	—		—		—		—		(16,255)		(16,255)
BALANCE—September 30, 2022	317,069,926	$	32	$	1,864,477	$	(996,601)	$	(61,156)	$	806,752


	Nine Months Ended September 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	2,168,289		—		3,035		—		—		3,035
Vesting of restricted Common Stock	135,341		—		—		—		—		—
Vesting of restricted stock units	3,248,204		1		—		—		—		1
Repurchase of shares for employee tax withholdings	(68,060)		—		(228)		—		—		(228)
Issuance of Common Stock related to settlement of contingent consideration	112,202		—		500		—		—		500
Stock‑based compensation expense	—		—		37,826		—		—		37,826
Net loss	—		—		—		(427,990)		—		(427,990)
Other comprehensive income (loss)	—		—		—		—		(54,742)		(54,742)
BALANCE—September 30, 2022	317,069,926	$	32	$	1,864,477	$	(996,601)	$	(61,156)	$	806,752

Table of Contents

Three Months Ended September 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paid‑in

Accumulated

(Loss)

Stockholders’


Shares

Amount

Capital

Deficit

Income

Equity
BALANCE—July 1, 2021

259,545,731

$
26

$
1,387,779

$
(430,565)

$
104

$
957,344
Exercise of Common Stock options

1,615,484

—

1,576

—

—

1,576
Vesting of restricted Common Stock

295,599

—

—

—

—

—
Vesting of restricted stock units

259,735

—

—

—

—

—
Net share settlement related to employee tax withholdings upon vesting of restricted stock units

(40,299)

—

(309)

—

—

(309)
Issuance of Common Stock for acquisitions

—

—

—

—

—

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

—

—

—

—

—

—
Net share settlement related to employee tax withholdings upon vesting of restricted stock awards

(109,150)

—

(958)

—

—

(958)
Stock‑based compensation expense

—

—

9,951

—

—

9,951
Net loss

—

—

—

(66,879)

—

(66,879)
Other comprehensive income (loss)

—

—

—

—

(1,223)

(1,223)
BALANCE—September 30, 2021

261,567,100

$
26

$
1,398,039

$
(497,444)

$
(1,119)

$
899,502

Nine Months Ended September 30, 2021

Accumulated

Other

Common Stock

Additional

Comprehensive

Total

Voting

Paid‑in

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

4,462,218

—

5,241

—

—

5,241
Vesting of restricted Common Stock

407,629

—

—

—

—

—
Vesting of restricted stock units

303,656

—

—

—

—

—
Net settlement of shares related to employee tax withholdings upon vesting of restricted stock units

(49,471)

—

(454)

—

—

(454)
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
Net share settlement related to employee tax withholdings upon vesting of restricted stock awards

(109,150)

—

(958)

(958)
Stock‑based compensation expense

—

—

16,167

—

—

16,167
Vesting of Trine Founder shares

1,850,938

—

—

—

—

—
Exercise of warrants

20,690,975

2

320,567

—

—

320,569
Net loss

—

—

—

(169,167)

—

(169,167)
Other comprehensive income (loss)

—

—

—

—

(1,110)

(1,110)
BALANCE—September 30, 2021

261,567,100

$
26

$
1,398,039

$
(497,444)

$
(1,119)

$
899,502

~~Table of Contents~~


	Three Months Ended September 30, 2020														Three Months Ended September 30, 2021
											Accumulated											Accumulated
											Other											Other
	Legacy Convertible			Common Stock			Additional				Comprehensive		Total		Common Stock			Additional				Comprehensive		Total
	Preferred Stock			Voting			Paid‑in		Accumulated		(Loss)		Stockholders’		Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity		Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—July 1, 2020	100,038,109	$	436,533	29,937,631	$	3	$	21,254	$	(339,832)	$	48	$	(318,527)
Retroactive application of recapitalization (Note 1)	(100,038,109)		(436,533)	128,792,027		13		434,672		—		—		434,685
Adjusted balance, beginning of period	—		—	158,729,658		16		455,926		(339,832)		48		116,158
BALANCE—July 1, 2021															259,545,731	$	26	$	1,387,779	$	(430,565)	$	104	$	957,344
Exercise of Common Stock options	—		—	184,447		—		131		—		—		131	1,615,484		—		1,576		—		—		1,576
Vesting of restricted Common Stock	—		—	1,751,364		—		2		—		—		2	295,599		—		—		—		—		—
Vesting of restricted stock units															259,735		—		—		—		—		—
Net share settlement related to employee tax withholdings upon vesting of restricted stock units															(40,299)		—		(309)		—		—		(309)
Issuance of Common Stock for acquisitions															—		—		—		—		—		—
Issuance of common stock for acquired in-process research and development															—		—		—		—		—		—
Net share settlement related to employee tax withholdings upon vesting of restricted stock awards															(109,150)		—		(958)		—		—		(958)
Stock‑based compensation expense	—		—	—		—		1,895		—		—		1,895	—		—		9,951		—		—		9,951
Common Stock warrants issued	—		—	—		—		—		—		—		—
Net loss	—		—	—		—		—		(19,457)		—		(19,457)	—		—		—		(66,879)		—		(66,879)
Other comprehensive income (loss)	—		—	—		—		—		—		(43)		(43)	—		—		—		—		(1,223)		(1,223)
BALANCE—September 30, 2020	—	$	—	160,665,469	$	16	$	457,954	$	(359,289)	$	5	$	98,686
BALANCE—September 30, 2021															261,567,100	$	26	$	1,398,039	$	(497,444)	$	(1,119)	$	899,502


	Nine Months Ended September 30, 2020														Nine Months Ended September 30, 2021
											Accumulated											Accumulated
											Other											Other
	Legacy Convertible			Common Stock			Additional				Comprehensive		Total		Common Stock			Additional				Comprehensive		Total
	Preferred Stock			Voting			Paid‑in		Accumulated		(Loss)		Stockholders’		Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity		Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—January 1, 2020	100,038,109	$	436,533	26,813,113	$	3	$	16,722	$	(294,262)	$	75	$	(277,462)
Retroactive application of recapitalization (Note 1)	(100,038,109)		(436,533)	128,100,821		13		436,520		—		—		436,533
Adjusted balance, beginning of period	—		—	154,913,934		16		453,242		(294,262)		75		159,071
BALANCE—January 1, 2021															224,626,597	$	23	$	844,188	$	(328,277)	$	(9)	$	515,925
Exercise of Common Stock options	—		—	499,256		—		267		—		—		267	4,462,218		—		5,241		—		—		5,241
Vesting of restricted Common Stock	—		—	5,252,279		—		6		—		—		6	407,629		—		—		—		—		—
Vesting of restricted stock units															303,656		—		—		—		—		—
Net settlement of shares related to employee tax withholdings upon vesting of restricted stock units															(49,471)		—		(454)		—		—		(454)
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
Net share settlement related to employee tax withholdings upon vesting of restricted stock awards															(109,150)		—		(958)						(958)
Stock‑based compensation expense	—		—	—		—		4,228		—		—		4,228	—		—		16,167		—		—		16,167
Common Stock warrants issued	—		—	—		—		211		—		—		211
Vesting of Trine Founder shares															1,850,938		—		—		—		—		—
Exercise of warrants															20,690,975		2		320,567		—		—		320,569
Net loss	—		—	—		—		—		(65,027)		—		(65,027)	—		—		—		(169,167)		—		(169,167)
Other comprehensive income (loss)	—		—	—		—		—		—		(70)		(70)	—		—		—		—		(1,110)		(1,110)
BALANCE—September 30, 2020	—	$	—	160,665,469	$	16	$	457,954	$	(359,289)	$	5	$	98,686
BALANCE—September 30, 2021															261,567,100	$	26	$	1,398,039	$	(497,444)	$	(1,119)	$	899,502

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,


2021

2020
Cash flows from operating activities:

Net loss

$
(169,167)

$
(65,027)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

15,576

6,525
Stock‑based compensation

16,167

4,228
Change in fair value of warrant liability

56,576

—
Change in fair value of subscription agreement liability

2,920

—
Expense related to Common Stock warrants issued

—

43
Amortization (accretion) of discount on investments

2,189

34
Amortization of debt financing cost

9

14
Provision for bad debt

316

333
Acquired in-process research and development

25,581

—
(Gain) loss on disposal of property and equipment

19

10
Net increase in accrued interest related to marketable securities

(414)

162
Net unrealized loss on equity investment

1,880

—
Net unrealized gain on other investments

(639)

—
Deferred tax benefit

(32,761)

—
Change in fair value of contingent consideration

(166)

—
Changes in operating assets and liabilities:

Accounts receivable

(8,476)

2,881
Inventory

(11,067)

(1,958)
Prepaid expenses and other current assets

(3,096)

1,082
Other assets

(118)

—
Accounts payable

4,243

(5,800)
Accrued expenses and other current liabilities

(9,294)

430
Customer deposits

(1,298)

(547)
Deferred revenue

1,295

(1,094)
Change in right of use assets and lease liabilities, net

(340)

(243)
Other liabilities

6

—
Net cash used in operating activities

(110,059)

(58,927)
Cash flows from investing activities:

Purchases of property and equipment

(4,145)

(1,039)
Purchase of other investments

(3,620)

—
Purchase of equity investment

(20,000)

—
Purchase of marketable securities

(330,873)

(62,810)
Proceeds from sales and maturities of marketable securities

163,882

94,116
Cash paid to acquire in-process research and development

(21,220)

—
Cash paid for acquisitions, net of cash acquired

(191,146)

—
Net cash (used in) provided by investing activities

(407,122)

30,267
Cash flows from financing activities:

Proceeds from the exercise of stock options

5,241

255
Proceeds from the exercise of stock warrants

170,665

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

(454)

—
Proceeds from PPP loan

—

5,379
Repayment of PPP loan

—

(5,379)
Repayment of term loan

(10,000)

—
Deferred financing costs paid

—

(400)
Net cash provided by (used in) financing activities

165,452

(145)
Net (decrease) increase in cash, cash equivalents, and restricted cash

(351,729)

(28,805)
Effect of exchange rate changes

(56)

—
Cash and cash equivalents at beginning of period

483,525

66,161
Restricted cash at beginning of period

612

612


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(427,990)	$	(169,167)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		38,294		15,576
Stock‑based compensation		37,826		16,167
Goodwill impairment		229,500		—
Change in fair value of warrant liability		—		56,576
Change in fair value of subscription agreement		—		2,920
Amortization (accretion) of discount on investments		(305)		2,189
Amortization of debt financing cost		—		9
Amortization of deferred costs on convertible notes		276		—
Provision for bad debt		1,038		316
Acquired in-process research and development		—		25,581
Loss on disposal of property and equipment		209		19
Foreign exchange (gains) losses on intercompany transactions, net		1,261		—
Net increase (decrease) in accrued interest related to marketable securities		771		(414)
Net unrealized (gain) loss on equity investment		6,172		1,880
Net unrealized (gain) loss on other investments		745		(639)
Deferred tax benefit		(1,602)		(32,761)
Change in fair value of contingent consideration		(254)		(166)
Foreign currency transaction (gain) loss		(59)		—
Changes in operating assets and liabilities:
Accounts receivable		3,166		(8,476)
Inventory		(31,195)		(11,067)
Prepaid expenses and other current assets		(969)		(3,096)
Other assets		1,196		(118)
Accounts payable		(2,959)		4,243
Accrued expenses and other current liabilities		(3,855)		(9,294)
Customer deposits		2,360		(1,298)
Deferred revenue		(1,589)		1,295
Change in right of use assets and lease liabilities, net		(2,850)		(340)
Other liabilities		24		6
Net cash used in operating activities		(150,789)		(110,059)
Cash flows from investing activities:
Purchases of property and equipment		(8,157)		(4,145)
Purchase of other investments		—		(3,620)
Proceeds from other investments		3,155		—
Purchase of equity investment		—		(20,000)
Proceeds from sale of property and equipment		6		—
Purchase of marketable securities		(158,404)		(330,873)
Proceeds from sales and maturities of marketable securities		205,650		163,882
Proceeds from capital grant		200		—
Cash paid to acquire in-process research and development		—		(21,220)
Cash paid for acquisitions, net of cash acquired		(23)		(191,146)
Net cash provided by (used in) investing activities		42,427		(407,122)
Cash flows from financing activities:
Proceeds from the exercise of stock options		3,036		5,241
Proceeds from the exercise of stock warrants		—		170,665
Payment of taxes related to net share settlement upon vesting of restricted stock units		(230)		(454)
Repayment of loans		(421)		—
Proceeds from issuance of convertible notes		115,000		—
Costs incurred in connection with the issuance of convertible notes		(3,619)		—
Repayment of term loan		—		(10,000)
Net cash provided by financing activities		113,766		165,452
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1,491)		(56)
Net increase (decrease) in cash, cash equivalents, and restricted cash		3,913		(351,785)
Cash, cash equivalents, and restricted cash at beginning of period		68,258		484,137
Cash, cash equivalents, and restricted cash at end of period	$	72,171	$	132,352

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	Nine Months Ended September 30,
	2021		2020
Cash and cash equivalents at end of period		131,676			37,356
Restricted cash at end of period		676			612
Total cash, cash equivalents and restricted cash, end of period	$	132,352		$	37,968

Supplemental cash flow information:
Interest paid	$	137		$	253
Taxes paid	$	150		$	—

Non‑cash investing and financing activities:
Net unrealized loss on investments	$	11		$	—
Exercise of private placement warrants	$	149,904		$	—
Common Stock issued for acquisitions	$	208,989		$	—
Common Stock issued for acquisition of in-process research and development	$	4,300		$	—
Cash held back in acquisitions	$	50		$	—
Additions to right of use assets and lease liabilities	$	891		$	—
Purchase of property and equipment included in accounts payable	$	77		$	—
Purchase of property and equipment included in accrued expense	$	33		$	79
Contingent consideration in connection with acquisitions	$	6,083		$	—
Taxes related to net share settlement upon vesting of restricted stock awards in accrued expense	$	958		$	—
Forgiveness of PPP Loan	$	3,376		$	—

Nine Months Ended September 30,

2021

2020
Cash and cash equivalents at end of period

131,676

37,356
Restricted cash at end of period

676

612
Total cash, cash equivalents and restricted cash, end of period

$
132,352

$
37,968

Supplemental cash flow information:

Interest paid

$
137

$
253
Taxes paid

$
150

$
—

Non‑cash investing and financing activities:

Net unrealized loss on investments

$
11

$
—
Exercise of private placement warrants

$
149,904

$
—
Common Stock issued for acquisitions

$
208,989

$
—
Common Stock issued for acquisition of in-process research and development

$
4,300

$
—
Cash held back in acquisitions

$
50

$
—
Additions to right of use assets and lease liabilities

$
891

$
—
Purchase of property and equipment included in accounts payable

$
77

$
—
Purchase of property and equipment included in accrued expense

$
33

$
79
Contingent consideration in connection with acquisitions

$
6,083

$
—
Taxes related to net share settlement upon vesting of restricted stock awards in accrued expense

$
958

$
—
Forgiveness of PPP Loan

$
3,376

$
—


	Nine Months Ended September 30,
	2022		2021

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	$	66,987		131,676
Restricted cash included in other current assets		4,072		—
Restricted cash included in other noncurrent assets		1,112		676
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	72,171	$	132,352

Supplemental cash flow information:
Interest paid	$	—	$	137
Taxes paid	$	—	$	150

Non‑cash investing and financing activities:
Net unrealized (gain) loss on investments	$	418	$	11
Exercise of private placement warrants	$	—	$	149,904
Common Stock issued for acquisitions	$	—	$	208,989
Common Stock issued for acquisition of in-process research and development	$	—	$	4,300
Common Stock issued for settlement of contingent consideration	$	500	$	—
Cash held back in acquisitions	$	—	$	50
Additions to right of use assets and lease liabilities	$	10,742	$	891
Purchase of property and equipment included in accounts payable	$	1,507	$	77
Purchase of property and equipment included in accrued expense	$	—	$	33
Contingent consideration in connection with acquisitions	$	—	$	6,083
Transfers from property and equipment to inventory	$	2,470	$	—
Transfers from inventory to property and equipment	$	3,475	$	—
Deferred contract costs	$	1,341	$	—

See notes to condensed consolidated financial statements.

Table of Contents

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 ~~with the mission of~~and is accelerating the transformation of manufacturing with ~~an expansive portfolio of~~ 3D printing solutions ~~focused on the production of end-use parts.~~for engineers, designers, and manufacturers. The Company designs, produces and ~~distributes additive manufacturing solutions comprising hardware, software, materials, parts, and services~~markets 3D printing systems to ~~businesses across~~ a variety of end ~~markets.~~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.

Legacy Desktop Metal was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805. This determination was primarily based on Legacy Desktop Metal’s stockholders prior to the Business Combination having a majority of the voting power in the combined company, Legacy Desktop Metal having the ability to appoint a majority of the Board of Directors of the combined company, Legacy Desktop Metal’s existing management comprising the senior management of the combined company, Legacy Desktop Metal comprising the ongoing operations of the combined company, Legacy Desktop Metal being the larger entity based on historical revenues and business operations, and the combined company assuming Legacy Desktop Metal’s name. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Desktop Metal issuing stock for the net assets of Trine, accompanied by a recapitalization. The net assets of Trine are stated at historical cost, with no goodwill or other intangible assets recorded.

While Trine was the legal acquirer in the Business Combination, because Legacy Desktop Metal was deemed the accounting acquirer, the historical financial statements of Legacy Desktop Metal became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Desktop Metal prior to the Business Combination; (ii) the combined results of Trine and Legacy Desktop Metal following the close of the Business Combination; (iii) the assets and liabilities of Legacy Desktop Metal at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy Desktop Metal’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Desktop Metal convertible preferred stock and Legacy Desktop Metal common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 1.22122 established in the Business Combination. Legacy Desktop Metal’s convertible preferred stock previously classified as mezzanine was retroactively adjusted, converted into Common Stock, and reclassified to permanent as a result of the reverse recapitalization.

~~ExOne Business Combination~~

On November 12, 2021, the Company acquired The ExOne Company and its affiliates (“ExOne”) pursuant to an Agreement and Plan of Merger dated August 12, 2021. The acquisition of ExOne extends the Company’s product platforms with complementary solutions to create a comprehensive portfolio combining throughput, flexibility, and materials breadth while allowing customers to optimize production based on their specific application needs. The Company acquired all of ExOne’s outstanding common stock for an aggregate purchase price of $601.2 million, consisting of $191.4 paid in cash and 48,218,063 shares of Common Stock with a fair value of $409.8 million as of the close of business on the transaction date. The Company also granted 86,020 incentive stock options with a weighted-average exercise price of $4.47 to certain employees of ExOne in exchange for unvested ExOne stock options. The

~~Table of Contents~~

acquisition will be accounted for as a business combination using the acquisition method of accounting. The Company is currently finalizing the allocation of the purchase price and expects the purchase price to be allocated primarily to goodwill and intangible assets.

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 ~~Business Combination.~~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

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September 30, ~~2021~~2022 will be sufficient to fund operating and capital expenditure requirements through at least twelve months from the date of issuance of these consolidated financial statements.

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 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.

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (“COVID-19”) to be a pandemic. As of September 30, ~~2021,~~2022, the impact of the COVID-19 pandemic continues to unfold and there has been uncertainty and disruption in the global economy and financial markets. The Company has considered the COVID-19 pandemic related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods.

The COVID-19 pandemic, as well as the response to mitigate the spread and effects of COVID-19, ~~has impacted~~may impact the Company and its customers, as well as the demand for its products and services. The impact of COVID-19 on the Company’s operational results in subsequent periods will largely depend on future developments, and cannot be accurately predicted. These developments may include, but are not limited to, new information concerning the severity of COVID-19, the degree of success of actions ~~taken~~take to contain or treat COVID-19, the severity and impact of new variants of COVID-19, and the reactions by consumers, companies, governmental entities, and capital markets to such actions.

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/A~~10-K for the year ended December 31, ~~2020. See the below discussion of changes to the Company’s policies for foreign currency translation, products revenue and services revenue, warranty reserve, intangible assets, asset~~

~~Table of Contents~~

~~acquisitions, and contingent consideration, due to 2021 business combinations and asset acquisitions.~~2021. There have been no ~~other~~material changes to the ~~Company’s~~ significant accounting policies ~~during the first nine months of fiscal year 2021.~~

~~Foreign Currency Translation~~

The Company translates assets and liabilities of its foreign subsidiaries from their respective functional currencies to U.S. Dollars at the appropriate spot rates as of the balance sheet date. The functional currency of all wholly owned subsidiaries is U.S. Dollars, except for EnvisionTEC GmbH and Aerosint, for which it is Euros. The functional currency of the Company's operations outside the United States is generally the local currency of the country where the operations are located or U.S. Dollars. The results of operations are translated into U.S. Dollars at a monthly average rate, calculated using daily exchange rates.

~~Differences arising~~ from the ~~translation of opening balance sheets of these entities to~~Annual Report on Form 10-K for the rate at the end of the fiscal period are recognized in accumulated other comprehensive (loss) income. The differences arising from the translation of foreign results at the average rate are also recognized in accumulated other comprehensive (loss) income. Such translation differences are recognized as income or expense in the period in which the Company disposes of the operations.

Transactions in foreign currencies are recorded at the rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. All such differences are recorded in Interest and other income, net in the condensed consolidated statements of operations.

~~Products Revenue and Services Revenue~~

Products revenue include sales of the Company’s additive manufacturing systems, along with the sale of related accessories and consumables, as well as parts produced by the Company’s direct manufacturing solutions. Consumables are primarily comprised of materials, which are used by the 3D printers during the printing process to produce parts, as well as replacement parts for items consumed during system operations. Certain on-device software is embedded with the hardware and sold with the product bundle and is included within product revenue. Revenue from products is recognized upon transfer of control, which is generally at the point of shipment.

Services revenue consists of installation, training, and post-installation hardware and software support, various software solutions the Company offers to facilitate the operation of the Company’s products, and research and development services. The Company offers multiple software products, which are licensed through either a cloud-based solution and/or local software, depending on the product. For the cloud-based solution, which the customer does not have the right to take possession of, the Company provides an annual subscription for customer access which is renewable at expiration. The revenue from the cloud-based solution is recognized ratably over the annual term as the Company considers the services provided under the cloud-based solution to be a series of distinct performance obligations, as the Company provides continuous daily access to the cloud solution. For local software subscriptions, the Company recognizes revenue once the customer has been given access to the software.

Revenue under research and development service contracts is generally recognized over time where progress is measured in a manner that reflects the transfer of control of the promised goods or services to the customer. Depending on the facts and circumstances surrounding each research and development service contract, revenue is recognized over time using either an input measure (based on the entity’s direct costs incurred in an effort to satisfy the performance obligations) or an output measure (specifically units or parts delivered, based upon certain customer acceptance and delivery requirements).

For certain products, the Company offers customers an optional extended warranty beyond the initial warranty period. The optional extended warranty is accounted for as a service-type warranty. Extended warranty revenue is deferred and recognized on a straight-line basis over the service-type warranty period of the contract and the associated costs are recognized as incurred.

~~Revenue Recognition~~

Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. The amount of consideration is typically a fixed price at the contract inception. Consideration from shipping and handling is recorded on a gross basis within product revenue.

~~Table of Contents~~

~~The Company determines revenue recognition through the following steps:~~

●

~~Identification of the contract, or contracts, with a customer~~

●

~~Identification of the performance obligations in the contract~~

●

~~Determination of the transaction price~~

●

~~Allocation of the transaction price to the performance obligations in the contract~~

●

~~Recognition of revenue when, or as, the Company satisfies a performance obligation~~

~~Nature of Products and Services~~

The Company sells its products primarily through authorized resellers, independent sales agents, and its own sales force. Revenue from hardware, consumables, and produced parts is recognized upon transfer of control, which is generally at the point of shipment.

The Company’s post-installation support is primarily sold through one-year annual contracts and such revenue is recognized ratably over the term of the agreement. Service revenue from installation and training is recognized as performed.

The Company’s terms of sale generally provide payment terms that are customary in the countries where the Company transacts business. To reduce credit risk in connection with certain sales, the Company may, depending upon the circumstances, require significant deposits or payment in full prior to shipment.

~~Due to the short-term nature of the Company’s contracts, substantially all of the outstanding performance obligations are recognized within one year.~~

Shipping and handling activities that occur after control over a product has transferred to a customer are accounted for as fulfillment activities rather than performance obligations, as allowed under a practical expedient provided by ASC 606. The shipping and handling fees charged to customers are recognized as revenue and the related costs are included in cost of revenue at the point in time when ownership of the product is transferred to the customer. Sales taxes and value added taxes collected concurrently with revenue generating activities are excluded from revenue.

~~Significant Judgements~~

The Company enters into contracts with customers that can include various combinations of hardware products, software licenses, and services, which are distinct and accounted for as separate performance obligations. Products or services that are promised to a customer can be considered distinct if both of the following criteria are met: (i) the customer can benefit from the products or services either on its own or together with other readily available resources and (ii) the Company’s promise to transfer the products, software, or services to the customer is separately identifiable from other promises in the contract. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgement.

Judgement is required to determine the standalone selling price (“SSP”). The transaction price is allocated to each distinct performance obligation on a relative standalone selling price basis and revenue is recognized for each performance obligation when control has passed. In most cases, the Company is able to establish SSP based on historical transaction data of the observable prices of hardware products and consumables sold separately in comparable circumstances to similar customers, observable renewal rates for software and post-installation support, and the Company’s best estimate of the selling price at which the Company would have sold the product regularly on a stand-alone basis for training and installation. The Company reassesses the SSP on a periodic basis or when facts and circumstances change.

~~Grants~~

The Company recognizes grants or subsidies from governments and other organizations when there is reasonable assurance that the Company will comply with any conditions attached to the grant arrangement and the grant will be received. The Company evaluates the conditions of the grant as of each reporting period to ensure that the Company has reached reasonable assurance of

~~Table of Contents~~

meeting the conditions of each grant arrangement and that it is expected that the grant will be received as a result of meeting the necessary conditions. Grants are recognized in the consolidated statements of operations on a systematic basis over the periods in which the Company recognized the related costs for which the grant is intended to compensate. Specifically, when government grants are related to reimbursements for cost operating expenses, the grants are recognized as a reduction of the related expense in the consolidated statements of operations.

The Company records grant receivables in the consolidated balance sheets in prepaid expenses and other current assets or other non-current assets, depending on when the amounts are expected to be received from the government agency. Proceeds received from grants prior to expenditures being incurred are recorded as restricted cash as well as other current liabilities or other long-term liabilities, depending on when the Company expects to use the proceeds.

The Company classifies in the consolidated statements of cash flows grant proceeds received in advance of spending for qualified expenditures as a cash flow from financing activities, as the proceeds are used to assist in funding future expenditures. Grant proceeds received as reimbursements for operating expenditures previously incurred are classified in cash flows from operating activities.

~~Warranty Reserve~~

~~Substantially all of the Company’s hardware and software products are covered by a standard assurance warranty of one~~ year within the United States and 13 months internationally, and estimated warranty obligations are recorded as an expense at the time of revenue recognition. In the event of a failure of hardware product or software covered by this warranty, the Company will repair or replace the software or hardware product. For certain products, the Company offers customers an optional extended warranty after the initial warranty period. The optional extended warranty is accounted for as a service-type warranty; therefore, costs are recognized as incurred and revenue is recognized over the service-type warranty period.ended December 31, 2021.

The Company’s warranty reserve reflects estimated material and labor costs for potential or actual product issues in its installed base for which the Company expects to incur an obligation. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. If the data used to calculate the adequacy of the warranty reserve is not indicative of future requirements, additional or reduced warranty reserves may be required.

~~Substantially all of the Company’s produced parts are covered by standard warranties of~~ ~~one~~ to five years, depending on the product. In the event a product does not meet the requested specifications or has a defect in materials or workmanship, the Company will remake or adjust the product at no additional cost within the specified warranty period. The Company’s produced parts warranty reserve is accounted for based on historical cost of rework.

~~Property and Equipment~~

Property and equipment is stated at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is included in the determination of net income or loss.

~~Depreciation is expensed using the straight-line method over the estimated useful lives of the assets as follows:~~


~~Asset Classification~~		~~Useful Life~~
~~Equipment~~		~~2-20 years~~
~~Buildings~~		~~15 years~~
~~Automobiles~~		~~2-7 years~~
~~Furniture and fixtures~~		~~3-10 years~~
~~Computer equipment~~		~~3 years~~
~~Tooling~~		~~3 years~~
~~Software~~		~~2-3 years~~
~~Leasehold improvements~~		~~Shorter of asset’s useful life or remaining life of the lease~~

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~~Intangible Assets~~

Intangible assets consist of identifiable intangible assets, including developed technology, trade names, and customer relationships, resulting from the Company’s acquisitions. The Company evaluates definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If indicators of impairment are present, the Company then compares the estimated undiscounted cash flows that the specific asset is expected to generate to its carrying value. If such assets are impaired, the impairment recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. To date, there have been 0 impairments of intangible assets. Intangible assets are amortized over their useful life.

~~Asset Acquisitions~~

Acquisitions of assets or a group of assets that do not meet the definition of a business are accounted for as asset acquisitions using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. No goodwill is recognized in an asset acquisition. Intangible assets that are acquired in an asset acquisition for use in research and development activities which have an alternative future use are capitalized as in-process research and development (“IPR&D”). Acquired IPR&D which has no alternative future use is recorded as research and development expense at acquisition.

~~Contingent Consideration~~

Contingent consideration represents potential future payments that the Company may be required to pay in the event negotiated milestones are met in connection with a business acquisition. Contingent consideration is recorded as a liability at the date of acquisition at fair value. The fair value of contingent consideration related to revenue metrics is estimated using a Monte Carlo simulation in a risk-neutral framework. Under this approach, the value of contingent consideration related to revenue metrics is calculated as the average present value of contingent consideration payments over all simulated paths. The fair value of contingent consideration related to technical developments is estimated using a scenario-based approach, which is a special case of the income approach that uses several possible future scenarios. Under this approach, the value of the technical milestone payment is calculated as the probability-weighted payment across all scenarios. Significant increases or decreases in any of the probabilities of success or changes in expected timelines for achievement of any of the revenue or technical milestones could result in a significantly higher or lower fair value of the contingent consideration liability. The fair value of the contingent consideration at each reporting date is updated by reflecting the changes in fair value reflected within research and development expenses in the Company’s condensed consolidated statements of operations.

Recently Issued Accounting Standards

Recently Adopted Accounting Guidance

In ~~December 2019,~~August 2020, the FASB issued ASU ~~2019-12,~~ 2020-06, ~~Income Taxes (Topic 740)~~Debt—~~Simplifying the~~Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for ~~Income Taxes,~~Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which ~~simplifies~~reduced the number of models used to account for convertible instruments, amends the accounting for ~~income taxes by eliminating some exceptions to~~certain contracts in an entity’s own equity that would have previously been accounted for as derivatives and modified the ~~general approach in Accounting Standards Codification 740,~~ ~~Income Taxes~~~~. It also clarifies certain aspects of the existing guidance to promote more consistent application. This standard is effective~~diluted earnings per share calculations for ~~calendar-year public business entities in 2021 and interim periods within that year, and early adoption is permitted. The Company~~convertible instruments. We adopted ~~the~~ ASU ~~as of~~2020-06 on January ~~1, 2021, which did not have a material effect on the Company’s condensed consolidated financial statements.~~

~~Recent Accounting Guidance Not Yet Adopted~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities

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~~Exchange Act of 1934, as amended, these changes become effective for the Company on January~~ 1, 2022. ~~The Company is currently evaluating~~As a result of the ~~potential impact~~adoption of ~~these changes on~~ASU 2020-06, the ~~condensed consolidated financial statements.~~convertible notes issued in May 2022 were considered to be debt with no allocation to equity.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. ~~As a smaller reporting~~The company ~~pursuant to Rule 12b-2~~adopted the ASU as of ~~the Securities Exchange Act of 1934, as amended, these changes become effective for the Company on~~ January 1, ~~2022. The Company is currently evaluating~~2022, which did not have a material effect on the ~~potential impact of these changes on the~~Company’s condensed consolidated financial statements.

3. REVENUE RECOGNITION

Contract Balances

The Company’s deferred revenue balance was $20.1 million and $22.7 million as of September 30, 2022 and December 31, 2021, respectively. During the three and nine months ended September 30, 2022, the Company recognized $3.6 million and $14.0 million of existing deferred revenue from 2021. 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 significant during the nine months ended September 30, 2022 and 2021.

Remaining Performance Obligations

At September 30, 2022, the Company had $20.1 million of remaining performance obligations, also referred to as backlog, of which approximately $16.3 million is expected to be fulfilled over the next 12 months, notwithstanding uncertainty related to the impact of COVID-19, including, but not limited to, international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. In addition, the Company also had customer deposits of $15.5 million at September 30, 2022.

4. ACQUISITIONS

2021 Acquisitions

Acquisition of EnvisionTEC

On February 16, 2021, the Company acquired EnvisionTEC, Inc. and its subsidiaries (“EnvisionTEC”) pursuant to a Purchase Agreement and Plan of Merger dated January 15, 2021. This acquisition ~~adds~~added a comprehensive portfolio in additive manufacturing across metals, polymers and composites and ~~grow~~grew distribution channels both in quantity and through the addition of a vertically-focused channel. The ~~Company paid consideration~~total purchase price was $303.6 million, consisting of $143.8 million paid in cash and ~~issued~~ 5,036,142 shares of the Company’s Common Stock with a fair value of $159.8 million as of the close of business on the transaction date.

~~The acquisition date fair value of the consideration transferred is as follows (in thousands):~~

Total Acquisition Date Fair Value
Cash consideration

$
143,788
Equity consideration

159,847
Total consideration transferred

$
303,635

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The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	143,795
Equity consideration		159,847
Total consideration transferred	$	303,642

The following table summarizes the ~~preliminary~~ allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At February 16, 2021		At February 16, 2021
Assets acquired:
Cash and cash equivalents	$	859	$	859
Restricted cash		5,004		5,004
Accounts receivable		2,982		2,982
Inventory		8,852		7,668
Prepaid expenses and other current assets		1,081		1,081
Restricted cash - noncurrent		285		285
Property and equipment		1,440		1,540
Intangible assets		137,300		137,300
Other noncurrent assets		1,801		1,801
Total assets acquired	$	159,604	$	158,520
Liabilities assumed:
Accounts payable	$	1,443	$	1,442
Customer deposits		2,461		2,460
Current portion of lease liability		605		605
Accrued expenses and other current liabilities		13,711		13,706
Liability for income taxes		480		480
Deferred revenue		300		492
Current portion of long-term debt		898		898
Long-term debt		285		285
Deferred tax liability		32,966		29,009
Lease liability, net of current portion		1,189		1,189
Total liabilities assumed	$	54,338	$	50,566
Net assets acquired	$	105,266	$	107,954

Goodwill	$	198,369	$	195,688
Total net assets acquired	$	303,635	$	303,642

Subsequent to the acquisition date, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in decrease to goodwill of $3.4 million. The decrease was primarily due to a decrease in deferred income tax liabilities of $4.1 million and a decrease in deferred revenue of $0.2 million related to the adoption of ASU 2021-08 and a decrease in inventory of $1.0 million related to obsolete inventory. Additionally, the Company recorded a measurement period adjustment of $0.3 million related to certain assets acquired and liabilities assumed due to clarification of information utilized to determine fair value during the measurement period. As of December 31, 2021, the measurement period was completed.

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The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life	Gross Value		Estimated Life
Acquired technology	$	77,800	7 – 12 years	$	77,800	7 – 14 years
Trade name		8,600	13 years		8,600	14 years
Customer relationships		50,900	10 years		50,900	12 years
Total intangible assets	$	137,300		$	137,300

The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. ~~$36.6~~$16.4 million of the goodwill recognized is deductible for income tax purposes. ~~The~~During 2021, the Company incurred $4.8 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the condensed consolidated statements of operations.

EnvisionTEC’s results are included in the Company’s consolidated results for the period from February 16, 2021 to ~~September 30,~~December 31, 2021. ~~For this~~During that period, EnvisionTEC’s net revenues were approximately ~~$24.2~~$33.3 million and net loss was approximately ~~$8.2~~$11.1 million.

Acquisition of Adaptive 3D

On May 7, 2021, the Company acquired Adaptive 3D Holdings, Inc. and its affiliates (“Adaptive 3D”) pursuant to a Purchase Agreement and Plan of Merger dated as of May 7, 2021. This acquisition ~~expands~~expanded the Company’s materials library to include

~~Table~~ photopolymer elastomers for use in the production of ~~Contents~~

~~photopolymer elastomers.~~end use parts. The total purchase price iswas $61.8 million, consisting of $24.1 million paid in cash and 3,133,276 shares of the Company’s Common Stock with a fair value of $37.7 million as of the close of business on the transaction date.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	24,083
Equity consideration		37,693
Total consideration transferred	$	61,776

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The following table summarizes the ~~preliminary~~ allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At May 7, 2021		At May 7, 2021
Assets acquired:
Cash and cash equivalents	$	2,852	$	2,852
Restricted cash		4,046
Accounts receivable		504		504
Inventory		305		305
Prepaid expenses and other current assets		462		462
Property and equipment		558		558
Intangible assets		27,300	��	27,300
Other noncurrent assets		654		654
Total assets acquired	$	36,681	$	32,635
Liabilities assumed:
Accounts payable	$	280	$	280
Customer deposits
Current portion of lease liability		151		151
Accrued expenses and other current liabilities		4,146		100
PPP loan payable		311		311
Deferred revenue		12		12
Lease liability, net of current portion		502		502
Deferred tax liability		4,768		4,616
Total liabilities assumed	$	10,170	$	5,972
Net assets acquired	$	26,511	$	26,663

Goodwill	$	35,265	$	35,113
Total net assets acquired	$	61,776	$	61,776

Subsequent to the acquisition date, the Company made a measurement period adjustment to the preliminary purchase price allocation, which resulted in a decrease to goodwill of $0.2 million. The decrease was due to a decrease in deferred income tax liabilities of $0.2 million. As of May 7, 2022, the measurement period was completed.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Acquired technology	$	27,000	14 years
Trade name		300	5 years
Total intangible assets	$	27,300

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The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is not deductible for income tax purposes. ~~The~~During 2021, the Company incurred $0.3 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the ~~condensed~~ consolidated statements of operations.

Adaptive 3D’s results are included in the Company’s consolidated results for the period from May 7, 2021 to ~~September 30,~~December 31, 2021. ~~For this~~During that period, Adaptive 3D’s revenues were approximately ~~$0.6~~$1.1 million, and its net loss was approximately ~~$2.8~~$4.9 million.

Acquisition of Aerosint

On June 24, 2021, the Company ~~entered into a Share Purchase Agreement with DM Belgium BV/SRL, Aerosint SA, the sellers named therein and representatives of such sellers (collectively “Aerosint”), pursuant to which the Company~~ acquired all outstanding securities of ~~Aerosint. Through this acquisition,~~Aerosint SA and its affiliates (“Aerosint”), which expanded the ~~Company expands its~~Company’s portfolio of technologies with the addition of multi-material printing capabilities. The total purchase price iswas $23.8 million, consisting of $6.2 million paid in cash, 879,922 shares of the Company’s Common Stock with a fair value of $11.5 million as of the close of business on the transaction date, and contingent consideration with a fair value of $6.1 million as of the acquisition

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date. The Company may be required to pay this contingent consideration based on the achievement of revenue metrics and technical milestones over the three-year period following the transaction date.

The acquisition is accounted for as a business combination using the acquisition method of accounting. The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the Company’s ~~preliminary~~ estimates of their fair values on the acquisition date. The fair values assigned to Aerosint’s tangible and intangible assets and liabilities assumed, and the related deferred tax assets and liabilities, are considered preliminary and are based on the information available at the date of the acquisition. The Company is in the process of finalizing its purchase price allocation, and the tax basis of the assets and liabilities acquired. This may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. Adjustments that impact the deferred tax liability recorded in the business combination could result in an increase or decrease in the Company’s recorded valuation allowance that will be recognized in the accompanying statement of operations.

The ~~Aerosint Acquisition~~acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of ~~which $1.4~~$6.1 million ~~is expected to be paid out over~~as of the ~~next twelve months~~date of acquisition and ~~is therefore classified~~a fair value of $3.9 million as ~~a current liability.~~of September 30, 2022. The Company will pay up to $5.5 million of contingent consideration based on stated revenue metrics, which had a fair value of $4.6 million as of the date of ~~acquisition,~~acquisition. During the three months ended September 30, 2022, based on the relevant revenues earned during the first year of the three-year contingent consideration period, the Company paid $1.0 million in cash and $0.5 million in shares to Aerosint shareholders, resulting in a reduction of the contingent consideration liability, which has a fair value of ~~$4.5~~$2.4 million as of September 30, ~~2021.~~2022. If Aerosint reaches certain product mass production technical milestones, the Company will pay out a maximum of $2.0 million in contingent consideration, which had a fair value of $1.5 million as of the date of acquisition, and a fair value of ~~$1.4~~$1.5 million as of September 30, ~~2021.~~2022. As of the date of acquisition, the fair value of the short-term liability was $1.4 million, and the long-term liability was $4.7 million, which the Company recorded in accrued expenses and other current liabilities and contingent consideration, net of current portion, on the condensed consolidated balance sheets. As of September 30, ~~2021,~~2022, $~~1.4~~2.8 million of contingent consideration is recorded in accrued expenses and other current liabilities and ~~$4.5~~$1.1 million is recorded in contingent consideration, net of current portion, in the condensed consolidated balance sheets.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	6,220
Equity consideration		11,448
Contingent consideration		6,083
Total consideration transferred	$	23,751

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The following table summarizes the ~~preliminary~~ allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At June 24, 2021
Assets acquired:
Cash and cash equivalents	$	419
Accounts receivable		34
Inventory		166
Prepaid expenses and other current assets		697
Property and equipment		369
Intangible assets		11,726
Other noncurrent assets		336
Total assets acquired	$	13,747
Liabilities assumed:
Accounts payable	$	58
Customer deposits		283
Current portion of lease liability		100
Accrued expenses and other current liabilities		169
Deferred revenue		810
Lease liability, net of current portion		226
Deferred tax liability		2,931
Total liabilities assumed	$	4,577
Net assets acquired	$	9,170

Goodwill	$	14,581
Total net assets acquired	$	23,751

Subsequent to the acquisition date, the Company made a measurement period adjustment to the preliminary purchase price allocation, which resulted in a decrease to goodwill of $0.6 million. The decrease was due to a decrease in deferred income tax liabilities. As of June 24, 2022, the measurement period was completed.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Acquired technology	$	11,547	11.5 years
Trade name		179	4.5 years
Total intangible assets	$	11,726

The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is not deductible for income tax purposes. ~~The~~During 2021, the Company incurred $0.9 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the ~~condensed~~ consolidated statements of operations.

Aerosint’s results are included in the Company’s consolidated results for the period from June 24, 2021 to ~~September 30,~~December 31, 2021. ~~For this~~During that period, Aerosint’s revenues were ~~immaterial~~$0.6 million and net loss was ~~$0.2~~$0.4 million.

Acquisition of Dental Arts Labs

On July 30, 2021, the Company acquired Dental Arts Laboratories, Inc., (“Dental Arts Labs”) ~~pursuant to a Stock Purchase Agreement of~~, which expanded the ~~same date, expanding its~~Company’s portfolio in additive and conventional manufacturing within the healthcare ~~and dental~~ industry. The purchase price was ~~$26.3~~$26.0 million paid in cash. The Company also issued 1,190,468 restricted stock units with a grant date fair value of $11.0 million, which are subject to a

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four-year vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	26,042
Total consideration transferred	$	26,042

The following table summarizes the allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At July 30, 2021
Assets acquired:
Cash and cash equivalents	$	858
Accounts receivable		3,707
Inventory		2,438
Prepaid expenses and other current assets		3,853
Property and equipment		8,643
Intangible assets		5,000
Other noncurrent assets		4,636
Total assets acquired	$	29,135
Liabilities assumed:
Accounts payable	$	1,949
Current portion of lease liability		535
Accrued expenses and other current liabilities		1,795
Current portion of long‑term debt		3,888
Long‑term debt		3
Lease liability, net of current portion		3,762
Total liabilities assumed	$	11,932
Net assets acquired	$	17,203

Goodwill	$	8,839
Total net assets acquired	$	26,042

Subsequent to the acquisition date, the Company made a working capital adjustment to the preliminary purchase price allocation, which resulted in decrease to goodwill of $0.3 million. As of June 30, 2022, the measurement period was completed.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Trade name	$	1,300	8.5 years
Customer relationships		3,700	9.5 years
Total intangible assets	$	5,000

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The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is deductible for income tax purposes. During 2021, the Company incurred $0.6 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the consolidated statements of operations.

Dental Arts Labs’ results are included in the Company’s consolidated results for the period from July 30, 2021 to December 31, 2021. During that period, Dental Arts Labs’ revenues were $14.1 million and net loss was $0.3 million.

Acquisition of A.I.D.R.O.

On September 7, 2021, the Company purchased the entire corporate capital of A.I.D.R.O. Srl (“A.I.D.R.O.”). This acquisition expanded the Company’s parts production capabilities and application expertise in the hydraulics industry. The purchase price for the A.I.D.R.O. acquisition was $5.7 million paid in cash, of which $4.9 million was paid at closing and the remaining $0.8 million was deposited to an escrow account subsequent to September 30, 2022. The Company also issued 364,050 restricted stock units with a grant date fair value of $3.2 million, which are subject to a four-year vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	5,683
Total consideration transferred	$	5,683

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The following table summarizes the allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At September 7, 2021
Assets acquired:
Cash and cash equivalents	$	855
Accounts receivable		966
Inventory		906
Prepaid expenses and other current assets		412
Property and equipment		691
Intangible assets		1,080
Other noncurrent assets		1,100
Total assets acquired	$	6,010
Liabilities assumed:
Accounts payable	$	1,307
Current portion of lease liability		72
Accrued expenses and other current liabilities		508
Current portion of long-term debt, net of deferred financing costs		138
Long‑term debt		764
Lease liability, net of current portion		750
Deferred tax liability		75
Other noncurrent liabilities		228
Total liabilities assumed	$	3,842
Net assets acquired	$	2,168

Goodwill	$	3,515
Total net assets acquired	$	5,683

Subsequent to the acquisition date, the Company made a working capital adjustment to the preliminary purchase price allocation, which resulted in an immaterial increase to goodwill. As of September 7, 2022, the measurement period was completed.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Trade name	$	142	4 years
Customer relationships		938	15 years
Total intangible assets	$	1,080

The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is not deductible for income tax purposes. During 2021, the Company incurred $0.4 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the consolidated statements of operations.

A.I.D.R.O.’s results are included in the Company’s consolidated results for the period from September 7, 2021 to December 31, 2021. During that period, A.I.D.R.O.’s revenues were $1.7 million and net loss was $0.2 million.

Acquisition of Brewer Dental

On October 14, 2021, the Company acquired Larry Brewer Dental Lab, Inc. (“Brewer Dental”), which expanded the Company’s portfolio in additive and conventional manufacturing within the healthcare and dental industry. The purchase price was $7.6 million paid in cash, of which $7.0 million was paid at closing and the remaining $0.5 million will be paid 24 months after closing. The Company also issued 252,096 restricted stock units with a grant date fair value of $1.8 million, which are subject to a four-year

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vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.

The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the Company’s preliminary estimates of their fair values on the acquisition date. The fair values assigned to ~~Dental Arts Labs’~~Brewer Dental’s tangible and intangible assets and liabilities assumed, and the related deferred tax assets and liabilities, are considered preliminary and are based on the information available at the date of the acquisition. The Company is in the process of finalizing its purchase price allocation, and the tax basis of the assets and liabilities acquired. This may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. Adjustments that impact the deferred tax liability recorded in the business combination could result in an increase or decrease in the Company’s recorded valuation allowance that will be recognized in the accompanying statement of operations.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value		Total Acquisition Date Fair Value
Cash consideration	$	26,292	$	7,613
Total consideration transferred	$	26,292	$	7,613

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At July 30, 2021		At October 14, 2021
Assets acquired:
Cash and cash equivalents	$	858	$	1,574
Accounts receivable		3,707		524
Inventory		2,438		226
Prepaid expenses and other current assets		3,853
Property and equipment		8,643		375
Intangible assets		5,000		2,630
Other noncurrent assets		4,636		706
Total assets acquired	$	29,135	$	6,035
Liabilities assumed:
Accounts payable	$	1,949	$	34
Current portion of lease liability		535		87
Accrued expenses and other current liabilities		1,795		145
Current portion of long‑term debt		3,888
Long‑term debt		3
Lease liability, net of current portion		3,762		619
Total liabilities assumed	$	11,932	$	885
Net assets acquired	$	17,203	$	5,150

Goodwill	$	9,089	$	2,463
Total net assets acquired	$	26,292	$	7,613

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life	Gross Value		Estimated Life
Trade name	$	1,300	9.5 years	$	230	8 years
Customer relationships		3,700	10.5 years		2,400	8 years
Total intangible assets	$	5,000		$	2,630

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The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is deductible for income tax purposes. ~~The~~During 2021, the Company incurred ~~$0.6 million of~~immaterial acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the ~~condensed~~ consolidated statements of operations.

~~Dental Arts Labs’~~Brewer Dental’s results are included in the Company’s consolidated results for the period from ~~July 30,~~October 14, 2021 to ~~September 30,~~December 31, 2021. ~~For this~~During that period, ~~Dental Arts Labs’~~Brewer Dental’s revenues were ~~$5.6~~$1.4 million and net ~~loss~~income was ~~$0.4~~$0.1 million.

Acquisition of ~~A.I.D.R.O.~~May Dental

On ~~September 7,~~October 29, 2021, the Company ~~purchased the entire corporate capital of A.I.D.R.O. Srl~~acquired May Dental Lab, Inc. (“~~A.I.D.R.O.”~~May Dental”) ~~pursuant to a Stock Purchase Agreement dated July 2, 2021. This acquisition expands~~, which expanded the Company’s ~~parts production capabilities~~portfolio in additive and ~~application expertise in~~conventional manufacturing within the ~~hydraulics~~healthcare and dental industry. The aggregate purchase price ~~for the A.I.D.R.O. acquisition~~ was ~~$5.6~~$12.5 million paid in cash, of which ~~$4.8~~$11.8 million was paid at closing and the remaining $0.8 million ~~was deposited~~will be paid 24 months after closing, subject to ~~an escrow account subsequent to September 30, 2021.~~the Limited Liability Interest Purchase Agreement. The Company also issued ~~364,050~~357,642 restricted stock units with a grant date fair value of ~~$3.2~~$2.5 million, which are subject to a four-year vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.

~~The acquisition is accounted for as a business combination using the acquisition method of accounting.~~

The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the Company’s preliminary estimates of their fair values on the acquisition date. The fair values assigned to ~~A.I.D.R.O.’s~~May Dental’s tangible and intangible assets and liabilities assumed, and the related deferred tax assets and liabilities, are considered preliminary and are based on the information available at the date of the acquisition. The Company is in the process of finalizing its purchase price allocation, and the tax basis of the assets and liabilities acquired. This may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. Adjustments that impact the deferred tax liability recorded in the business combination could result in an increase or decrease in the Company’s recorded valuation allowance that will be recognized in the accompanying statement of operations.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value		Total Acquisition Date Fair Value
Cash consideration	$	5,649	$	12,522
Total consideration transferred	$	5,649	$	12,522

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The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At September 7, 2021		At October 29, 2021
Assets acquired:
Cash and cash equivalents	$	855	$	230
Accounts receivable		966		677
Inventory		906		343
Prepaid expenses and other current assets		412		98
Property and equipment		691		495
Intangible assets		1,080		4,340
Other noncurrent assets		1,100		1,416
Total assets acquired	$	6,010	$	7,599
Liabilities assumed:
Accounts payable	$	1,307	$	209
Current portion of lease liability		72		201
Accrued expenses and other current liabilities		508		255
Current portion of long-term debt, net of deferred financing costs		138
Long‑term debt		764
Lease liability, net of current portion		750		1,216
Deferred tax liability		75
Other noncurrent liabilities		228
Total liabilities assumed	$	3,842	$	1,881
Net assets acquired	$	2,168	$	5,718

Goodwill	$	3,481	$	6,804
Total net assets acquired	$	5,649	$	12,522

Subsequent to the acquisition date, the Company made a working capital adjustment to the preliminary purchase price allocation, which resulted in an immaterial increase to goodwill.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life	Gross Value		Estimated Life
Trade name		142	4 years	$	3,900	9 years
Customer Relationships		938	15 years
Customer relationships					440	10 years
Total intangible assets	$	1,080		$	4,340

The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is deductible for income tax purposes. During 2021, the Company incurred immaterial acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the consolidated statements of operations.

May Dental’s results are included in the Company’s consolidated results for the period from October 29, 2021 to December 31, 2021. During that period, May Dental’s revenues were $1.3 million and net loss was $0.1 million.

Acquisition of ExOne

On November 12, 2021, the Company acquired The ExOne Company and its affiliates (“ExOne”). The acquisition of ExOne extends the Company’s product platforms with complementary solutions to create a comprehensive portfolio combining throughput, flexibility, and materials breadth while allowing customers to optimize production based on their specific application needs. The Company acquired all of ExOne’s outstanding common stock for an aggregate purchase price of $613.0 million, consisting of $201.4 paid in cash and 48,218,063 shares of Common Stock with a fair value of $411.6 million as of the close of business on the transaction date. The Company also granted 86,020 incentive stock options with a weighted-average exercise price of $4.47 to certain employees of ExOne in exchange for unvested ExOne stock options. The acquisition will be accounted for as a business combination using the

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acquisition method of accounting. The Company is currently finalizing the allocation of the purchase price and expects the purchase price to be allocated primarily to goodwill and intangible assets.

The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the Company’s preliminary estimates of their fair values on the acquisition date. The fair values assigned to ExOne’s tangible and intangible assets and liabilities assumed, and the related deferred tax assets and liabilities, are considered preliminary and are based on the information available at the date of the acquisition. The Company is in the process of finalizing its purchase price allocation, and the tax basis of the assets and liabilities acquired. This may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. Adjustments that impact the deferred tax liability recorded in the business combination could result in an increase or decrease in the Company’s recorded valuation allowance that will be recognized in the accompanying statement of operations.

The acquisition date fair value of the consideration transferred is as follows (in thousands):


	Total Acquisition Date Fair Value
Cash consideration	$	201,399
Equity consideration		411,603
Total consideration transferred	$	613,002

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed (in thousands):


	At November 12, 2021
Assets acquired:
Cash and cash equivalents	$	119,068
Restricted cash - current		3,007
Accounts receivable		13,611
Inventory		27,200
Prepaid expenses and other current assets		5,165
Property and equipment		33,991
Intangible assets		82,100
Other noncurrent assets		2,734
Total assets acquired	$	286,876
Liabilities assumed:
Accounts payable	$	5,830
Accrued expenses and other current liabilities		10,368
Current portion of deferred revenue		15,331
Customer deposits		10,168
Current portion of operating lease liability		1,919
Deferred tax liability		3,465
Lease liability, net of current portion		332
Deferred revenue, net of current portion		147
Other noncurrent liabilities		321
Total liabilities assumed	$	47,881
Net assets acquired	$	238,995

Goodwill	$	374,007
Total net assets acquired	$	613,002

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Subsequent to the acquisition date the Company made a measurement adjustment to the preliminary purchase allocation which resulted in an increase to goodwill of $0.6 million.

The estimated useful lives of the identifiable intangible assets acquired is as follows:


	Gross Value		Estimated Life
Developed Technology	$	72,900	8 years
Trade name		1,300	4 years
Customer relationships		7,900	12 years
Total intangible assets	$	82,100

The goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of expanding the combined companies’ target markets both geographically and across industries. The goodwill recognized is not deductible for income tax purposes. ~~The~~During 2021, the Company incurred ~~$0.4~~$8.5 million of acquisition-related and other transactional charges related to this acquisition, which are included in general and administrative expenses in the ~~condensed~~ consolidated statements of operations.

~~A.I.D.R.O.’s~~ExOne’s results are included in the Company’s consolidated results for the period from ~~September 7,~~November 12, 2021 to ~~September 30,~~December 31, 2021. ~~For this~~During that period, ~~A.I.D.R.O.’s~~ExOne’s revenues were ~~$0.4~~$15.5 million and net ~~income~~loss was ~~immaterial.~~$6.9 million.

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Pro Forma Information (unaudited)

The following unaudited pro forma financial information is based on the historical financial statements of the Company and presents the Company’s results as if the acquisitions of EnvisionTEC, Adaptive 3D, Aerosint, Dental Arts Labs, A.I.D.R.O., Brewer Dental, May Dental, and ~~A.I.D.R.O.~~ExOne had occurred on January 1, 2020 (in thousands):


					Year Ended December 31,
	Nine Months Ended September 30,				2021		2020
	2021		2020		(unaudited)		(unaudited)
Net revenues	$	84,030	$	66,485	$	207,688	$	164,947
Net income (loss)	$	(174,362)	$	(74,476)	$	(273,319)	$	(138,346)

The unaudited pro forma financial information was computed by combining the historical financial information of the Company and EnvisionTEC, Adaptive 3D, Aerosint, Dental Arts, ~~Labs,~~A.I.D.R.O., Brewer Dental, May Dental, and ~~A.I.D.R.O.~~ExOne along with the effects of the acquisition method of accounting for business combinations as though the companies were combined on January 1, 2020. The unaudited pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does not represent what the actual net revenues and net loss would have been had the companies been combined as of this date.

2021 Asset Acquisitions

Acquisition of Beacon Bio

On June 10, 2021, the Company acquired Beacon Bio, Inc. (“Beacon Bio”) pursuant to a Stock Purchase Agreement. The purchase price consisted of cash consideration of $6.1 million, including transaction costs of $0.2 million, and 334,370 shares of Common Stock with a fair value of $4.3 million as of the close of business on the transaction date. The cash consideration includes a simple agreement for future equity investment of $1.0 million made by the Company in advance of the acquisition that was settled in the acquisition. Beacon Bio is engaged in research and development of PhonoGraft technology. The Company concluded the arrangement did not result in the acquisition of a business, as substantially all of the fair value of the gross assets acquired was concentrated in in-process research and development for which there was no alternative future use. Therefore, the Company accounted for the arrangement as an asset acquisition. In connection with the acquisition, the Company issued additional restricted stock units to retain research and development employees and contractors of Beacon Bio through the expected term to complete the development, which vest over a service period of 3 years and are accounted for as post-combination expense.

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The acquired in-process research and development asset consists of a license to commercialize the PhonoGraft technology. Due to the stage of development of this license at the date of the acquisition, significant research, development, and risk remained, and it was not yet probable that there was future economic benefit from this asset. Absent successful clinical results and regulatory approval for this asset, there was no alternative future use associated with this asset. Accordingly, the value of the asset was expensed in the condensed consolidated statements of operations and no deferred tax liability has been recorded.

Acquisition of Meta Additive

On September 9, 2021, the Company acquired Meta Additive Ltd (“Meta Additive”), pursuant to a Stock Purchase Agreement of the same date. Meta Additive is engaged in research and development of binder jet printing. The purchase price consisted of cash consideration of $15.2 million, including transaction costs of $0.2 million. The Company concluded the arrangement did not result in the acquisition of a business, as substantially all of the fair value of the gross assets acquired was concentrated in in-process research and development for which there was no alternative future use. The Company accounted for the arrangement as an asset acquisition. In connection with the acquisition, the Company issued 1,101,592 restricted stock units with a fair value of $9.0 million as of the acquisition date to retain key employees of Meta Additive through the expected term to complete the development, which vest over a service period of 4 years and are accounted for as post-combination expense. In June 2022, per the terms of the acquisition agreement, the Company accelerated 895,044 RSUs for certain key employees in connection with the Initiative described in Note 24. Restructuring Charges.

The acquired in-process research and development asset consists of the development of novel functional binders to provide advanced additive manufacturing solutions. Due to the stage of development of this technology at the date of the acquisition, significant research, development, and risk remained, and it was not yet probable that there was future economic benefit from this asset. Absent successful commercialization of this asset, there was no associated alternative future use. Accordingly, the value of the assets was expensed in the condensed consolidated statements of operations and no deferred tax liability has been recorded.

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~~2020 Acquisition~~

~~Business Combination~~

On December 9, 2020, the Company and Trine consummated the Business Combination, with Legacy Desktop Metal surviving the merger as a wholly-owned subsidiary of Trine. Upon the consummation of the Business Combination, each share of Legacy Desktop Metal capital stock issued and outstanding was converted into the right to receive 1.22122 shares (the “Exchange Ratio”) of the Company’s common stock (the “Per Share Merger Consideration”).

Upon the closing of the Business Combination, Trine’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 550,000,000 shares, of which 500,000,000 shares were designated common stock; $0.0001 par value per share, and of which 50,000,000 shares were designated preferred stock, $0.0001 par value per share.

In connection with the execution of the definitive agreement for the Business Combination, Trine entered into separate subscription agreements (each, a “Trine Subscription Agreement”) with a number of investors (each, a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and Trine agreed to sell to the Subscribers, an aggregate of 27,497,500 shares of the Company’s Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $275 million, in a private placement pursuant to the Trine Subscription Agreements (the “PIPE financing”). The PIPE financing closed simultaneously with the consummation of the Business Combination.

The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Trine was treated as the “acquired” company for financial reporting purposes. See Note 1 “Organization and Nature of Business” for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Desktop Metal issuing stock for the net assets of Trine, accompanied by a recapitalization. The net assets of Trine are stated at historical cost, with no goodwill or other intangible assets recorded.

Prior to the Business Combination, Legacy Desktop Metal and Trine filed separate standalone federal, state and local income tax returns. As a result of the Business Combination, structured as a reverse recapitalization for tax purposes, Desktop Metal, Inc. (f/k/a Trine Acquisition Corp.), became the parent of the consolidated filing group, with Desktop Metal Operating, Inc. (f/k/a Desktop Metal, Inc.) as a subsidiary.

The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended December 31, 2020:

Recapitalization
Cash – Trine's trust and cash (net of redemptions)

$
305,084,695
Cash – PIPE financing

274,975,000
Less: transaction costs and advisory fees paid

(45,463,074)
Net proceeds from reverse recapitalization

534,596,621
Plus: non-cash net liabilities assumed¹

(152,394,714)
Less: accrued transaction costs and advisory fees

(1,900,793)
Net contributions from reverse recapitalization

$
380,301,114

⁽¹⁾~~Includes $149.7 million of non-cash warrant liability assumed.~~

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~~The number of shares of common stock issued immediately following the consummation of the Business Combination:~~


	~~Number of Shares~~
~~Common stock, outstanding prior to Business Combination~~		~~30,015,000~~
~~Less: redemption of Trine shares~~		~~(26,049)~~
~~Common stock of Trine~~		~~29,988,951~~
~~Trine Founder Shares~~		~~5,552,812~~
~~Trine Director Shares~~		~~100,000~~
~~Shares issued in PIPE financing~~		~~27,497,500~~
~~Business Combination and PIPE financing shares~~		~~63,139,263~~
~~Legacy Desktop Metal shares~~ ⁽¹⁾		~~161,487,334~~
~~Total shares of common stock immediately after Business Combination~~		~~224,626,597~~

⁽¹⁾ The number of Legacy Desktop Metal shares was determined from the shares of Legacy Desktop Metal shares outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of 1.22122. All fractional shares were rounded down.

In connection with the Business Combination, 7,403,750 Trine Founder Shares were issued. Pursuant to the Business Combination agreement, 75% of the Founder shares, or 5,552,812 shares, vested at the close of the Business Combination, with the remaining 25%, or 1,850,938 shares, vesting if the Company trades at $12.50 per share or higher for any 20 trading days within a 30-day window by the fifth anniversary of the Business Combination. The vesting criteria was met on January 8, 2021.

4.5. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

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


September 30, 2021	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
									September 30, 2022
									Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	126,086	$	—	$	—	$	126,086	$	52,029	$	—	$	—	$	52,029
Total cash equivalents		126,086		—		—		126,086		52,029		—		—		52,029
Commercial paper		128,825		—		—		128,825		71,888		—		—		71,888
Corporate bonds		86,913		—		(14)		86,899		29,020		—		(213)		28,807
U.S. Treasury securities										29,797		—		(110)		29,687
Government bonds		36,524		—		(4)		36,520		14,798		—		(137)		14,661
Asset-backed securities		24,830		1		(3)		24,828		3,984		—		(6)		3,978
Total short-term investments		277,092		1		(21)		277,072		149,487		—		(466)		149,021
Total cash equivalents and short-term investments	$	403,178	$	1	$	(21)	$	403,158	$	201,516	$	—	$	(466)	$	201,050


December 31, 2020	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	75,374	$	—	$	—	$	75,374
									December 31, 2021
									Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds		407,512		—		—		407,512	$	46,521	$	—	$	—	$	46,521
Total cash equivalents		482,886		—		—		482,886		46,521		—		—		46,521
U.S. Treasury securities		19,995		2		—		19,997
Commercial paper		43,911		—		—		43,911		70,401		—		—		70,401
Corporate bonds		47,970		—		(11)		47,959		65,645		—		(28)		65,617
Government bonds										36,487		—		(11)		36,476
Asset-backed securities										24,665		—		(10)		24,655
Total short-term investments		111,876		2		(11)		111,867		197,198		—		(49)		197,149
Total cash equivalents and short-term investments	$	594,762	$	2	$	(11)	$	594,753	$	243,719	$	—	$	(49)	$	243,670

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~~In September~~During the year ended December 31, 2021, the Company made a $20.0 million ~~equity~~ investment in ~~Shapeways Holdings, Inc. (“Shapeways”).~~equity securities of a publicly-traded company. The Company records this investment at fair ~~value. The~~value, which was $1.2 million as of September 30, 2022. Prior to the investment, the Company entered into a subscription agreement to purchase the investment, resulting in a subscription agreement liability which was derecognized upon investment. During the three and nine months ended September 30, 2022, the Company recorded an unrealized loss due to the change in fair value of the ~~Shapeways stock~~equity securities of ~~$1.9~~$0.3 million ~~during the three~~ and ~~nine months ended September 30, 2021,~~$6.2 million, respectively, in interest and other (expense) income, net in the ~~condensed~~ consolidated statements of operations.

6. 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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~~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.~~

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):


	September 30, 2021								September 30, 2022
	Quoted Prices in		Significant						Quoted Prices in		Significant
	Active Markets		Other		Significant				Active Markets		Other		Significant
	for Identical		Observable		Unobservable				for Identical		Observable		Unobservable
	Items		Inputs		Inputs				Items		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	126,086	$	—	$	—	$	126,086	$	52,029	$	—	$	—	$	52,029
Commercial paper		—		128,825		—		128,825		—		71,888		—		71,888
Corporate bonds		—		86,899		—		86,899		—		28,807		—		28,807
U.S. Treasury securities										—		29,687		—		29,687
Government bonds		—		36,520		—		36,520		—		14,661		—		14,661
Asset-backed securities		—		24,828		—		24,828		—		3,978		—		3,978
Equity securities		—		—		15,200		15,200		1,248		—		—		1,248
Company-owned life insurance cash surrender value		—		330		—		330
Other investments		—		—		7,259		7,259		—		—		2,850		2,850
Total assets	$	126,086	$	277,402	$	22,459	$	425,947	$	53,277	$	149,021	$	2,850	$	205,148
Liabilities:
Contingent consideration	$	—	$	—	$	5,917	$	5,917	$	—	$	—	$	3,900	$	3,900
Total liabilities	$	—	$	—	$	5,917	$	5,917	$	—	$	—	$	3,900	$	3,900


	December 31, 2020								December 31, 2021
	Quoted Prices in		Significant						Quoted Prices in		Significant
	Active Markets		Other		Significant				Active Markets		Other		Significant
	for Identical		Observable		Unobservable				for Identical		Observable		Unobservable
	Items		Inputs		Inputs				Items		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	407,512	$	—	$	—	$	407,512	$	46,521	$	—	$	—	$	46,521
Commercial paper		—		119,285		—		119,285		—		70,401		—		70,401
Corporate bonds		—		47,959		—		47,959		—		65,617		—		65,617
U.S. Treasury securities		19,997		—		—		19,997
Government bonds										—		36,476		—		36,476
Asset-backed securities										—		24,655		—		24,655
Equity securities										7,420		—		—		7,420
Other investments		—		—		3,000		3,000		—		—		6,750		6,750
Total assets	$	427,509	$	167,244	$	3,000	$	597,753	$	53,941	$	197,149	$	6,750	$	257,840
Liabilities:
Private Placement Warrants	$	—	$	—	$	93,328	$	93,328
Contingent consideration									$	—	$	—	$	5,654	$	5,654
Total liabilities	$	—	$	—	$	93,328	$	93,328	$	—	$	—	$	5,654	$	5,654

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The Company has determined that the estimated fair value of its corporate bonds and commercial paper 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 ~~the~~its equity ~~investment includes~~securities is reported as Level 1 financial assets as they are based on quoted market ~~price and management assumptions around the discount~~prices in active markets for ~~the lack or marketability due to security specific characteristics.~~identical assets. During the three and nine months ended September 30, ~~2021,~~2022, the Company recorded an unrealized loss ondue to the change in fair value of the equity ~~investment~~securities of ~~$1.9~~$0.3 million and $6.2 million, respectively, in interest and other (expense) income, net in the ~~condensed~~ consolidated statements of operations. Additionally, the Company recorded an initial subscription agreement liability of $0.5 million related to this investment and recognized a loss on the subscription agreement liability of $2.4 million during the year ended December 31, 2021. The initial subscription liability was recorded as a Level 3 liability as a result of the discount for lack of marketability. Upon investment, the liability was derecognized and the investment was recorded as a Level 3 investment because the equity securities were not registered for resale and a discount for lack of marketability was still applied. Subsequently, the securities were registered and the investment was transferred from Level 3 to Level 1.

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Other investments ~~consist of~~include investments ~~in private companies~~made via convertible debt instruments ~~which~~totaling $2.9 million. The other investments are reported as a Level 3 financial asset because the methodology used to develop the estimated fair values includes significant unobservable inputs reflecting management’s own assumptions. Assumptions used in fair valuing convertible debt instruments include the rights and obligations of the notes the Company holds as well as the probability of a qualified financing event, acquisition, or change in control. During the three months ended September 30, 2022, the Company did not recognize any losses on convertible debt instruments. During the nine months ended September 30, 2022, the Company recognized losses on convertible debt instruments of $0.8 million. During the three and nine months ended September 30, 2021, the Company recognized immaterial gains on convertible debt instruments ~~of $0.1 million and $0.6~~ ~~million, respectively,~~ in interest and other (expense) income, net in the condensed consolidated statements of operations.

~~Company-owned life insurance contracts are recorded at their cash surrender value, which approximates fair value. These assets are measured using Level 2 inputs, based on~~ During the ~~underlying assets~~three and nine months ended September 30, 2022, $3.1 million of the ~~insurance policies.~~outstanding convertible debt instruments was repaid in full.

The fair value of the Private Placement Warrants is estimated using the Black-Scholes option pricing model and is classified as a Level 3 financial instrument. The significant assumptions used in the model were the Company’s stock price, exercise price, expected term, volatility, interest rate, and dividend yield. During the ~~three and~~ nine months ended September 30, 2022 and 2021, the Company recognized 0no gain or loss and a ~~gain~~loss of $56.6 million, respectively, on the Private Placement Warrants. The Private Placement Warrants were all exercised as of March 2, 2021.

The contingent consideration liability was valued using a Monte Carlo simulation in a risk-neutral framework as well as a scenario based approach (both special cases of the income approach), based on key inputs that are not all observable in the market and is classified as a Level 3 liability. The Company ~~assess~~assesses the fair value of the contingent consideration liability at each reporting period, with any subsequent changes to the fair value of the liability reflected in the condensed consolidated statement of operations until the liability is settled. During the three and nine months ended September 30, ~~2021,~~2022, the Company recognized a ~~change~~gain in fair value of contingent consideration of $~~0.2~~0.3 million and $0.3 million, respectively. During the three months ended September 30, 2022, the Company did not make any contingent consideration payments. During the nine months ended September 30, 2022, based on the relevant revenues earned during the first year of the three-year contingent consideration period, the Company paid $1.0 million in ~~both periods.~~cash and $0.5 million in shares to Aerosint, resulting in a reduction of the contingent consideration liability.

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 0no transfers between fair value measure levels during the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. The following table presents information about the Company’s movement in Level 3 assets measured at fair value (in thousands):

Nine Months Ended September 30,

2021

2020
Balance at beginning of period

$
3,000

$
—
Additions

23,620

—
Changes in fair value

(4,161)

—
Balance at end of period

$
22,459

$
—


	Nine Months Ended September 30,
	2022		2021
Balance at beginning of period	$	6,750	$	3,000
Additions		—		23,620
Changes in fair value		(745)		(4,161)
Disposals		(3,155)		—
Balance at end of period	$	2,850	$	22,459

The following table presents information about the Company’s movement in Level 3 liabilities measured at fair value (in thousands):

Nine Months Ended September 30,

2021

2020
Balance at beginning of period

$
93,328

$
—
Additions

6,558

—
Changes in fair value

59,022

—
Foreign currency translation

(167)

Exercise of private placement warrants

(149,904)

—
Disposals

(2,920)

Balance at end of period

$
5,917

$
—


	Nine Months Ended September 30,
	2022		2021
Balance at beginning of period	$	5,654	$	93,328
Payment of contingent consideration liability		(1,500)		—
Changes in fair value		(254)		59,022
Additions		—		6,558
Disposals				(2,920)
Foreign currency translation		—		(167)
Exercise of private placement warrants		—		(149,904)
Balance at end of period	$	3,900	$	5,917

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In June 2021, the Company entered into a subscription agreement to purchase the equity investment in Shapeways, which resulted in an initial subscription agreement liability of $0.5 million. During the three months ended September 30, 2021, the Company recognized an additional loss in fair value of $2.4 million related to the subscription agreement liability, which was derecognized in September 2021 upon the purchase of the equity investment in Shapeways in September 2021.

6.7. ACCOUNTS RECEIVABLE

The components of accounts receivable are as follows (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Trade receivables	$	23,257	$	7,016	$	43,093	$	47,352
Allowance for doubtful accounts		(379)		(500)		(1,703)		(665)
Total accounts receivable	$	22,878	$	6,516	$	41,390	$	46,687

The following table summarizes activity in the allowance for doubtful accounts (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Balance at beginning of period	$	500	$	199	$	665	$	500
Provision for uncollectible accounts		(316)		377
Provision for uncollectible accounts, net of recoveries						1,324		447
Uncollectible accounts written off		195		(76)		(286)		(282)
Balance at end of period	$	379	$	500	$	1,703	$	665

7.8. INVENTORY

Inventory consists of the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Raw materials	$	9,208	$	—	$	38,561	$	24,887
Work in process		5,124		2,896		7,596		8,875
Finished goods		18,398		6,812
Finished goods:
Deferred cost of sales						1,029		6,999
Manufactured finished goods						44,037		24,638
Total finished goods						45,066		31,637
Total inventory	$	32,730	$	9,708	$	91,223	$	65,399

8.9. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consists of the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Prepaid operating expenses		2,388		68	$	10,510	$	11,961
Prepaid taxes						1,566		1,981
Prepaid dues and subscriptions		1,360		189		2,924		1,889
Prepaid insurance		943		121		1,868		492
Prepaid taxes		827		—
Government grants receivable		493		—		393		226
Escrow deposits		311		—
Prepaid rent		176		118		338		178
Deferred cost of goods sold		—		454
Other		752		26		1,182		1,481
Total prepaid expenses and other current assets	$	7,250	$	976	$	18,781	$	18,208

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9.10. PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Equipment	$	22,061	$	13,708	$	49,150	$	42,892
Land and buildings		3,515		—		16,322		17,214
Automobiles		840		—		1,183		905
Furniture and fixtures		1,399		895		2,350		1,844
Computer equipment		1,257		1,089		2,012		1,725
Tooling		1,938		1,805		2,138		2,000
Software		1,532		1,249		2,248		2,346
Leasehold improvements		15,026		13,870		18,007		15,263
Construction in process		1,916		879		3,152		4,185
Property and equipment, gross		49,484		33,495		96,562		88,374
Less: accumulated depreciation		(25,702)		(21,335)		(38,807)		(29,664)
Total property and equipment, net	$	23,782	$	12,160	$	57,755	$	58,710

Depreciation and amortization expense was $3.1 million and $9.3 million for the three and nine months ended September 30, 2022. Depreciation and amortization expense was $1.6 million and $4.4 million for the three and nine months ended September 30, ~~2021, respectively. Depreciation and amortization expense was $1.7 million and $5.9 million for the three and nine months ended September 30, 2020, respectively.~~2021.

~~10.~~11. GOODWILL & INTANGIBLE ASSETS

The carrying amount of goodwill at September 30, 2022 and December 31, 2021 ~~and 2020~~ was ~~$262.3~~$365.3 million and ~~$2.3~~$639.3 million respectively, and has been recorded in connection with the Company’s acquisitions. The goodwill activity is as follows (in thousands):


		Goodwill		Goodwill
Balance at December 31, 2019	$	2,252
Balance at December 31, 2020	$	2,252	$	2,252
Acquisition of EnvisionTEC		198,369		195,688
Acquisition of Adaptive3D		35,265		35,113
Acquisition of Aerosint		14,581		14,581
Acquisition of Dental Arts Labs		9,089		8,839
Acquisition of A.I.D.R.O.		3,481		3,515
Acquisition of Brewer Dental				2,463
Acquisition of May Dental				6,782
Acquisition of ExOne				374,636
Foreign currency translation adjustment		(694)		(4,568)
Balance at September 30, 2021	$	262,343
Balance at December 31, 2021			$	639,301
Measurement period adjustments				(606)
Foreign currency translation adjustment				(43,942)
Goodwill impairment				(229,500)
Balance at September 30, 2022			$	365,253

At June 30, 2022, a quantitative interim goodwill impairment assessment was performed due to further sustained declines in the Company’s and comparable companies’ stock prices in the six months ended June 30, 2022. At September 30, 2022, there was no incremental goodwill impairment recorded.

The Company ~~has 0 accumulated impairment losses on goodwill.~~

~~Intangible assets consisted of the following (in thousands):~~

Accumulated

Balance

Gross Value

Estimated Life

Amortization

September 30, 2021
Acquired technology

$
126,285

5 – 12 years

$
8,423

$
117,862
Trade name

10,515

4 – 13 years

474

10,041
Customer relationships

55,392

10 – 10.5 years

3,166

52,226
Total intangible assets

$
192,192

$
12,063

$
180,129

The Company recognized $4.4 million and $11.0 million of amortization expense during the three and nine months ended September 30, 2021, respectively. The Company recognized $0.1 million and $0.5 million of amortization expense during the three and nine months ended September 30, 2020, respectively.

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~~The Company expects to recognize the following amortization expense (in thousands):~~

Amortization
2021 (remaining 3 months)

$
4,446
2022

19,099
2023

20,800
2024

21,160
2025

21,545
2026 and after

93,079
Total intangible amortization

$
180,129

~~The weighted-average remaining amortization period is 9.7~~ years. Amortization of acquired technology, trade names, and customer relationships is recognized in cost of sales and research and development, research and development, and sales and marketing, respectively, in the condensed consolidated statements of operations.

~~11. OTHER NONCURRENT ASSETS~~

~~The following table summarizes the Company’s components of other noncurrent assets (in thousands):~~

September 30,

December 31,

2021

2020
Right of use asset

$
9,635

$
1,810
Long-term deposits

331

69
Company-owned life insurance cash surrender value

330

—
Other investments

7,259

3,000
Other

124

—
Total other noncurrent assets

$
17,679

$
4,879

During the year ended December 31, 2020, the Company made an investment in a privately held company in the form of convertible debt for $3.0 million. Under the terms of this agreement, the debt, including any accrued interest, will be converted to common stock of the investee upon the closing of a qualified financing, acquisition or change in control. The full principal balance plus 3% annual interest is due in two years and does not allow voluntary prepayment. The Company has electedestimated the fair value ~~option for this investment and recognized 0 gain or loss during~~using the ~~three months ended September 30, 2021, and a gain of $0.3 million during~~discounted cash flow method under the ~~nine months ended September 30, 2021 2021, in interest and other (expense)~~ income ~~net~~approach. The significant assumptions used in the ~~condensed consolidated statement of operations.~~

In April 2021, the Company made an investment in a privately held company by purchasing a convertible promissory note for principal amount of $1.6 million. Under the terms of this note, the debt, including any accrued interest, will convertvaluation include revenue growth rates, future gross profit margins and operating expenses used to ~~equity securities~~calculate projected future cash flows, determination of the ~~applicable investee upon~~weighted average cost of capital, and future economic and market conditions. The terminal value is based on an exit revenue multiple which requires significant assumptions regarding the ~~closing~~selections of ~~a qualified financing, acquisition or other change in control. The full principal balance plus 3% annual interest is due in two years and does not allow voluntary prepayment.~~appropriate multiples that consider relevant market trading data. The Company ~~has elected~~bases its estimates and assumptions on its knowledge of the fair value option for this investment and recognized a gain of $0.1 million during the three months ended September 30, 2021 and a gain of $0.3 million during the nine months ended September 30, 2021, in interest and other (expense) income, net in the condensed consolidated statements of operations.

In April 2021, the Company made an investment in a privately held company by purchasing a convertible promissory note for a principal amount of $2.0 million. Under the terms of this note, the debt, including any accrued interest, will convert to cash or equity securities upon the closing of a qualified financing, acquisition or other change in control. The full principal balance plus 3% annual interest is due in five years and does not allow voluntary prepayment. The Company has elected the fair value option for this investment, and there was 0 change in fair value during the three and nine months ended September 30, 2021.

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additive manufacturing industry, recent performance, expectations of future performance and other assumptions the Company believes to be reasonable.

The Company determined that the estimated fair value of the reporting unit was less than its carrying amount. During the three and nine months ended September 30, 2022, the Company recorded goodwill impairment charges of $0 and $229.5 million, respectively, in the condensed consolidated statements of operations.

Intangible assets consisted of the following (in thousands):


		September 30, 2022						December 31, 2021
	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	8.7	$	193,194	$	30,163	$	163,031	$	198,631	$	11,421	$	187,210
Trade name	10.4		12,435		1,945		10,490		12,475		684		11,791
Customer relationships	10.1		66,272		14,426		51,846		69,127		6,296		62,831
Capitalized software	0.7		518		447		71		518		366		152
Total intangible assets		$	272,419	$	46,981	$	225,438	$	280,751	$	18,767	$	261,984

During the three and nine months ended September 30, 2022 and 2021, the Company recognized the following amortization expense (in thousands):


	Statement of	Three Months Ended September 30,				Nine Months Ended September 30,
Category	Operations Line Item	2022		2021		2022		2021
Acquired technology	Cost of Sales	$	5,877	$	2,532	$	17,817	$	5,942
Acquired technology	Research and Development		466		375		1,314		1,387
Trade name	General and Administrative		424		227		1,267		477
Customer relationships	Sales and Marketing		2,276		1,280		8,044		3,174
Capitalized software	Research and Development		26		45		80		135
		$	9,069	$	4,459	$	28,522	$	11,115

The Company expects to recognize the following amortization expense (in thousands):


	Amortization Expense
2022 (remaining 3 months)	$	9,520
2023		40,908
2024		40,966
2025		38,509
2026		28,874
2027 and after		66,661
Total intangible amortization	$	225,438

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12. OTHER NONCURRENT ASSETS

The following table summarizes the Company’s components of other noncurrent assets (in thousands):


	September 30,		December 31,
	2022		2021
Right of use asset	$	22,657	$	17,794
Long-term deposits		575		390
Other investments		2,850		6,750
Other		2,991		546
Total other noncurrent assets	$	29,073	$	25,480

13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table summarizes the Company’s components of accrued expenses and other current liabilities (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Compensation and benefits related	$	9,689	$	2,068	$	11,429	$	17,124
Professional services		2,039		2,508		1,853		2,659
Warranty reserve		2,435		1,553		3,723		4,048
Contingent consideration		1,390		—
Acquisition consideration		750		—
Franchise and royalty fees						1,308		2,035
Current portion of contingent consideration						2,812		1,471
2027 Notes Interest						2,686		—
Inventory purchases		352		86		1,686		1,072
Franchise and royalty fees		264		159
Commissions						824		849
Income tax payable						285		233
Sales and use and franchise taxes		215		586		310		274
Income tax payable		71		—
Current portion of acquisition consideration						500		—
Other		3,481		605		4,014		4,064
Total accrued expenses and other current liabilities	$	20,686	$	7,565	$	31,430	$	33,829

As of September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, the Company has recorded ~~$2.4~~$3.7 million and ~~$1.6~~$4.0 million, respectively, of warranty reserve within accrued expenses and other current liabilities in the condensed consolidated balance sheets. Warranty reserve consisted of the following (in thousands):


					September 30,		December 31,
	2021		2020		2022		2021
Warranty reserve, at the beginning of the period	$	1,553	$	1,491	$	4,048	$	1,553
Warranty reserve assumed in acquisition		490		—		—		1,389
Additions to warranty reserve		1,390		346		2,444		2,576
Claims fulfilled		(998)		(284)		(2,769)		(1,470)
Warranty reserve, at the end of the period	$	2,435	$	1,553	$	3,723	$	4,048

~~13.~~14. DEBT

2027 Convertible Notes—In May 2022, the Company issued an aggregate of $115.0 million principal amount of convertible senior notes due in 2027 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes consisted of $100.0 million initial placement and an over-allotment option that provided the initial purchasers of the 2027 Notes with the option to purchase an additional $15.0 million aggregate principal amount of the 2027 Notes, which was fully exercised. The 2027 Notes were issued pursuant to an indenture dated May 13, 2022. The net proceeds from the issuance of the 2027 Notes were $111.4 million, after deducting the initial purchasers’ discounts and commissions

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and our estimated offering expenses. The issuance costs will be treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the 2027 Notes.

The 2027 Notes are senior unsecured obligations. The 2027 Notes accrue interest at a rate of 6.0% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2022. The 2027 Notes will mature on May 15, 2027, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.

Before November 15, 2026, holders of the 2027 Notes will have the right to convert their 2027 Notes only upon the occurrence of certain events and during specified periods, including:

●

if the last reported sale price per share of the Company’s Common Stock, par value $0.0001 per share exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

●

if during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of 2027 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s Common Stock on such trading day and the conversion rate on such trading day;

●

upon the occurrence of certain corporate events or distributions on the Company’s Class A common stock; or

●

if the Company calls the 2027 Notes for redemption.

From and after November 15, 2026, holders of the 2027 Notes may convert their 2027 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering cash and, if applicable, shares of its Class A common stock.

The initial conversion rate is 601.5038 shares of Class A common stock per $1,000 principal amount of 2027 Notes, which represents an initial conversion price of approximately $1.66 per share of Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2027 Notes. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture governing the 2027 Notes) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Company may redeem for cash all or any portion of the 2027 Notes, at the Company’s option, on or after May 20, 2025, and on or before the 40^th scheduled trading day immediately before the maturity date, but only if certain liquidity conditions are satisfied and the last reported sales price of the Company’s Class A common stock exceeds 130% of the conversion price then in effect on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice and (ii) the trading day immediately before the date the Company sends such notice.

However, the Company may not redeem less than all of the outstanding 2027 Notes unless at least $100.0 million aggregate principal amount of 2027 Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. The redemption price will be a cash amount equal to the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any 2027 Note for redemption will constitute a Make-Whole Fundamental Change with respect to that 2027 Note, in which case the conversion rate applicable to the conversion of that 2027 Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the indenture governing the 2027 Notes) occur, then, subject to a limited exception for certain cash mergers, holders of the 2027 Notes may require the Company to repurchase their 2027 Notes at a cash repurchase price equal to the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A common stock.

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The 2027 Notes are valued as a single liability measured at amortized cost, which approximates fair value, as no other features require bifurcation and recognition as derivatives. The following table presents the outstanding principal amount and carrying value of the 2027 Notes as of the date indicated (in thousands):


	September 30,
	2022
Principal	$	115,000
Unamortized debt discount		(2,642)
Unamortized debt issuance costs		(701)
Net carrying value	$	111,657

The annual effective interest rate for the 2027 Notes was approximately 6.1%. Interest expense related to the 2027 Notes for the periods presented below are as follows (in thousands):


	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Coupon interest	$	1,739	$	2,686
Amortization of debt discount		186		218
Amortization of transaction costs		50		58
Total interest expense	$	1,975	$	2,962

Term Loan—In June 2018, the Company entered into a $20 million term loan for 36 months. The loan provided $10 million immediately funded with the additional $10 million available to be drawn in up to 3three draws of not less than $2 million for 12 months from close of the facility. The loan was interest-only for the full 36 months with the principal due at maturity in June 2021. Interest is calculated using the Wall Street Journal Prime rate (3.25% at September 30, 2021 and 3.25% at December 31, 2020) minus 0.5%, for a rate of 2.75% at September 30, 2021 and 2.75% at December 31, 2020, payable monthly in arrears. The outstanding loan was paid in full in June 2021. ~~As of September 30, 2021, the term loan has 0 outstanding balance.~~

PPP ~~Loan~~Loans— In connection with the acquisition of EnvisionTEC, the Company acquired $1.2 million in Paycheck Protection Program (the “PPP”) loans. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, ~~provides~~provided for loans to qualifying businesses. Under the terms of the CARES Act, PPP loan recipients ~~can~~could apply for forgiveness for all or a portion of the loan which is dependent upon the Company having initially qualified for the loan. Furthermore, the loan iswas subject to forgiveness to the extent loan proceeds are used for payroll costs, certain rents, utilities, and mortgage interest expense. The PPP loan ~~has~~had a maturity date of April 3, 2022 and an interest rate of 1%. Principal and interest are payable monthly commencing on a date determined by the lender following the determination of the amount of the PPP loan to be forgiven or potentially earlier, as determined under applicable Small Business Administration rules. The outstanding borrowings may be prepaid by the Company at any time prior to maturity with 0 prepayment penalties. On May 14, 2021, the outstanding loan ~~balance was~~balances were forgiven and the restricted cash that was held back from the initial purchase price in the event the loan was not forgiven was released to the seller. There ~~was 0~~is no outstanding PPP loan balance for EnvisionTEC as of ~~September 30, 2021.~~

In connection with the acquisition of Adaptive 3D, the Company acquired $0.3 million in PPP loans. As of September 30, 2021, $0.3 million of the PPP loans is recorded in current portion of long-term debt, net of deferred financing costs in the condensed consolidated balance sheets. Subsequent to September 30, 2021, $0.3 million of the loan was forgiven, and an immaterial loan remains outstanding.

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In connection with the acquisition of Dental Arts Labs, the Company acquired $3.4 million in PPP loans. On September 30, 2021, the entire balance of PPP loans was forgiven. There was 0 outstanding PPP loan balance for Dental Arts Labs as of September 30,December 31, 2021.

Bank Debt—In connection with the acquisition of A.I.D.R.O., the Company acquired 3three loans (“Bank Loans”) totaling $1.1 million in aggregate. The Bank Loans have term of 4.5 years and mature from September 2024 through September 2025, with interest rates ranging from 1.70% to 2.10%. Payments of principal and interest are made quarterly. During the three and nine months ended September 30, ~~2021,~~2022 the Company paid $~~0.2~~0.1 million and $0.3 million, respectively, and as of September 30, ~~2021 $0.9~~2022, $0.6 million remains outstanding. $0.2 million of the outstanding debt is recorded within current portion of long-term debt, net of deferred financing costs and ~~$0.7~~$0.4 million is recorded within long-term debt, ~~net of deferred financing costs~~ in the condensed consolidated balance sheets.

Equipment Financing Agreement—In connection with the acquisition of Dental Arts Labs, the Company acquired a thirteen-month equipment financing agreement (“Financing Agreement”) in the amount of $0.5 million. The Financing Agreement provided for an advance payment of $0.5 million to secure equipment for the Company. Payments are made monthly under the Financing ~~Agreement. During the three months ended September 30,~~Agreement upon acceptance, which had not yet occurred as of December 31, 2021. Subsequent to December 31, 2021, the Company ~~has made immaterial finance payments~~executed a delivery and acceptance certificate which commences payment. As of September 30, 2022, the ~~remaining~~outstanding financing agreement balance of ~~$0.5~~$0.2 million is recorded in current portion of long-term debt, net of deferred financing costs, in the condensed consolidated balance sheets. The Financing Agreement will mature in June 2023.

~~Deferred Financing Costs~~—In connection with the term loan borrowing, the Company incurred $0.1 million of expenses, which have been recorded as deferred financing costs. The Company amortizes these costs over the life of the borrowing. During the three months ended September 30, 2021 and 2020, the Company recorded immaterial interest expense related to the amortization of the financing costs. As of September 30, 2021, the there is 0 remaining unamortized balance of deferred financing costs. As of December 31, 2020, the remaining unamortized balance of deferred financing costs is immaterial, and is included as a component of current portion of long-term debt, net of deferred financing costs in the condensed consolidated balance sheets.

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~~14.~~15. OTHER NONCURRENT LIABILITIES

The following table summarizes the Company’s components of other noncurrent liabilities (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
Taxes payable	$	1,188	$	—	$	1,034	$	1,034
Acquisition consideration						1,250		1,750
Other		229		—		362		386
Total other noncurrent liabilities	$	1,417	$	—	$	2,646	$	3,170

~~15. LEASES~~

At September 30, 2021, the Company recorded $9.6 million as a right of use asset and $10.4 million as an operating lease liability. At December 31, 2020, the Company recorded $1.8 million as a right of use asset and $3.0 million as an operating lease liability. The Company assesses its right of use asset and other lease-related assets for impairment. There were 0 impairments recorded related to these assets during the three and nine months ended September 30, 2021, and the year ended December 31, 2020.

As a result of the acquisition of EnvisionTEC, the Company acquired operating, short-term, and finance leases for corporate offices, manufacturing and warehouse facilities, and machineries, increasing the Company’s right of use asset by $1.8 million. The operating leases consist of 5 real estate leases and 6 equipment leases with current terms extending from 2021 to 2024. The Company’s finance leases are immaterial as of September 30, 2021.

As a result of the acquisition of Adaptive 3D, the Company acquired operating leases for corporate offices, research and development, and manufacturing, increasing the Company’s right of use asset by $0.7 million. The operating leases consist of 2 real estate leases with current terms extending from 2024 to 2025.

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~~As a result of the acquisition of Aerosint,~~16. LEASES

Lessee

At September 30, 2022, the Company ~~acquired operating leases for corporate office and lab space,~~recorded $22.7 million as ~~well as company cars, increasing the Company’s~~a right of use asset ~~by $0.4 million. The~~and $23.6 million as an operating ~~leases consist of 1 real estate~~ lease ~~and 3 leases for company cars with current terms extending through 2025.~~

~~As a result of the acquisition of Dental Arts Labs,~~liability. At December 31, 2021, the Company ~~acquired operating leases for corporate office and laboratory space~~recorded $17.8 million as ~~well as warehouse facilities, increasing the Company’s~~a right of use asset ~~by $4.3 million.~~and $17.8 million as an operating lease liability. The ~~operating leases consist of 13 real estate leases with current terms extending through 2025.~~

~~As a result of the acquisition of A.I.D.R.O., the~~ Company ~~acquired operating and finance leases for corporate office space, research and development, and manufacturing, increasing the Company’s~~assesses its right of use asset ~~by $0.9 million. The term of~~and other lease-related assets for impairment. There were no impairments recorded related to these assets during the ~~finance lease extends to 2030.~~three and nine months ended September 30, 2022 and the year ended December 31, 2021.

The Company reviews all supplier, vendor, and service provider contracts to determine whether any service arrangements contain a lease component. The Company identified 2two service agreements that contain an embedded lease. The agreements do not contain fixed or minimum payments, and the variable lease expense was immaterial during the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Information about other lease-related balances is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Lease cost
Operating lease cost	$	593		$	187		$	1,338		$	561		$	1,507		$	593		$	4,286		$	1,338
Finance lease cost		1			—			2			—			22			1			64			2
Short‑term lease cost		37			—			82			3			31			37			101			82
Variable lease cost		46			18			131			30			54			46			176			131
Total lease cost	$	677		$	205		$	1,553		$	594		$	1,614		$	677		$	4,627		$	1,553
Other Information
Operating cash flows used in operating leases	$	673		$	269		$	1,572		$	805		$	1,580		$	673		$	4,675		$	1,572
Operating cash flows used in finance leases		2			—			4			—			16			2			56			4
Weighted‑average remaining lease term—operating leases (years)		4.8			3.5			4.8			3.5			12.8			4.8			12.8			4.8
Weighted‑average remaining lease term—finance leases (years)		8.5			—			8.5			—			7.8			8.5			7.8			8.5
Weighted‑average discount rate—operating leases		4.2	%		7.6	%		4.2	%		7.6			4.5	%		4.2	%		4.5	%		4.2	%
Weighted‑average discount rate—finance leases		1.5	%		—	%		1.5	%		—	%		3.1	%		1.5	%		3.1	%		1.5	%

The rate implicit in the lease is not readily determinable in most of the Company’s leases, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

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Future minimum lease payments under noncancelable operating leases, including immaterial future minimum lease payments under finance leases, at September 30, ~~2021,~~2022, are as follows (in thousands):


	Operating Leases		Finance Leases		Operating Leases		Finance Leases
2021 (remaining 3 months)	$	738	$	1
2022		2,943		77
2022 (remaining 3 months)					$	1,604	$	19
2023		2,741		78		6,180		75
2024		1,319		75		4,797		71
2025		780		75		4,043		70
2026 and after		2,097		484
2026						3,550		70
2027 and after						6,281		356
Total lease payments		10,618		790		26,455		661
Less amount representing interest		(929)		—		(2,824)		(83)
Total lease liability		9,689		790		23,631		578
Less current portion of lease liability		(2,619)		(58)		(5,363)		(58)
Lease liability, net of current portion	$	7,070		732	$	18,268	$	520

~~As of September 30, 2021,~~In February 2022, the Company ~~has an operating~~amended its existing facility lease for ~~corporate office space of $1.2 million that has not yet commenced. This~~the ExOne European headquarters and operating ~~lease will commence~~facility in Gersthofen, Germany, extending the ~~fourth quarter of 2021 and has a~~ lease term ~~of 5 years.~~set to expire in December 2022 through December 2027, with the option to extend for two additional five-year extension periods. The rent is fixed through December 31, 2024 for an aggregate annual rent totaling $1.7 million, plus applicable taxes and is subject to adjustment on an annual basis thereafter (in accordance with the consumer price index for Germany) through December 31, 2027.

~~16.~~Lessor

The Company leases machinery and equipment to customers (principally 3D printing machines and related equipment) under lease arrangements classified as either operating leases or sales-type leases. At September 30, 2022, the Company estimated that the total fair market value approximated the related net book value of the machinery and equipment held under the Company’s operating lease arrangements. The Company’s net investment in sales-type lease arrangements at September 30, 2022 is immaterial and is recorded in prepaid expense and other current assets in the consolidated balance sheets. There was no net investment in sales-type lease arrangements at September 30, 2021.

The Company recognized the following components under operating and sales-type lease arrangements in the accompanying consolidated statements of operations and comprehensive loss for the periods indicated:


		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
		Operating		Sales-type		Operating		Sales-type		Operating		Sales-type		Operating		Sales-type
Revenue	$	70	$	—	$	—	$	—	$	287	$	—	$	—	$	—
Interest Income ⁽¹⁾		—		6		—		—		—		23		—		—

⁽¹⁾ Interest income related to sales-type leases is recorded as a component of revenue in the consolidated statements of operations and comprehensive loss for each of the periods presented.

The Company’s net investment in sales-type leases consisted of the following:


	Nine Months Ended September 30,
	2022		2021
Future minimum lease payments receivable	$	342	$	—
Less: Allowance for doubtful accounts		—		—
Net future minimum lease payments receivable		342		—
Less: Unearned interest income		(16)		—
Net investment in sales-type leases	$	326	$	—

The Company did not record any provisions for bad debt related to lessees during the three and nine months ended September 30, 2022.

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Future minimum lease receipts of non-cancellable operating and sales-type lease arrangements as of September 30, 2022 were as follows:


	Operating		Sales-type
2022 (remaining three months)	$	—	$	68
2023		—		274
2024		—		—
2025		—		—
2026		—		—
Thereafter		—		—
Total minimum lease payments	$	—	$	342
Less: Allowance for doubtful accounts				—
Less: Present value discount				(16)
Future minimum lease payments receivable			$	326

17. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may face legal claims or actions in the normal course of business. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings. While the outcome of these claims cannot be predicted with certainty, management does not believe the outcome of any current legal proceedings will have a material adverse impact on the Company’s condensed consolidated financial statements.

Between September 2021 and the closing of the ExOne Merger on November 12, 2021, twelve putative class action complaints were filed by purported ExOne shareholders against ExOne and the former ExOne Board of Directors alleging violations of federal securities laws in connection with the S-4 filed by ExOne for the ExOne Merger. All have been dismissed.

On November 8, 2021, another purported stockholder, Leo Lissoq Goldstein, filed a Section 220 complaint in Delaware Chancery Court against ExOne (Goldstein v. The ExOne Company, Case No. 2021-0958-KSJM). Mr. Goldstein seeks to discover certain books and records of the company related to the ExOne Merger purportedly in order to investigate, among other things, the events leading up to and the disclosures made in connection with the ExOne Merger. Mr. Goldstein has also moved to intervene and stay the Campanella action, discussed below, until his Section 220 action is complete.

On November 22, 2021, purported stockholder Pietro Campanella filed a class action lawsuit against ExOne, Desktop Metal, Inc., and former ExOne directors and officers alleging breach of fiduciary duties and aiding and abetting breach of fiduciary duties in connection with the ExOne Merger (Campanella v. The ExOne Company et al., Case No. 2021-1013, Case No. 2021-1013-LWW). In particular, Mr. Campanella alleges that ExOne’s proxy statement and supplemental disclosures did not adequately disclose information related to a whistleblower investigation at one of Desktop Metal’s subsidiaries, EnvisionTEC, and the resignation of EnvisionTEC’s CEO.

As previously disclosed, on December 21, 2021, January 14, 2022, February 2, 2022 and February 22, 2022, four alleged shareholders of Desktop Metal stock filed purported securities class action complaints in the United States District Court for the District of Massachusetts. (Luongo v. Desktop Metal, D. Mass., Case No. 1:21-cv-12099-IT; Hathaway v. Desktop Metal, D. Mass., Case No. 1:22-cv-10059-IT; Guzman-Martinez v. Desktop Metal, D. Mass, Case No. 1:22-cv-10173, Xie v. Desktop Metal, Case No. 1:22-cv-10297-IT). Each complaint alleges that Desktop Metal and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities and Exchange Act by making false or misleading statements regarding EnvisionTEC’s manufacturing and product compliance practices and procedures. On February 4, 2022, the court issued an order consolidating the first three District of Massachusetts securities class actions. On July 7, 2022, the court appointed Sophia Zhou lead plaintiff for the class period of February 17, 2021 through November 15, 2021. The court also vacated its earlier order consolidating the Xie action with the other lawsuits and

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will allow that action to proceed separately, with a new notice to investors, based on a class period of January 15, 2021 to February 16, 2021. On September 29, 2022, the Court re-consolidated the Xie action with the other actions for all pre-trial proceedings.

As previously disclosed, on July 12, 2022, two alleged shareholders of Desktop Metal stock filed derivative actions purportedly on behalf of Desktop Metal in the United States District Court for the District of Massachusetts. (Keyser v. Fulop, et al., Case No. 1:22-cv-11117; Qi v. Fulop, et al., Case No. 1:22-cv-1118). On July 22, 2022, an alleged shareholder of Desktop Metal stock filed a similar derivative complaint in the United States District Court for the District of Delaware (Cherry v. Fulop, et al., Case No. 1:22-cv-00962). The complaints allege that certain officers and directors of Desktop Metal caused harm to the Company by violating Section 14(A) of the Exchange Act and SEC Rule 14a-9 and breaching their fiduciary duties by making false or misleading statements regarding EnvisionTEC’s manufacturing and product compliance practice and procedures.

The Company believes that these complaints are all without merit and intends to defend against them vigorously.

Commitments

The Company has entered into legally binding agreements with certain suppliers to purchase materials used in the manufacturing of the Company’s products. As of September 30, ~~2021,~~2022, the Company had outstanding purchase orders with contract manufacturers in the amount of ~~$32.6~~$61.0 million which are not included in the condensed consolidated balance sheets.

The Company has also entered into licensing and royalty agreements with certain manufacturing and software companies and universities related to the use of patented technology. Under the terms of each agreement, the Company has made initial, one-time payments of $0.3 million and is obligated to pay a set percentage, ranging from ~~2.75%~~1.0% - 13%, of all consideration received by the Company for sales of related products and services, until the agreements are terminated at various dates through 2037. The Company’s aggregate minimum annual commitment under these contracts is ~~$0.5~~$0.3 million. During the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded immaterial licensing and royalty fees.

~~17.~~As a result of the acquisition of ExOne, the Company assumed short-term financial guarantees and letters of credit. Within the Company’s normal course of operations, it issues these short-term financial guarantees and letters of credit through a credit facility with a German bank to third parties in connection with certain commercial transactions requiring security. The credit facility provides a capacity amount of $4.0 million for the issuance of financial guarantees and letters of credit for commercial transactions requiring security. The credit facility does not require cash collateral for the issuance of financial guarantees and letters of credit for commercial transactions requiring security for amounts up to $1.1 million. Amounts in excess of $1.1 million require cash collateral under the credit facility.

At September 30, 2022, total outstanding financial guarantees and letters of credit issued by the Company under the credit facility were $4.0 million, of which $1.9 million have expiration dates ranging from August 2022 to March 2023, and the remaining $2.1 million with no expiration date. At September 30, 2022, cash collateral of $3.5 million was required for financial guarantees and letters of credit issued under the credit facility, and is included in current portion of restricted cash in the consolidated balance sheets.

18. INCOME TAXES

The Company’s provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate primarily due to valuation allowances on its deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be ~~realized, as well as~~realized. During the ~~partial release~~three and nine months ended September 30, 2022, the Company recorded an income tax expense of ~~the valuation allowance related to the EnvisionTEC~~$0.6 million and ~~Adaptive 3D acquisitions.~~an income tax benefit of $1.6 million, respectively. During the three and nine months ended September 30, 2021, the Company recorded an income tax benefit of $0.5 million and $32.8 million, respectively. ~~There was 0 income tax benefit for the three and nine months ended September 30, 2020.~~

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based

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upon the differences between the consolidated financial statements carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the years in which the differences are expected

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to reverse. The Company has provided a full valuation allowance against the net deferred tax assets as the Company has determined that it was more likely than not that the Company would not realize the benefits of federal and state net deferred tax assets.

As a result of the recent acquisitions of EnvisionTEC and Adaptive 3D, the Company recorded a U.S. deferred tax liability related to non-tax-deductible intangible assets recognized in the financial statements. The acquired deferred tax liability is a source of income to support recognition of the Company’s existing deferred tax assets. Accordingly, the Company recorded an income tax benefit of $0.5 million and $32.8 million for the release of the valuation allowance related to the acquired intangibles in the three and nine months ended September 30, ~~2021, respectively.~~

The Company provides reserves for potential payments of taxes to various tax authorities related to uncertain tax positions. Amounts recognized are based on a determination of whether a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be sustained on audit. The amount associated with uncertain tax positions are recorded as a component of income tax expense. As of September 30, ~~2021,~~2022, the Company has accrued uncertain tax positions of approximately ~~$1.2~~$1.0 million related to the EnvisionTEC acquisition. The amounts relate to U.S. state and foreign tax positions.

Included in the balance of unrecognized tax benefits as of September 30, ~~2021~~2022 are amounts that, if recognized, would impact the effective tax rate. As of December 31, ~~2020,~~2021, the ~~Company has not identified any~~company accrued uncertain tax positions ~~for which reserves would be required.~~of approximately $1.0 million related to the EnvisionTEC acquisition.

~~18.~~19. STOCKHOLDERS’ EQUITY

As of September 30, ~~2021,~~2022, the Company’s authorized shares consisted of 500,000,000 shares of Class A Common Stock, $0.0001 par value per share (the “Common Stock”) and 50,000,000 shares of Preferred Stock, $0.0001 par value per share (the “Preferred Stock”).

During 2015, the Company issued 34,010,977 shares of Common Stock to the initial founders and certain employees of the Company at a purchase price of $0.0001 per share. These shares are fully vested.

~~Common Stock Warrants~~

In May 2017, the Company entered into a strategic collaboration agreement with an investor allowing the investor’s resellers to sell and distribute the Company’s products. In consideration for this agreement, the Company agreed to issue warrants to purchase up to 2,442,440 shares of Common Stock. The investor was eligible to receive a warrant to purchase 1 share of Common Stock for every $35.00 in revenue generated by the Company from the investor’s resellers. Each warrant was issued at an exercise price equal to $3.34 per share (subject to appropriate adjustment in the event of a stock dividend, stock split, combination, or other similar recapitalization) and was set to expire on December 31, 2027. The Company issued 0 warrants during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, the Company issued 399,960 warrants and recorded immaterial expense related to the fair value of the warrants, calculated using the Black-Scholes warrant-pricing model with the following assumptions:

Nine Months Ended

September 30, 2020

Risk‑free interest rate

2.0
%
Expected volatility

52.5
%
Expected life (in years)

7.8

Expected dividend yield

—

Fair value of Common Stock

$
3.34

~~756,498 warrants were converted to 447,938 shares of Common Stock through a cashless exercise in connection with the Business Combination.~~

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Trine Warrants

In Trine’s initial public offering, it sold units at a price of $10.00 per unit, which consisted of 1one share of Common Stock, $0.0001 par value, and one-half of a redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase 1one share of Common Stock at a price of $11.50 per share and became exercisable as of 30 days from the date of the Business Combination. Unless earlier redeemed, the Public Warrants will expire five years from the completion of the Business Combination. The Company may redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, and only in the event that the last sale price of the Company’s Common Stock is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which notice of redemption is given. If the Company redeems the Public Warrants as described above, it will have the option to require all Public Warrant holders that wish to exercise to do so on a “cashless basis”. On February 26, 2021, the Company delivered a notice to redeem all of its outstanding Public Warrants that remain unexercised at 5:00 p.m. New York City time on March 29, 2021. During 2021, Public Warrants for 14,840,589 shares of the Company’s Common Stock were exercised for cash, resulting in the Company receiving net proceeds of $170.7 million. On March 29, 2021, the 166,905 outstanding Public Warrants were redeemed by the Company for $0.01 per Public Warrant. Effective March 29, 2021, all of the Public Warrants were exercised or redeemed.

The Warrant Agreement, dated as of March 14, 2019, by and between the Company and Continental Stock Transfer & Trust Company also obligated the Company to use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants, and to cause the same to become effective and remain effective while the Public Warrants remain outstanding. On February 4, 2021, the Company’s registration statement covering such shares became effective.

Simultaneously with the consummation of Trine’s initial public offering, Trine Sponsor IH, LLC (the “Sponsor”) purchased an aggregate of 8,503,000 warrants to purchase 1one share of Common Stock at an exercise price of $11.50 (the “Private Placement Warrants”) at a price of $1.00 per warrant ($8,503,000) in the aggregate in a private placement.

The Private Placement Warrants are identical to the Public Warrants except that the Private Placement Warrants are not redeemable by Desktop Metal, and may be exercised for cash or on a cashless basis so long as they are held by the Sponsor or any of its permitted transferees. Additionally, pursuant to the terms of the amended and restated registration rights agreement entered in connection with the Business Combination, the Sponsor had the right to have the resale of the shares of Common Stock acquired upon

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exercise of the Private Placement Warrants registered under the Securities Act. On February 4, 2021, the Company’s registration statement covering such shares became effective.

On February 24, 2020, Trine issued an unsecured promissory note (the “2020 Note”) to the Sponsor. The 2020 Note bore no interest and was repayable in full upon consummation of the Business Combination. The Sponsor had the option to convert any unpaid balance of the 2020 Note into warrants equal to the principal amount of the 2020 Note so converted divided by $1.00. Upon closing of the Business Combination, the 2020 Note was converted into a Private Placement Warrant for 1,500,000 shares of Common Stock, with an exercise price of $11.50. The terms of these warrants are identical to the terms of the Private Placement Warrants. Pursuant to the terms of the amended and restated registration rights agreement entered in connection with the Business Combination, the Sponsor had the right to have the resale of the shares of Common Stock acquired upon exercise of such warrant registered under the Securities Act. On February 4, 2021, the Company’s registration statement covering such shares became effective.

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The Company’s Private Placement Warrants are classified as liabilities, and are measured at fair value through earnings. During ~~the three~~nine months ended September 30, ~~2021,~~2022, the Company recorded 0no gain or loss related to the change in fair value of the private placement warrants. During the nine months ended September 30, ~~2021~~ 2021, the Company recorded a $56.6 million loss related to the change in fair value of the Private Placement Warrants, which were remeasured through the date of each exercise, calculated using the Black-Scholes warrant pricing model with the following assumptions:


	Nine Months Ended			Nine Months Ended
	September 30, 2021			September 30, 2021
Risk‑free interest rate		0.4% – 0.6	%		0.4% – 0.6	%
Expected volatility		55.0	%		55.0	%
Expected life (in years)		4.8			4.8
Expected dividend yield		—			—
Fair value of Common Stock	$	19.82 – 30.49		$	19.82 – 30.49
Exercise price	$	11.50		$	11.50

All of the Private Placement Warrants were exercised on a cashless basis prior to March 2, 2021, and an aggregate of 5,850,346 shares of the Company’s Common Stock were issued in connection with these exercises. Effective March 2, 2021, all Private Placement Warrants were exercised.

~~19.~~20. STOCK BASED COMPENSATION

~~Stock Incentive Plan~~—In 2015, the Board of Directors approved the adoption of the 2015 stock incentive plan (the “2015 Plan”). The 2015 Plan allowed for the award of incentive and nonqualified stock options, restricted stock, and other stock-based awards to employees, officers, directors, consultants, and advisers of the Company. Awards could be made under the 2015 Plan for up to 26,283,789 shares of Common Stock. Option awards expire 10 years from the grant date and generally vest over four years; however, vesting conditions can vary at the discretion of our Board of Directors.

As part of the acquisition of Make Composites, Inc. (“Make”) in 2019, the Company assumed the 2018 equity incentive plan of Make (the “Make Plan”). The Make Plan allows for the award of incentive and nonqualified stock options and warrants for those employees and contractors that were hired as part of the acquisition. The Make Plan allowed for 232,304 options and warrants to be issued, which were issued in 2019, with 0no additional options to be issued in the future. Option awards expire 10 years from the grant date and generally vest over four years; however, vesting conditions can vary at the discretion of our Board of Directors.

In December 2020, the Board of Directors and stockholders of the Company approved the adoption of the 2020 Incentive Award Plan (the “2020 Plan” and together with the 2015 Plan and the Make Plan, the “Plans”), which became effective on the date of the Business Combination. Upon effectiveness of the 2020 Plan, the Company ceased granting new awards under the 2015 Plan.

The 2020 Plan allows for the award of incentive and nonqualified stock options, restricted stock, and other stock-based awards to employees, officers, directors, consultants, and advisers of the Company. The number of shares of common stock initially available for issuance under the 2020 Plan was 12,400,813 shares of common stock plus the number of shares subject to awards outstanding under the 2015 Plan that expire, lapse, terminate, or are exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited. In addition, the number of shares of common stock available for issuance under the 2020 Plan is

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subject to an annual increase on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030 equal to the lesser of (i) 5% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the ~~Board.~~Board of Directors. On January 1, ~~2021, 11,337,837~~2022, 15,573,698 shares were added as available for issuance to the ~~plan.~~2020 Plan.

Stock Options

The ~~Company grants~~option activity of the Plans for the nine months ended September 30, 2022, is as follows (shares in thousands):


				Weighted-Average
		Weighted-Average		Remaining	Aggregate
	Number of	Exercise Price		Contractual Term	Intrinsic Value
	Shares	per Share		(in years)	(in thousands)
Outstanding at January 1, 2022	13,249	$	1.73	7.23	$	42,775
Granted	—	$
Exercised	(2,168)	$	1.40
Forfeited/expired	(2,061)	$	1.47
Outstanding at September 30, 2022	9,020	$	1.87	6.31	$	7,478
Options vested at September 30, 2022	7,313	$	1.94	6.00	$	5,554
Options vested or expected to vest at September 30, 2022	9,000	$	1.87	6.31	$	7,456

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2022 and 2021, was $4.6 million and $49.6 million, respectively.

The total stock-based compensation expense related to stock options ~~at exercise prices deemed by~~was $0.3 million and $2.2 million during the Board of Directors to be equal to the fair value of the Common Stock at the time of grant. The fair value of Common Stock has been determined by the Board of Directors of the Company at each stock option measurement date based on a variety of different factors, including the results obtained from independent third-party appraisals, the Company’s consolidated financial positionthree and ~~historical financial performance, the status of technological development within the Company, the composition~~nine months ended September 30, 2022, respectively, and ~~ability of the current engineering~~$1.0 million and management team, an evaluation and benchmark of the Company’s competition, the current climate in the marketplace, the illiquid nature of the Common Stock, arm’s-length sales of the Company’s capital stock, and the prospects of a liquidity event, among others.

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~~During~~$3.4 million during the three and nine months ended September 30, 2021, respectively. Total unrecognized stock-based compensation expense related to unvested stock options at September 30, 2022, aggregated $3.1 million and is expected to be recognized over a weighted-average period of 1.8 years.

Performance-Based Stock Options (included above)

During the year ended December 31, 2020, 560,256 performance-based stock options were granted to key employees of the Company. These awards vest upon the achievement of certain performance milestones by the Company ~~did 0t grant any~~and prescribed service milestones by the employee. During the year ended December 31, 2021, 83,958 performance-based stock options were forfeited due to ~~purchase shares of Common Stock to employees.~~employee termination. During the three ~~and~~months ended September 30, 2022, no performance-based stock options were forfeited or expired. During the nine months ended September 30, ~~2020,~~2022, 290,038 performance-based stock options were forfeited due to employee termination and the remaining 186,260 performance-based stock options outstanding expired without vesting as the performance milestones were not achieved by the Company. As of September 30, 2022 no unrecognized compensation cost remains.

Assumed Stock Options (included above)

In connection with the acquisition of ExOne, the Company ~~granted~~assumed 86,020 unvested stock options ~~to purchase 2,269,131~~which are considered post-combination expense and ~~6,925,144 shares of Common Stock to employees with fair values of $26.1 million and $29.8 million, respectively, calculated~~were valued using the Black-Scholes option-pricing model with the following assumptions:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2020

Risk‑free interest rate

0.3 % – 1.7
%

0.3 % – 1.7
%
Expected volatility

52.7 % – 54.2
%

52.7 % – 54.2
%
Expected life (in years)

5.9 – 6.3

5.9 – 6.3

Expected dividend yield

—

—

Fair value of Common Stock

$
3.34

$
3.34

During the three and nine months ended September 30, 2021, the Company did 0t grant any options to purchase shares of Common Stock to non-employees. During the three months ended September 30, 2020, the Company did 0t grant any options to purchase shares of Common stock to non-employees. During the nine months ended September 30, 2020, the Company granted options to purchase 12,212 shares of Common Stock to non-employees with a fair value of $0.1 million, calculated using the Black-Scholes option-pricing model with the following assumptions:


	Nine Months Ended
	September 30, 2020				As of November 12, 2021
Risk‑free interest rate		0.8	%		0.5% – 0.8	%
Expected volatility		54.3	%		57.2% – 59.4	%
Expected life (in years)		10.0			1.0 – 2.8
Expected dividend yield		—			—
Fair value of Common Stock	$	3.34		$	8.61

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of the related stock options. The expected life of stock options was calculated using the average of the contractual term of the option and the weighted-average

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vesting period of the option, as the Company does not have sufficient history to use an alternative method to the simplified method to calculate an expected life for employees. The Company has not paid a dividend and is not expected to pay a dividend in the foreseeable future. Expected volatility for the Common Stock was determined based on an average of the historical volatility of a peer group of similar public companies.

AtRestricted Stock Awards

In connection with acquisitions, the Company has granted restricted stock awards (“RSAs”) that are considered post-combination expense and accounted for as stock-based compensation as the shares vest.

The activity for stock subject to vesting as of September 30, 2022, is as follows (shares in thousands):


	Shares Subject	Weighted-Average
	to Vesting	Grant Date Fair Value
Balance of unvested shares as of January 1, 2022	264	$ 7.79
Cancelled/Forfeited	(5)	$ 8.78
Vested	(136)	$ 6.85
Balance of unvested shares as of September 30, 2022	123	$ 8.78

The total stock-based compensation expense related to RSAs was $0.2 million and $0.8 million during the three and nine months ended September 30, 2022, respectively, and $2.3 million and $2.7 million during the three and nine months ended September 30, 2021, respectively. As of September 30, 2022, the total unrecognized stock-based compensation expense related to unvested ~~stock options aggregated $8.8 million. The costs are~~RSAs is $1.0 million, and is expected to be recognized over a weighted-average period of ~~2.7~~1.4 years.

There were 17,933,802 shares available for award under the 2020 Plan at September 30, 2021. The option activity of the Plans for the nine months ended September 30, 2021, is as follows (shares in thousands):

Weighted-Average

Weighted-Average

Remaining

Aggregate

Number of

Exercise Price

Contractual Term

Intrinsic Value

��
Shares

per Share

(in years)

(in thousands)
Outstanding at January 1, 2021

19,553

$
1.53

7.75

$
306,408
Granted

—

$
—

Exercised

(4,462)

$
1.17

Forfeited/expired

(591)

$
1.45

Outstanding at September 30, 2021

14,500

$
1.64

7.32

$
80,166
Options vested at September 30, 2021

9,062

$
1.72

6.50

$
49,349
Options vested or expected to vest at September 30, 2021

13,942

$
1.65

7.26

$
76,947

The weighted-average grant-date fair value for options granted during the nine months ended September 30, 2020 was $0.98. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020, was $49.6 million and $1.7 million, respectively.

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Restricted Stock Units~~—RSUs~~

Restricted Stock Units (“RSUs”) awarded to employees and non-employees generally vest over four years from the anniversary date of the grant, with ~~1-year~~one-year cliff vesting and ~~monthly~~quarterly vesting thereafter, provided service with the Company is not terminated. The fair value of RSUs is equal to the estimated fair market value of the Company’s Common Stock on the date of grant. Total unrecognized compensation costs related to unvested RSUs at September 30, 2021 was approximately $90.1 million and is expected to be recognized over a period of 3.5 years. The total expense recognized during the three and nine months ended September 30, 2021 was $6.7 million and $10.1 million, respectively.

RSU activity under the 2020 Plan for the nine months ended September 30, ~~2021~~2022, is as follows (shares in thousands):


	Shares Subject	Weighted-Average	Shares Subject	Weighted-Average
	to Vesting	Grant Date Fair Value	to Vesting	Grant Date Fair Value
Balance of unvested shares as of January 1, 2021	683	$ 8.02
Balance of unvested shares as of January 1, 2022			16,395	$ 7.54
Granted	7,983	$ 12.53	8,736	$ 3.56
Vested	(304)	$ 11.63	(3,248)	$ 11.05
Cancelled/Forfeited	(51)	$ 13.01	(2,851)	$ 7.50
Balance of unvested shares as of September 30, 2021	8,311	$ 12.24
Balance of unvested shares as of September 30, 2022			19,032	$ 5.12

The total stock-based compensation expense related to RSUs was $11.6 million and $38.2 million during the three and nine months ended September 30, 2022, respectively, and $6.7 million and $10.1 million during the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2022, per the terms of an acquisition agreement, the Company accelerated 895,044 RSUs for certain key employees in connection with their termination, resulting in stock compensation expense of $7.3 million. Total unrecognized compensation costs related to unvested RSUs at September 30, 2022, is $80.9 million and is expected to be recognized over a period of 2.8 years.

RSUs include awards that vest subject to certain performance and market-based criteria.

Performance-Based Restricted Stock ~~Awards~~—Units (included above)

During the year ended December 31, 2021, 670,000 performance-based RSUs were granted to key employees of the Company. These awards vest upon the achievement of certain performance milestones by the Company and prescribed service milestones by the employee. No performance-based RSUs vested during the year ended December 31, 2021. During the year ended December 31, 2021,

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120,000 awards expired due to performance milestones not being achieved. During the three and nine months ended September 30, 2022, no performance-based RSUs vested. During the three months ended September 30, 2022, no performance-based RSUs were forfeited. During the nine months ended September 30, 2022, 400,000 performance-based RSUs were forfeited due to employee termination. As of September 30, 2022, 150,000 performance-based RSUs remain outstanding.

During the year ended December 31, 2020, 124,300 performance-based RSUs were granted to a key employee of the Company. This award vests upon the achievement of certain performance milestones by the Company and prescribed service milestones by the employee. No performance-based RSUs vested during the year ended December 31, 2021, or during the three and nine months ended September 30, 2022. As of September 30, 2022, 124,300 performance-based RSUs remain outstanding.

Market-Based Restricted Stock Units (included above)

In ~~connection~~October 2021 the Compensation Committee of the Company’s Board of Directors awarded certain executive officers a total of up to 9,070,269 market-based RSUs. These RSUs will vest and result in the issuance of shares of Common Stock based on continuing employment and the achievement of certain market conditions set by the Company.

The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the RSUs granted in October 2021. The fair value is recorded as stock compensation expense in the consolidated statements of operations over the period from the date of grant to October 2026 regardless of the actual outcome achieved.

The table below sets forth the assumptions used to value the market-based awards and the estimated grant-date fair value:


	October 2021
	Awards
Risk-free interest rate		1.3	%
Expected dividend yield		—	%
Remaining performance period (in years)		7.0
Expected volatility		55.0	%
Estimated grant date fair value (per share)	$	0.98 – 4.95
Target performance (number of shares)		9,070,269

During the year ended December 31, 2021, one of the executive officers resigned from the Company, forfeiting his market-based RSUs. The service condition was not met prior to his resignation, so no stock-based compensation expense was recorded for this award. No market-based RSUs vested or were forfeited during the three and nine months ended September 30, 2022. As of September 30, 2022, 6,802,702 market-based RSUs remain outstanding.

Liability-Classified Share-Based Arrangement

During the year ended December 31, 2021, the Compensation Committee of the Company’s Board of Directors provided performance goals and achievement criteria to certain key employees. If these performance criteria were met, the Company committed to issue RSUs with ~~acquisitions,~~a target fair value of $8.5 million on the future grant date. The awards were to vest upon prescribed service milestones of the employee subsequent to the achievement of the specified performance criteria. During the nine months ended September 30, 2022, the designated employees terminated employment and the liability-classified awards were forfeited. As of September 30, 2022, there is no fair value associated with these awards. The liability-classified awards have been excluded from the potentially dilutive securities table.

Bonus Program

In June 2022, the Compensation Committee approved an amendment to the Company’s bonus program ("2022 Bonus Program"). Certain employees were granted dollar bonus amounts, which are to be paid out in RSUs. The number of RSUs awarded will be determined using the closing price of the Company's Common Stock on the date of the Board's final certification of the Company's performance attainment and awards to be issued to each employee.

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The Company has accounted for these awards as liability-based awards, since the monetary value of the obligation associated with the award is based predominantly on a fixed monetary amount known at inception, and it has an unconditional obligation that it must or may settle by issuing a variable number of its equity shares. The Company will recognize stock-based compensation expense over the employees’ requisite service period, based on the expected attainment of the Company-wide targets. As of September 30, 2022, the Company has ~~issued shares~~accrued $3.4 million associated with these awards, which is recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets. The Company has recorded stock-based compensation expense of ~~restricted stock~~$1.2 million and $3.4 million for the three and nine months ended September 30, 2022, which includes the reclassification of $1.2 million bonus expense recorded during the three months ended March 31, 2022, that ~~are considered post-combination expense and accounted for~~was not previously classified as stock-based compensation asexpense prior to the ~~shares vest.~~amendment of the 2022 Bonus Plan.

~~The activity for stock subject to vesting as of September 30, 2021 is as follows (shares in thousands):~~Stock-Based Compensation Expense

Shares Subject

Weighted-Average


to Vesting

Grant Date Fair Value
Balance of unvested shares as of January 1, 2021

280

$ 4.08
Issuance of additional shares

476

$ 8.78
Vested

(408)

$ 6.84
Balance of unvested shares as of September 30, 2021

348

$ 7.27

~~At September 30, 2021, the remaining weighted-average vesting period for the stock subject to vesting was 1.8 years.~~

Total stock-based compensation expense related to all of the Company’s stock-based awards granted is reported in the ~~condensed~~ consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Research and development(1)	$	4,450	$	893	$	7,205	$	2,176	$	4,355	$	4,450	$	21,872	$	7,205
General and administrative expense		3,138		616		5,332		1,070		3,899		3,138		11,681		5,332
Sales and marketing expense		1,732		294		2,653		715		3,052		1,732		5,725		2,653
Cost of sales		631		92		977		267		734		631		1,892		977
Total stock-based compensation expenses	$	9,951	$	1,895	$	16,167	$	4,228
Total stock-based compensation expense									$	12,040	$	9,951	$	41,170	$	16,167

⁽¹⁾ Includes $7.3 million of stock-based compensation expense during the nine months ended September 30, 2022, incurred in connection with the Initiative described in Note 24. Restructuring Charges.

~~20. RELATED PARTY TRANSACTIONS~~

~~As a result of~~During the ~~acquisition of EnvisionTEC,~~three and nine months ended September 30, 2022, the Company ~~entered into certain agreements with entities affiliated with Mr. El Siblani, a director~~recognized $1.2 million and ~~executive officer of the Company.~~

The Company is the lessee in a lease agreement with ATMRE, LLC, a leasing company, in which Mr. El Siblani is the sole member, for the Dearborn, Michigan facility utilized by EnvisionTEC. This lease extends through December 31, 2023. As of September 30, 2021, the Company recorded $0.5$3.4 million of ~~right of use asset and lease~~ stock-based compensation expense associated with liability. classified awards related to the 2022 Bonus Program. During the three and nine months ended September 30, 2021, the Company ~~paid immaterial lease~~did not recognize any stock-based compensation expense ~~to AMTRE, LLC. The Company’s annual commitment to AMTRE, LLC is $0.2 million.~~associated with liability classified awards.

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~~The Company is~~There were 21,447,243 shares available for award under the lessee in a lease agreement JES Besitzgesellschaft GmbH, a leasing company that is controlled by members of the immediate family of Mr. El Siblani, for facilities located in Gladbeck, Germany utilized by EnvisionTEC. As of2020 Plan at September 30, ~~2021, the Company recorded $0.2 million of right of use asset and lease~~ 2022.

~~liability~~. During the three and nine months ended September 30, 2021, the Company paid immaterial lease expense to JES Besitzgesellschaft GmbH. The Company’s annual commitment to JES Besitzgesellschaft GmbH is $0.1 million.

The Company is the lessee in a lease agreement with Sitraco (UK) Limited, a leasing company that is controlled by Mr. El Siblani, for an additional facility located in Gladbeck, Germany utilized by EnvisionTEC. As of September 30, 2021, the Company recorded $0.2 million of right of use asset and lease ~~liability~~. During the three and nine months ended September 30, 2021, the Company paid immaterial lease expense to Sitraco (UK) Limited. The Company’s annual commitment to Sitraco (UK) Limited is $0.1 million.

The Company has a distribution agreement with Sibco Europe Ltd., a distributor based out of the United Kingdom. Mr. El Siblani is Managing Director of and sole shareholder of Sibco Europe Ltd. The Company did not have any sales to Sibco Europe Ltd. for the period ended September 30, 2021. In addition, Sibco Europe Ltd. provides sales and marketing support for EnvisionTEC GmbH. At September 30, 2021, the Company did not have accounts receivable or accounts payable due to or from Sibco Europe Ltd.

The Company also has an agreement with E3D Technology, a wholly-owned subsidiary of Sibco Europe Ltd., for services including research and development, maintenance, and marketing services. As part of the agreement, the Company also pays a fee for overhead at the facilities where these contracted services are being performed. During the three and nine months ended September 30, 2021, the Company paid immaterial service expense to E3D Technology.21. RELATED PARTY TRANSACTIONS

As a result of the acquisition of Dental Arts Labs, the Company assumed certain lease agreements with a related party for facilities in Peoria, Illinois used for research and development and administrative purposes. As of September 30, ~~2021,~~2022, the Company recorded ~~$3.7~~$3.3 million of right of use asset and lease ~~liability.~~liability. During the three and nine months ended September 30, ~~2021,~~2022, the Company paid lease expense of $0.1 million and $0.4 million, respectively, to the related party. The Company’s annual commitment related to these lease agreements is $0.5 million.

As a result of the acquisition of Brewer Dental, the Company assumed a lease agreement with a related party for a laboratory facility in Tulsa, Oklahoma. As of September 30, 2022, the Company recorded $0.6 million of right of use asset and lease liability. During the three and nine months ended September 30, 2022, the Company paid immaterial lease expense and lease expense of $0.1 million, respectively, to the related party. The Company’s annual commitment related to this lease agreement is $0.1 million.

As a result of the acquisition of May Dental, the Company assumed certain lease agreements with a related party for laboratory facilities in Fenton, Missouri. As of September 30, 2022, the Company recorded $1.2 million of right of use asset and lease liability. During the three and nine months ended September 30, 2022, the Company paid immaterial lease expense and lease expense of $0.1 million, respectively, to the related party. The Company’s annual commitment related to this lease agreement is $0.2 million.

The Company sells products to Lightforce Orthodontics which is affiliated with a member of the Company’s Board of Directors. Management believes the sales were conducted on terms equivalent to those prevailing in an arm’s-length transaction. During the three and nine months ended September 30, 2022, the Company recognized $0.3 million and $0.9 million of revenue, respectively. As of September 30, 2022, the Company has an account receivable balance of $0.2 million with Lightforce Orthodontics.

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~~21. SEGMENT INFORMATION~~

In its operation of the business, management, including the Company’s chief operating decision maker, who is also Chief Executive Officer, reviews the business as 1 segment. The Company currently ships its product to markets in the Americas, Europe Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). Disaggregated revenue data for those markets is as follows (in thousands):

~~Revenue for the three months ended September 30, 2021~~

Americas

EMEA

APAC

Total
Products

$
17,556

$
5,031

$
1,362

$
23,949
Services

1,005

327

157

1,489
Total

$
18,561

$
5,358

$
1,519

$
25,438

~~Revenue for the three months ended September 30, 2020~~

Americas

EMEA

APAC

Total
Products

$
857

$
249

$
782

$
1,888
Services

353

232

54

639
Total

$
1,210

$
481

$
836

$
2,527

~~Revenue for the nine months ended September 30, 2021~~

Americas

EMEA

APAC

Total
Products

$
33,907

$
11,326

$
6,587

$
51,820
Services

2,615

923

370

3,908
Total

$
36,522

$
12,249

$
6,957

$
55,728

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22. SEGMENT INFORMATION

In its operation of the business, management, including the Company’s chief operating decision maker, who is also Chief Executive Officer, reviews the business as one segment. The Company currently ships its product to markets in the Americas, Europe Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). Disaggregated revenue data for those markets is as follows (in thousands):

Revenue for the three months ended September 30, 2022


	Americas		EMEA		APAC		Total
Products	$	29,615	$	9,105	$	4,217	$	42,937
Services		2,457		1,279		413		4,149
Total	$	32,072	$	10,384	$	4,630	$	47,086

Revenue for the three months ended September 30, 2021


	Americas		EMEA		APAC		Total
Products	$	17,556	$	5,031	$	1,362	$	23,949
Services		1,005		327		157		1,489
Total	$	18,561	$	5,358	$	1,519	$	25,438

Revenue for the nine months ended September 30, ~~2020~~2022


	Americas		EMEA		APAC		Total		Americas		EMEA		APAC		Total
Products	$	2,372	$	2,411	$	1,330	$	6,113	$	94,958	$	29,017	$	11,110	$	135,085
Services		962		888		138		1,988		8,001		4,427		953		13,381
Total	$	3,334	$	3,299	$	1,468	$	8,101	$	102,959	$	33,444	$	12,063	$	148,466

Revenue for the nine months ended September 30, 2021


	Americas		EMEA		APAC		Total
Products	$	33,907	$	11,326	$	6,587	$	51,820
Services		2,615		923		370		3,908
Total	$	36,522	$	12,249	$	6,957	$	55,728

During the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized the following revenue from service contracts and cloud-based software licenses over time, and hardware and consumable product shipments and subscription software at a point in time (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Revenue recognized at a point in time	$	23,949	$	1,888	$	51,820	$	6,113	$	42,937	$	23,949	$	135,085	$	51,820
Revenue recognized over time		1,489		639		3,908		1,988		4,149		1,489		13,381		3,908
Total	$	25,438	$	2,527	$	55,728	$	8,101	$	47,086	$	25,438	$	148,466	$	55,728

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The Company’s operations are principally in the United States. The locations of long-lived assets, including property, plant and equipment, net and operating lease right-of-use assets, are summarized as follows (in thousands):


	September 30,		December 31,
	2022		2021
Americas	$	59,492	$	58,355
EMEA		15,526		11,289
APAC		5,395		6,861
Total long-lived assets	$	80,413	$	76,505

September 30,

December 31,

2021

2020
Americas

$
29,625

$
12,160
EMEA

3,763

—
Total long-lived assets

$
33,388

$
12,160

~~22.~~23. NET LOSS PER SHARE

The Company computes basic loss per share using net loss attributable to Common Stockholders and the weighted-average number of Common Stock shares outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options and stock-based awards where the conversion of such instruments would be dilutive.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2021		2020		2021		2020		2022		2021		2022		2021
Numerator for basic and diluted net loss per share:
Net loss attributable to Common Stockholders	$	(66,879)	$	(19,457)	$	(169,167)	$	(65,027)
Net loss									$	(60,774)	$	(66,879)	$	(427,990)	$	(169,167)
Denominator for basic and diluted net loss per share:
Weighted-average shares		260,556		159,968		251,468		158,121		316,008		260,556		313,902		251,468
Net loss per share—Basic and Diluted	$	(0.26)	$	(0.12)	$	(0.67)	$	(0.41)	$	(0.19)	$	(0.26)	$	(1.36)	$	(0.67)

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The Company’s potential dilutive securities, which include outstanding Common Stock options, unvested restricted stock units, unvested restricted stock awards and outstanding Common Stock warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding as of September 30, ~~2021~~2022 and ~~2020,~~2021, from the computation of diluted net loss per share attributable to common stockholders because including them would have an anti-dilutive effect (in thousands):


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2022		2021
Common Stock options outstanding		14,500		12,964		9,020		14,500
Unvested restricted stock units outstanding		8,311		—		19,032		8,311
Unvested restricted stock awards outstanding		348		1,317		123		348
Common Stock warrants outstanding		—		619
6.0% Convertible Senior Notes due 2027						86,466		—
Total shares		23,159		14,900		114,641		23,159

The dilution table above excludes RSUs to be awarded under the Company's 2022 Bonus Program, which is expected to have an impact on its outstanding awards in the first quarter of 2023. Refer to Note 20. Stock-Based Compensation for further details on the Company's Bonus Program.

~~23. SUBSEQUENT EVENTS~~24. RESTRUCTURING CHARGES

In June 2022, the Board of Directors approved a strategic integration and cost optimization initiative that includes a global workforce reduction of approximately 12%, facilities consolidation, and other operational savings measures (the “Initiative”). The purpose of the Initiative is to streamline the Company’s operational structure, reducing its operating expenses and managing its cash flows. The Company has commenced workforce reductions in the United States and is reviewing workforce changes in other countries, the timing of which will vary according to local regulatory requirements. The Company is also conducting a facility rationalization assessment and assessing other operational savings measures, including discontinued product lines. The Company anticipates that the Initiative will be substantially complete by the end of 2023.

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During the nine months ended September 30, 2022, the Company recorded the following activity in accrued expenses and other current liabilities on the balance sheet (in thousands):


	Nine Months Ended
	September 30, 2022
Accrued expenses, January 1, 2022	$	—
Restructuring charges		12,782
Cash payments		(1,478)
Stock-based compensation		(7,313)
Inventory write-off		(3,085)
Accrued expenses, September 30, 2022	$	906

During the three and nine months ended September 30, 2022, the Company recorded restructuring charges of $12.8 million related to employee severance, benefits and related costs, which were expensed as follows (in thousands):


	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Cost of goods sold	$	3,085	$	3,126
Research and development⁽¹⁾		—		8,117
Sales and marketing		—		667
General and administrative		—		489
Interest and other (expense) income, net		—		383
Total restructuring charges⁽²⁾	$	3,085		12,782

⁽¹⁾Includes $7.3 million of stock-based compensation expense incurred in connection with the Initiative.

⁽²⁾ Lease termination costs associated with the Initiative have yet to be determined, pending completion of the facility rationalization assessment. Other costs related to operational savings measures associated with the Initiative have yet to be determined.

~~On October 14, 2021,~~As of September 30, 2022, the Company ~~acquired Larry Brewer Dental Lab, Inc. (“Brewer Dental”), pursuant to a Stock Purchase Agreement~~had $0.9 million of restructuring charges, recorded in accrued expenses and other current liabilities in the same date, expanding its portfolio in additive manufacturing within the healthcare and dental industry. The purchase price was $7.5 million paid in cash. The Company also issued 252,096 restricted stock units with a grant date fair value of $1.8 million, which are subject to a four-year vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.condensed consolidated balance sheet.

OnIn October ~~29, 2021,~~2022, the Company ~~acquired May Dental Lab, Inc. (“May Dental”), pursuant~~continued this initiative with further workforce reductions. As a result of these reductions, the Company incurred an additional $1.0 million of expense related to ~~a Limited Liability Interest Purchase Agreement of the same date, expanding its portfolio in additive manufacturing within the healthcare~~employee severance, benefits and dental industry. The aggregate purchase price was $12.5 million paid in cash. The Company also issued 357,642 restricted stock units with a grant date fair value of $2.5 million, which are subject to a related costs.

~~four-year vesting period and continuing employment. The Company will recognize compensation expense for these restricted stock units over the vesting period.~~

25. SUBSEQUENT EVENTS

On ~~November 4, 2021,~~October 21, 2022, the ~~Audit Committee~~Company appointed Jason Cole as its Chief Financial Officer and Treasurer. Mr. Cole’s employment with the Company commenced on October 31, 2022, and Mr. Cole will assume the title Chief Financial Officer and Treasurer and the responsibilities of the ~~Board of Directors engaged a third party to conduct an independent internal investigation as a result of a whistleblower complaint relating to, among other matters, manufacturing~~Company’s principal financial officer and product compliance practices and procedures with respect to a subset of its photopolymer equipment and materials at its EnvisionTec US LLC facility in Dearborn, Michigan. While the investigation remains on-going, the Company has taken initial actions, including implementing changes in the management of and procedures associated with manufacturing the applicable products. Based on the investigation to date, the Company does not believe the matters involved will have a material impact on the Company, its financial statements or its business.

principal accounting officer effective November 10, 2022.

On November ~~5, 2021, Ali El Siblani notified~~6, 2022, Arjun Aggarwal and the Company ofagreed Mr. Aggarwal will step down from his ~~intent to resign~~position as Executive Vice President, Corporate Development, after completing a ~~member of~~transition period during which Mr. Aggarwal will serve as the Company’s ~~Board of Directors and as an employee of the Company in his role as Chief~~ Executive ~~Officer of EnvisionTec US LLC. The decision of~~Vice President, Corporate Development until January 2, 2023. Mr. ~~Siblani was~~Aggarwal’s departure is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

As of November 12, 2021, based on compliance issues with certain shipments of EnvisionTEC’s Flexcera dental resins and its PCA4000 curing box, the Company has determined that it will notify the FDA and consult with them on the appropriate voluntary market action with respect to these products. The Company does not expect the costs of any such market action to have a material impact on its financial statements.

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

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, trends, events, and our objectives for future operations, are forward-looking statements. The words “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “project,” “could,” “would,” “estimate,” “potential,” “continue,” “plan,” “target,” or the negative of these words or similar expressions are intended to identify forward-looking statements.

The forward-looking statements included herein are based on current expectations of management. Actual results may differ from those expressed in forward-looking statements due to additional factors, including those set forth in Item 1A. “Risk Factors” elsewhere in this Quarterly Report on Form 10-Q. Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Business Overview

Desktop Metal is pioneering a new generation of additive manufacturing technologies focused on Additive Manufacturing 2.0, the volume production of ~~end-use~~end use parts. We offer a comprehensive portfolio of integrated additive manufacturing solutions ~~comprising~~comprised of hardware, software, materials ~~parts,~~ and services with support for metals, ~~composites,~~ polymers, elastomers, ceramics, sands, composites, wood and biocompatible materials. Our solutions span use cases across the product life cycle, from product development to mass production and aftermarket operations, and they address an array of industries, including automotive, ~~aerospace,~~ healthcare and dental, consumer products, heavy industry, ~~general machinery and~~aerospace, machine ~~components~~design and research and development.

Our growth strategy begins with a commitment to research and development. Since our founding in 2015, we have invested significant resources in research and development ~~including $45.8 million thus far in 2021,~~ towards building an extensive portfolio of proprietary and differentiated technologies with a focus on making additive manufacturing an easy-to-use, economic and scalable solution. These technologies represent the cornerstones of our future product introductions, ~~and~~ are critical to enhancing our existing offerings, and ~~we have~~are supported by over ~~300 registered~~950 patents or pending patent applications. Our additive manufacturing platforms, which leverage these technologies for the production of tools and end-use parts, enable businesses to address their specific goals through a range of solutions that span ~~multiple~~ price points, throughput levels and operating environments.

~~These~~Our product platforms ~~enable customers to adopt~~offer several key advantages over competitive additive manufacturing ~~across new applications where conventional manufacturing has customarily held cost and volume advantages by offering~~systems including breakthrough print speeds, competitive part costs, accessible workflows and software, turnkey solutions and support for ~~over 250~~an extensive library of qualified materials, the sale of which represent a recurring revenue stream from customers of our additive manufacturing ~~systems~~solutions in addition to system consumables and other services, such as installation, training and technical support. As a result of these strengths, our solutions are lowering the barriers to adopting additive manufacturing and unlocking new applications where conventional manufacturing has customarily held cost and volume advantages. Across printers, parts and materials, we intend to continue investing ~~resources~~ to advance our current technology portfolio and develop ~~advances and~~ new technologies that allow us to serve a broader customer base and reach new verticals, thereby expanding our addressable market and driving adoption of ~~additive manufacturing for the volume production of end-use parts.~~Additive Manufacturing 2.0.

We leverage our core competencies in technology innovation and product development by marketing and selling our ~~additive manufacturing~~Additive Manufacturing 2.0 solutions through a leading global distribution network, managed and augmented by our own internal sales and marketing teams. This distribution network, which covers over 65 countries around the world, ~~and~~ is composed of sales and distribution professionals with decades of experience in digital manufacturing ~~technologies.~~technologies and works alongside our direct sales force to market and sell products across a range of industries and price points. Similarly, ~~in addition to manufacturing a subset of our additive manufacturing systems in-house,~~ our internal manufacturing and supply chain teams to work

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collaboratively with ~~both~~ our internal engineering department and third-party contract manufacturers to scale up initial prototypes for commercialization and volume

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commercial shipments. Together, our hybrid distribution ~~network~~ and manufacturing ~~approach~~approaches allow us to produce, sell and service our products at-scale in global markets and ~~creates~~create substantial operating leverage as we execute our strategy.

Our proprietary technology solutions also serve as the foundation for product parts offerings in which we which we directly manufacture parts for sale to our customers with a focus on key applications and verticals in which additive manufacturing can provide significant design, performance, cost and supply chain advantages relative to conventional manufacturing. These offerings will enable us to provide a more holistic suite of solutions for our customers and enable the accelerated adoption of our Additive Manufacturing 2.0 solutions across select high-value production applications, which we refer to as “killer apps”, including, but not limited to, medical and dental devices, fluid power systems, and sustainable, end-use wood parts. We believe such offerings will not only create a high-margin revenue stream, but will also facilitate lead generation for our additive manufacturing systems at scale and enable high-performance and specialized applications using new materials ahead of broader market introduction.

Operating Results

For the three and nine months ended September 30, ~~2021,~~2022, we recognized revenues of ~~$25.4~~$47.1 million and ~~$55.9~~$148.5 million, respectively, and incurred net losses of ~~$66.9~~$60.8 million and ~~$169.2~~$428.0 million, respectively. ~~For the nine months ended~~As of September 30, ~~2021,~~2022, we used cash in operating activities of ~~$110.1 million. We~~$150.8 million, and we ended the period with ~~$423.9~~$217.3 million of cash, cash equivalents, and short-term investments. In December 2020, we completed the Business Combination, receiving $534.6 million net cash proceeds, and during the first three months of 2021, the public warrants were exercised, generating $170.7 million of net cash proceeds, both of which we expect to support our operations and investments in the near term. As of September 30, ~~2021,~~2022, we had ~~$131.7~~$67.0 million in cash and cash equivalents, ~~$292.3~~$150.3 million in short-term liquid investments, and current liabilities of ~~$49.8~~$98.3 million.

Recent Developments

~~Desktop Health~~

On March 15, 2021, we announced the launch of Desktop Health, an expanded focus on accelerating the growth of additive manufacturing solutions for dental, orthodontic, otolaryngology and dermatology applications. Enabled by Desktop Metal's proprietary technology infrastructure for end-use parts production, including high-speed photopolymer, metal binder jetting and bioprinting additive manufacturing technologies combined with an extensive library of advanced materials, Desktop Health's mission is to create advanced, patient-specific solutions in the medical field.

~~Trine Warrants~~

On April 12, 2021, the Staff of the SEC issued the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)”, or the Staff Statement”. The Staff Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across many entities.” The Staff Statement indicated that when one or more of such features is included in a warrant, the warrant “should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.” The Company has concluded that the Private Placement Warrants are to be classified as a liability measured at fair value on the Company’s consolidated balance sheet upon the Business Combination on December 9, 2020, with subsequent changes in fair value reported in our statement of operations each reporting period. Effective March 2, 2021, all Private Placement Warrants were exercised and there was no outstanding warrant liability.

~~Acquisitions~~

~~EnvisionTEC Acquisition~~

On February 16, 2021, pursuant to the Purchase Agreement and Plan of Merger dated January 14, 2021, we consummated the EnvisionTEC Acquisition. We paid $143.8 million in cash and issued 5,036,142 shares of our Class A Common Stock, or Common Stock, with a fair value of $159.8 million as of the close of business on the acquisition date. In connection with the transaction, the Company also granted restricted stock awards totaling 475,848 shares of Common Stock, with a fair value of $4.2 million, to key EnvisionTEC employees in August 2021, which are subject to a three-year vesting period and continued employment.

~~Adaptive 3D Acquisition~~

On May 7, 2021, we, Diamond US Merger Sub, Inc., Diamond US LLC, Adaptive 3D Holdings, Inc., or Adaptive 3D, and Fortis Advisor LLC entered into an Agreement and Plan of Merger, or the A3D Merger Agreement, pursuant to which we acquired Adaptive 3D. The total purchase price was $61.8 million, consisting of $24.1 million paid in cash and 3,133,276 shares of Common Stock with a fair value of $37.7 million as of the close of business on the acquisition date.

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~~Beacon Bio Acquisition~~

On June 10, 2021, we and Beacon Bio, Inc. entered into a Share Purchase Agreement pursuant to which we acquired all outstanding securities of Beacon Bio, Inc. The aggregate purchase price was $10.4 million, consisting of $6.1 million paid in cash and fully vested restricted stock units with an acquisition date fair value of $4.3 million, subject to certain adjustments and contingencies.

~~Aerosint Acquisition~~

On June 24, 2021, we, DM Belgium BV/SRL, Aerosint SA, or Aerosint, and the sellers named therein and representatives of such sellers, entered into a Share Purchase Agreement pursuant to which we acquired all outstanding shares of Aerosint. The total purchase price was $23.8 million, consisting of $6.2 million paid in cash, 879,922 shares of our Common Stock with a fair value of $11.5 million as of the close of business on the acquisition date and contingent consideration with a fair value of $6.1 million as of the acquisition date.

~~Dental Arts Labs Acquisition~~

On July 30, 2021, we and Dental Arts Laboratories, Inc., or Dental Arts Labs, entered into a Stock Purchase Agreement of the same date, pursuant to which we acquired all outstanding shares of Dental Arts Labs. The purchase price was $26.3 million paid in cash. The Company also issued 1,190,468 restricted stock units with a grant date fair value of $11.0 million, which are subject to a four-year vesting period and continuing employment.

~~A.I.D.R.O. Acquisition~~

On September 7, 2021, we purchased the issued and outstanding capital stock of A.I.D.R.O. Srl and its shareholders, or A.I.D.R.O., pursuant to a Stock Purchase Agreement dated July 2, 2021. The purchase price was $5.6 million paid in cash. The Company also issued 364,050 restricted stock units with a grant date fair value of $3.2 million, which are subject to a four-year vesting period and continuing employment.

~~Meta Additive Acquisition~~

On September 9, 2021, we and Meta Additive Ltd, or Meta Additive, entered into a Stock Purchase Agreement of the same date, pursuant to which we acquired Meta Additive. The purchase price consisted of cash consideration of $15.2 million, including transaction costs of $0.1 million. In connection with the acquisition, the Company issued 1,101,592 restricted stock units with a fair value of $9.0 million as of the acquisition date, which are subject to a four-year vesting period and continuing employment.

ExOne Acquisition

On November 12, 2021, we acquired The ExOne Company, or ExOne, pursuant to an Agreement and Plan of Merger dated August ~~12,~~11, 2021. The total purchase price ~~consisted~~was $613.0 million consisting of cash consideration of ~~$191.4~~$201.4 million and 48,218,063 shares of our Class A Common Stock with a fair value of ~~$409.8~~$411.6 million as of the close of business on the transaction date.

Convertible Debt Offering

On May 13, 2022, we issued $100.0 million principal amount of our 6.0% Convertible Senior Notes due 2027 (“2027 Notes”). The 2027 Notes were issued pursuant to, and are governed by, an indenture, dated as of May 13, 2022, between us and U.S. Bank Trust Company, National Association, as trustee. Pursuant to the purchase agreement between us and the initial purchasers of the 2027 Notes, we granted the initial purchasers an option to purchase up to an additional $15.0 million principal amount of 2027 Notes, which was exercised on May 19, 2022.

Restructuring

On June 10, 2022, the Board of Directors approved a strategic integration and cost optimization initiative that includes a global workforce reduction of approximately 12%, facilities consolidation, and other operational savings measures (the “Initiative”). The purpose of the Initiative is to streamline our operational structure, reducing our operating expenses and managing our cash flows. We have commenced workforce reductions in the United States and are reviewing workforce changes in other countries, the timing of which will vary according to local regulatory requirements. We are also conducting a facility rationalization assessment and assessing other operational savings measures. Lease termination costs associated with the Initiative have yet to be determined, pending completion of the facility rationalization assessment. Other costs related to operational savings measures associated with the Initiative have yet to be determined.

As a result of the Initiative, we anticipate $20.0 million of cost savings to be realized in the second half of 2022 and at least $100.0 million of aggregate cost savings to be realized from June 2022 through June 2024. We anticipate that the Initiative will be substantially complete by the end of 2023.

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COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. ~~It is not possible to accurately predict the full impact of the COVID-19 pandemic on our business, financial condition and results of operations due~~In response to the ~~evolving nature of~~pandemic, governments around the COVID-19 pandemic and the extent of its impact across industries and geographies and numerous other uncertainties. For example, we face uncertainties about the duration and spread of the outbreak, additional actions that may be taken by governmental entities, and the impact it may have on the ability of us, our customers, our suppliers, our manufacturers and our other business partners to conduct business. Governments in affected regions haveworld implemented ~~and may continue to implement,~~ safety precautions which ~~include~~included quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they ~~deem~~deemed necessary. Many organizations and individuals, including our company and employees, ~~are taking~~took additional steps to avoid or reduce infections, including limiting travel and staying home from work. These measures ~~are disrupting~~disrupted normal business operations and ~~have~~ had significant negative impacts on businesses and financial markets worldwide. WeIn 2021, with the availability of vaccines against COVID-19, restrictions on social, business travel and government activities and functions in certain areas of the world began to be lifted, but infection rates continue to fluctuate and new variants continue to appear, leading to continued uncertainty about the pandemic. While we have largely returned to our normal operations, we continue to monitor our operations and government recommendations ~~and have made~~to maintain readiness to implement modifications ~~to our normal operations because of~~if conditions warrant.

Early in the COVID-19 pandemic ~~including~~

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requiring most non-engineering or operations-related team members to work remotely, utilizing heightened cleaning and sanitization procedures, implementing new health and safety protocols and reducing non-essential travel.

~~The COVID-19 pandemic has caused us to experience~~we experienced several adverse impacts, including extended sales cycles to close new orders for our products, delays in shipping and installing orders due to closed facilities and travel limitations and delays in collecting accounts receivable. The rapid development and uncertainty of the impacts of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic on our business. However, the COVID-19 pandemic, and the measures taken to contain it, present material uncertainty and risk with respect to our performance and financial results. In particular, businesses across an array of vertical markets ~~are~~ temporarily ~~reducing~~reduced capital expenditure budgets globally as they ~~seek~~sought to preserve liquidity to ensure the longevity of their own operations, which ~~in turn may lead to reductions in~~we believe temporarily impacted demand for purchases of our additive manufacturing solutions. Further, office closures may prevent organizations from reaching typical utilizations of our additive manufacturing solutions, resulting in reductions in purchases of consumable materials and produced parts. Additionally, the COVID-19 pandemic may contribute toIn addition, facility closures at our third-party contract manufacturers and key suppliers ~~causing~~caused delays and disruptions in product manufacturing, which ~~could affect~~impacted our costs and our ability to ship products purchased by our customers in a timely manner. ~~Disruptions in~~While we have experienced some improvement from the ~~capital markets~~severity of these negative impacts, the ongoing pandemic may continue to impact business operations worldwide, including as a result of ~~the COVID-19 pandemic~~port congestion, supplier delays and labor shortages, which may ~~also adversely affect~~increase our ~~business if these impacts continue for a prolonged period~~costs and ~~we need additional liquidity.~~impact our path to profitability.

In the long-term, we believe that the COVID-19 pandemic and the subsequent disruptions in global supply chains and logistics networks will encourage organizations to reassess their supply chain structure and may accelerate their adoption of solutions such as additive manufacturing, which could allow for greater flexibility through decentralized production capabilities, on-demand inventory resiliency, reductions in supply chain complexity and a reduced reliance on overseas manufacturing.

Key Factors Affecting Operating Results

We believe that our performance and future success depend on many factors that present significant opportunities for us, but also pose risks and challenges, including those discussed below and in “Risk Factors” section of this Quarterly Report on Form 10-Q.

~~Commercial Launch of Products~~

Several of our products began commercial shipments in late 2020 and early 2021, with more in the late stages of development and scheduled to begin commercial shipments in 2021. Prior to commercialization, we must complete final testing and manufacturing ramp-up of these products, both in-house and at our third-party contract manufacturers. Any delays in successful completion of these steps may impact our ability to generate revenue from these products.

Adoption of our Additive Manufacturing Solutions

We believe the world is at an inflection point in the adoption of additive manufacturing solutions and that we are well-positioned to take advantage of this opportunity across an array of industries due to our proprietary technologies and global distribution capabilities. We expect that our results of operations, including revenue and gross margins, will fluctuate for the foreseeable future as businesses continue to shift away from conventional manufacturing processes towards additive manufacturing for end-use parts. Our turnkey and volume production solutions are designed to empower businesses to realize the full benefits of additive manufacturing at-scale, including geometric and design flexibility, mass customization and supply chain engineering, among others. ~~Both the speed with which and the~~The degree to which potential and current customers recognize these benefits and invest in our solutions will affect our financial results.

Pricing, Product Cost and Margins

~~Our comprehensive portfolio~~We offer customers a range of additive manufacturing solutions ~~spans~~spanning multiple price points, materials, throughput levels, operating environments and technologies to enable ~~customers~~them to find the solution that achieves their specific goals. ~~We also expect to commercialize additional previously announced products over the course of 2021.~~ Pricing for these products may vary by region due to ~~market‑specific~~market-specific supply and demand dynamics and product lifecycles, and sales of certain products have, or are expected to have, higher gross margins than others. As a result, our financial performance depends, in part, on the mix of products we sell during a given period. In addition, our financial performance depends on the portion of our parts-as-a-service, or produced parts, revenue supplied using additive manufacturing processes, which may enable higher gross margins and operational efficiencies as compared to conventional manufacturing technologies. Wewe are ~~also~~ subject to price competition, and our ability to compete in key markets will

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depend on the success of our investments in new technologies and cost improvements as well as our ability to efficiently and reliability introduce ~~cost‑effective~~cost-effective additive manufacturing solutions for our customers.

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Continued Investment and Innovation

We believe that we are a leader in mass production and turnkey additive manufacturing solutions, offering breakthrough technologies that enable high throughput and ease‑of‑use through our broad product portfolio. Our performance is significantly dependent on the investment we make in our research and development efforts and on our ability to be at the forefront of the additive manufacturing industry. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance existing products and generate customer demand for our solutions. We believe that investment in our additive manufacturing solutions will contribute to long‑term revenue growth, but it may adversely affect our near‑term profitability.

Commercial Launch of Products

We continually invest in the development of new products and enhancements to existing products to meet constantly evolving customer demands, and during the nine months ended September 30, 2022, we launched a number of new products. Prior to commercialization of new products, we must complete final testing, procurement and manufacturing ramp up of these products in-house or at our third-party contract manufacturers, as applicable. Any delays in successful completion of these steps may impact our ability to generate revenue from these products.

Acquisitions and Transaction-Related Costs

~~As part of our growth strategy, we intend to continue to acquire or make investments in other business, patents, technologies, products or services.~~ Our growth relies heavily on the successful integration of acquired companies, including our ability to realize the anticipated business opportunities from combining operations in an efficient and effective manner. We expect that the results of our operations will fluctuate as we continue to integrate these businesses, and the technologies, products, and services that they offer. Additionally, our results of operations will be impacted by non-recurring transaction-related costs, including integration costs, severance costs and other costs associated with these acquisitions.

Macroeconomic Conditions

The current macroeconomic environment is impacting our customers financially and operationally. Customers and potential customers are facing significant financial pressure as supply chain constraints and inflation drive up operating costs and rising interest rates make access to credit more expensive. In recent months, the consumer price index has increased substantially. In addition, during inflationary periods, interest rates have historically increased. In March 2022, the Federal Reserve began, and is expected to continue, to raise interest rates in an effort to curb inflation. As a consequence of these financial pressures, some customers may be lowering their capital investment plans and tightening their operational budgets, which may result in extended sales cycles, delayed purchasing decisions, and pricing pressure for our solutions. Higher interest rates may also impact our ability to obtain debt financing at attractive rates. While we reported revenue growth in the third quarter of 2022, we experienced less revenue growth than we expected, due to the negative impact of customers delaying purchase decisions amidst an uncertain macroeconomic backdrop.

Results of Operations

Comparison of the three months ended September 30, ~~2021~~2022, and September 30, ~~2020~~2021

Revenue

The following table presents the revenue of each of our revenue streams, as well as the percentage of total revenue and change from the prior year.


	For the Three Months Ended September 30,												For the Three Months Ended September 30,
	2021				2020				Change in Revenues				2022				2021				Change in Revenues
(Dollars in thousands)	Revenue		% of Total		Revenue		% of Total		$		%		Revenue		% of Total		Revenue		% of Total		$		%
Products Revenue	$	23,949	94	%	$	1,888	75	%	$	22,061	1,168	%	$	42,937	91	%	$	23,949	94	%	$	18,988	79	%
Services Revenue		1,489	6	%		639	25	%		850	133	%		4,149	9	%		1,489	6	%		2,660	179	%
Total Revenue	$	25,438	100	%	$	2,527	100	%	$	22,911	907	%	$	47,086	100	%	$	25,438	100	%	$	21,648	85	%

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Total revenue for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$25.4~~$47.1 million and ~~$2.5~~$25.4 million, respectively, an increase of ~~$22.9~~$21.7 million, or ~~907%~~85%. The increase in total revenue was attributable to an increase in revenue from both products and services.

We sold more products during the three months ended September 30, ~~2021~~2022, as compared to the three months ended September 30, ~~2020,~~2021, leading to an approximately ~~1,175%~~79% increase in product revenue. This was primarily the result of an increase in unit shipments across a more varied product mix during the ~~second~~third quarter of 2022 and additional revenue in connection with acquisitions that occurred during 2021.

Services revenue increased approximately 179% during the three months ended September 30, 2021 compared to the same period in 2020. For the three months ended September 30, 2020, we experienced decreased customer demand and longer sales cycles resulting from the COVID-19 pandemic. Additionally, as a result of customer facilities closures associated with the COVID-19 pandemic, we experienced delays in shipments and installation as well as decreased utilization of our installed products, leading to a decrease in sales of consumable materials.

~~Services revenue increased during the three months ended September 30, 2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, primarily due to an increase in support and installation revenue from increased shipments during the period and additional revenue in connection with acquisitions.

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The following table presents revenue by geographic region, as well as the percentage of total revenue and change from the prior period.


	For the Three Months Ended September 30,												For the Three Months Ended September 30,
	2021				2020				Change in Revenues				2022				2021				Change in Revenues
(Dollars in thousands)	Revenue		% of Total		Revenue		% of Total		$		%		Revenue		% of Total		Revenue		% of Total		$		%
Americas	$	18,561	73	%	$	1,210	48	%	$	17,351	1,434	%	$	32,072	68	%	$	18,561	73	%	$	13,511	73	%
EMEA (Europe, the Middle East and Africa)		5,358	21	%		481	19	%		4,877	1,014	%		10,384	23	%		5,358	21	%		5,026	94	%
APAC (Asia‑Pacific)		1,519	6	%		836	33	%		683	82	%		4,630	10	%		1,519	6	%		3,111	205	%
Total Revenue	$	25,438	100	%	$	2,527	100	%	$	22,911	907	%	$	47,086	101	%	$	25,438	100	%	$	21,648	85	%

Total revenue increased during the three months ended September 30, ~~2021~~2022, compared to the three months ended September 30, ~~2020,~~2021, due to an increase in unit shipments in all regions across a more varied product mix and additional revenue in connection with acquisitions. Overall, there was an increased customer demand during the period ended September 30, 2021. Customer demand was lower during the three months ended September 30, 2020 as a result of the COVID-19 pandemic.

Cost of Sales

Total cost of sales during the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$21.5~~$47.4 million and ~~$4.8~~$21.5 million, respectively, an increase of ~~$16.7~~$25.9 million or ~~348%~~120%. The increase in total cost of sales was driven primarily by an increase in product cost of sales, which resulted from ~~greater~~increased product ~~sales. Additionally, cost of sales increased $2.5 million due to amortization from intangible assets acquired through acquisitions that are included in cost of~~ sales.

Gross ~~Loss~~Profit and Gross Margin

The following table presents gross ~~loss~~profit (loss) by revenue stream, as well as change in gross ~~loss~~profit dollars from the prior period.


	For the Three
	Months Ended
	September 30,				Change in Gross				For the Three Months Ended September 30,				Change in Gross
	2021		2020		Profit				2022		2021		Profit

(Dollars in thousands)	Gross Profit (Loss)				$		%		Gross Profit				$		%
Products	$	3,499	$	(1,844)	$	5,343	290	%	$	(702)	$	3,499	$	(4,201)	(120)	%
Services		456		(457)		913	200	%		393		456		(63)	(14)	%
Total	$	3,955	$	(2,301)	$	6,256	272	%	$	(309)	$	3,955	$	(4,264)	(108)	%

Total gross profit (loss) during the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$4.0~~($0.3) million and ~~($2.3)~~$4.0 million, respectively. The ~~increase~~decrease in gross profit of ~~$6.3~~$4.3 million iswas driven by ~~increased revenue compared to~~reduced absorption of fixed ~~costs and~~overhead, a ~~more~~less favorable product mix sold ~~including products~~and increases in ~~connection with acquisitions, during the three months ended September 30, 2021, compared~~transportation and freight costs. Additionally, we incurred a one-time excess and obsolescence charge of $3.1 million related to the ~~same period in 2020.~~Initiative described above.

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The following table presents gross margin by revenue stream, as well as the change in gross margin from the prior period.


	For the Three
	Months Ended				Change in Gross
	September 30,				Margin			For the Three Months Ended September 30,				Change in Gross Margin
	2021		2020		Percentage			2022		2021		Percentage

(Dollars in thousands)	Gross Margin				Points	%
								Gross Margin				Points	%
Products	15	%	(98)	%	1.13	115	%	(2)	%	15	%	(0.17)	(113)	%
Services	31	%	(72)	%	1.03	143	%	9	%	31	%	(0.22)	(71)	%
Total	16	%	(91)	%	1.07	118	%	(1)	%	16	%	(0.17)	(106)	%

Total gross margin for the three months ended September 30, 2022 and 2021 was (1)% and ~~2020 was~~ 16% ~~and (91)%~~, respectively. The ~~increase~~decrease in total gross margin was primarily due to one-time excess and obsolescence charges in connection with the Initiative described above, an increase in gross margin from our product revenue, which resulted from a lower product cost for units shipped in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. In

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~~addition, increased revenue compared to fixed costs in~~amortization expense within cost of sales ~~which contributed to gross margin improvement. The increase in gross margin was offset by~~from acquisitions, and a ~~one-time acquisition accounting impact of inventory fair value step up being recognized through earnings, which decreased gross margin by 2%.~~less favorable product mix.

Research and Development

Research and development expenses during the three months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$19.3~~$22.4 million and ~~$9.2~~$19.3 million, respectively, an increase of ~~$10.1~~$3.1 million, or ~~110%~~16%. The increase in research and development expenses was largely due ~~in part~~ to 2021 acquisitions which added ~~$2.6 million. Compensation costs increased $5.4~~$2.8 million ~~due to headcount growth, of which $3.6~~in research and development expenses as well as a $0.9 million ~~relates to equity compensation and $1.8 million relates to~~increase in payroll costs ~~to support new product development and existing product enhancements. Additionally, engineering consulting~~associated with additional hiring at the end of 2021. The increase is partially offset by a decrease of $0.6 million in stock compensation costs ~~which were lowered during~~associated with the ~~three months ended September 30, 2020 due to the COVID-19 pandemic, increased significantly as efforts continue on new product development and existing product enhancements.~~Initiative described above.

Sales and Marketing

Sales and marketing expenses during the three months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$13.2~~$16.2 million and ~~$2.5~~$13.2 million, respectively, an increase of ~~$10.7~~$3.0 million, or ~~428%~~23%. The increase in sales and marketing expenses was primarily due to increased expense related to acquired entities of ~~$2.5~~$2.4 million. In addition, compensation costs increased ~~$4.0~~$2.0 million related to sales personnel hiring to support the launch and commercialization of new products. We incurred $0.9 million of ~~which $1.5 million relates to equity compensation costs~~restructuring charges included in sales and ~~$2.5 million relates to payroll costs, due to headcount growth and higher commission~~marketing expenses in ~~line~~connection with the ~~increase in sales.~~Initiative described above. Additionally, there was growth of $0.6 million in marketing program spend driven primarily by the commercialization of new products and related marketing efforts. These increases were partially offset by a reduction in partner commission expenses of $1.1 million.

General and Administrative

General and administrative expenses during the three months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$19.8~~$18.9 million and ~~$5.4~~$19.8 million, respectively, an ~~increase~~decrease of ~~$14.4~~$0.9 million, or ~~267%~~5%. The ~~increase~~decrease in general and administrative expenses was primarily due to ~~$5.6~~a decrease of $6.7 million ~~of professional~~in accounting, auditing and legal fees ~~incurred as~~due to a ~~result of~~reduction in merger and acquisition ~~activity and~~activity. This decrease was partially offset by an increase in expense related ~~integration costs.~~to acquired entities of $2.7 million. Additionally, stock-based compensation costs increased by ~~$4.3~~$0.8 million, ~~of which $2.5~~attributable to the amendment to the 2022 bonus program. We incurred $0.3 million ~~relates to equity compensation~~in restructuring charges included in general and ~~$1.8 relates to payroll costs, related to hiring to support public company requirements and director and officer insurance increased by $1.0 million as a public company.~~administrative expenses in connection with the Initiative described above.

In-Process Research and Development Assets Acquired

~~In-process~~There were no in-process research and development assets acquired during the three months ended September 30, 2022. We recognized $15.2 million of in-process research and development assets acquired during the three months ended September 30, 2021, ~~were $15.2 million, compared to no expense for in-process research and development assets acquired during the three months ended September 30, 2020. The increase is primarily~~ attributable to the Meta Additive acquisition in 2021, in which ~~the company~~we paid $15.2 million in cash, inclusive of transaction costs. As the acquired in-process research and development assets were deemed to have no current or alternative future use, the entire amount was recognized as expense in the consolidated statement of operations for the three months ended September 30, 2021.

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Goodwill Impairment

There was no goodwill impairment charge recorded during the three months ended September 30, 2022 and 2021.

Change in Fair Value of Warrant Liability

~~Change~~There was no change in fair value of warrant liability during the three months ended September 30, ~~2021,~~2022, and 2020, were a $56.6 million loss and $0, respectively. The decrease in fair value is the result of the remeasurement of the Private Placement Warrant liability prior to the cashless exercise of the Private Placement Warrants. The warrant liability increased $56.6 million as a result of the remeasurement, which resulted in the $56.6 million loss.2021. As of March 2, 2021, all Private Placement Warrants were exercised and there was no outstanding warrant liability.

Interest Expense

Interest expense during the three months ended September 30, 2022 and 2021 was $0.7 million and ~~2020 was~~ $0.0 million, ~~and $0.1 million, respectively.~~respectively, an increase of $0.7 million. Interest expense ~~decreased primarily~~increased due to the ~~payoff of~~increase in accrued interest on the ~~term loan in June 2021.~~2027 Notes.

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Interest and Other (Expense) Income, Net

Interest and other (expense) income, net during the three months ended September 30, ~~2021~~2022 and ~~2020 and~~2021 was ($~~3.8)~~1.7) million and ~~$0.1~~($3.8) million, respectively. The decrease during the three months ended September 30, ~~2021~~2022, is attributable to a loss on the investment in equity ~~investment, partially offset by an unrealized gain on notes receivable.~~securities of a publicly-traded company.

Income Taxes

We recorded an income tax ~~benefit~~expense of ~~$0.5~~$0.6 million during the three months ended September 30, ~~2021~~2022, compared to ~~no provision~~an income tax benefit of $0.5 million during for the three months ended September 30, ~~2020.~~2021. The increase was primarily due to ~~acquired entity operations~~the valuation allowance provided against certain German deferred tax assets during the three months ended September 30, ~~2021.~~2022.

We have provided a valuation allowance for all of our deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate, except for ~~Germany.~~Japan and Belgium. We continue to assess our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in a single, or multiple, taxing jurisdictions, a reversal of the related portion of our existing valuation allowances may occur.

Comparison of the nine months ended September 30, ~~2021~~2022 and ~~September 30, 2020~~

~~Revenue~~2021

The following table presents the revenue of each of our revenue streams, as well as the percentage of total revenue and change from the prior year.

For the Nine Months Ended September 30,

Change in

2021

2020

Revenues

(Dollars in thousands)

Revenue

% of Total

Revenue

% of Total

$

%

Product Revenue

$
51,820

93
%
$
6,113

75
%
$
45,707

748
%
Service Revenue

3,908

7
%

1,988

25
%

1,920

97
%
Total Revenue

$
55,728

100
%
$
8,101

100
%
$
47,627

588
%


	For the Nine Months Ended September 30,
	2022				2021				Change in Revenues
(Dollars in thousands)	Revenue		% of Total		Revenue		% of Total		$		%
Product Revenue	$	135,085	91	%	$	51,820	93	%	$	83,265	161	%
Service Revenue		13,381	9	%		3,908	7	%		9,473	242	%
Total Revenue	$	148,466	100	%	$	55,728	100	%	$	92,738	166	%

Total revenue for the nine months ended September 30, 2022 and 2021 ~~and September 30, 2020~~ was ~~$55.7~~$148.5 million and ~~$8.1~~$55.7 million, respectively, an increase of ~~$47.6~~$92.8 million, or ~~588%~~167%. The increase in total revenue was attributable to an increase in revenue from both products and services.

We sold more products during the nine months ended September 30, ~~2021~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, leading to an approximately ~~750%~~161% increase in product revenue. This was primarily the result of an increase in unit shipments across a more varied product mix during the ~~period~~first two quarters of 2022 and additional revenue in connection with acquisitions that occurred during 2021.

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Services revenue increased approximately 242% during the nine months ended September 30, 2021 compared to the same period in 2020. For the nine months ended September 30, 2020, we experienced decreased customer demand and longer sales cycles resulting from the COVID-19 pandemic. Additionally, as a result of customer facilities closures associated with the COVID-19 pandemic, we experienced delays in shipments and installation as well as decreased utilization of our installed products, leading to a decrease in sales of consumable materials.

~~Services revenue increased during the nine months ended September 30, 2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, primarily due to an increase in support and installation revenue from increased shipments during the ~~period.~~period and additional revenue in connection with acquisitions.

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The following table presents revenue by geographic region, as well as the percentage of total revenue and change from the prior period.


	For the Nine Months Ended September 30,								Change in				For the Nine Months Ended September 30,
	2021				2020				Revenues				2022				2021				Change in Revenues
(Dollars in thousands)	Revenue		% of Total		Revenue		% of Total		$		%		Revenue		% of Total		Revenue		% of Total		$		%
Americas	$	36,522	66	%	$	3,334	41	%	$	33,188	995	%	$	102,959	69	%	$	36,522	66	%	$	66,437	182	%
EMEA		12,249	22	%		3,299	41	%		8,950	271			33,444	23	%		12,249	22	%		21,195	173	%
APAC		6,957	12	%		1,468	18	%		5,489	374			12,063	8	%		6,957	12	%		5,106	73	%
Total Revenue	$	55,728	100	%	$	8,101	100	%	$	47,627	588	%	$	148,466	100	%	$	55,728	100	%	$	92,738	166	%

Total revenue increased during the nine months ended September 30, ~~2021~~2022, compared to the nine months ended September 30, ~~2020,~~2021, due to an increase in unit shipments in all regions across a more varied product mix and additional revenue in connection with acquisitions. Overall, there was an increased customer demand during the period ended September 30, 2021. Customer demand was lower during the nine months ended September 30, 2020 as a result of the COVID-19 pandemic.

Cost of Sales

Total cost of sales during the nine months ended September 30, 2022 and 2021 ~~and September 30, 2020~~ was ~~$50.0~~$141.7 million and ~~$21.5~~$50.0 million, respectively, an increase of ~~$28.5~~$91.7 million or ~~133%~~183%. The increase in total cost of sales was driven primarily by an increase in product cost of sales, which resulted from greater product sales. Additionally, ~~costs~~cost of sales increased ~~$5.8~~$8.4 million due to amortization from intangible assets acquired through acquisitions that are included in cost of sales.

Gross ~~Loss~~Profit and Gross Margin

The following table presents gross ~~loss~~profit by revenue stream, as well as change in gross ~~loss~~profit (loss) dollars from the prior period.


	For the Nine Months Ended September 30,				Change in Gross				For the Nine Months Ended September 30,				Change in Gross
	2021		2020		Profit				2022		2021		Profit

(Dollars in thousands)	Gross Profit (Loss)				$		%		Gross Profit (Loss)				$		%
Products	$	5,393	$	(12,032)	$	17,425	145	%	$	4,631	$	5,393	$	(762)	(14)	%
Services		347		(1,377)		1,724	125	%		2,129		347		1,782	(514)	%
Total	$	5,740	$	(13,409)	$	19,149	143	%	$	6,760	$	5,740	$	1,020	18	%

Total gross profit ~~(loss)~~ during the nine months ended September 30, 2022 and 2021 ~~and September 30, 2020~~ was ~~$5.7~~$6.8 million and ~~($13.4)~~$5.7 million, respectively. The increase in gross profit ~~(loss)~~ of ~~$19.1~~$1.1 million iswas driven by ~~increased~~ revenue ~~to compared to fixed costs~~growth and a more favorable product mix sold, ~~including products~~partially offset by one-time excess and obsolescence charges in connection with ~~acquisitions, during~~ the ~~nine months ended September 30, 2021 compared to the same period in 2020.~~Initiative described above.

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The following table presents gross margin by revenue stream, as well as the change in gross margin from the prior period.


					Change in Gross
	For the Nine Months Ended September 30,				Margin			For the Nine Months Ended September 30,				Change in Gross Margin
	2021		2020		Percentage			2022		2021		Percentage

	Gross Margin				Points	%		Gross Margin				Points	%
Products	10	%	(197)	%	2.07	105	%	3	%	10	%	(0.07)	(70)	%
Services	9	%	(69)	%	0.78	113	%	16	%	9	%	0.07	(78)	%
Total	10	%	(166)	%	1.76	106	%	5	%	10	%	(0.05)	(50)	%

Total gross margin for the nine months ended September 30, 2022 and 2021 was 5% and ~~September 30, 2020 was~~ 10% ~~and (166)%~~, respectively. The ~~increase~~decrease in total gross margin was primarily due to one-time excess and obsolescence charges in connection with the Initiative described above, an increase in gross margin from our product revenue, which resulted from a lower product cost for units shipped in the nine months ended September 30, 2021 as compared to nine months ended September 30, 2020. In addition, we incurred significant charges in productamortization expense within cost of ~~goods sold related to obsolete inventory parts in the nine months ended September 30, 2020; similar charges were not incurred in the nine months ended September 30, 2021.~~sales from acquisitions, and a less favorable product mix.

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Research and Development

Research and development expenses during the nine months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$45.8~~$78.4 million and ~~$31.4~~$45.8 million, respectively, an increase of ~~$14.4~~$32.6 million, or ~~46%~~71%. The increase in research and development expenses was due primarily to an increase in stock compensation expense of $14.3 million, attributable to the amendment to the 2022 bonus program, the acceleration of RSUs for certain key employees, in connection with the Initiative described above, and grants to new hires. The increase is also due in part to 2021 acquisitions, which added ~~$5.1 million, mainly due to amortization of acquired technology. Additionally, compensation costs increased $6.9~~$15.0 million of ~~which $5.0~~research and development expenses. Additionally, we incurred $2.8 million ~~relates~~of additional personnel costs related to ~~equity compensation~~hiring to support research operations and ~~$1.9~~$0.6 million ~~relates to payroll costs, due to headcount growth. Finally, engineering consulting costs increased due to continued investments~~of restructuring charges included in ~~new product development.~~research and development expenses in connection with the Initiative described above.

Sales and Marketing

Sales and marketing expenses during the nine months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$29.6~~$56.3 million and ~~$10.0~~$29.6 million, respectively, an increase of ~~$19.6~~$26.7 million, or ~~196%~~90%. The increase in sales and marketing expenses was primarily due to increased expense related to acquired entities of ~~$7.1~~$8.7 million. In addition, ~~to acquisitions,~~ compensation costs increased ~~$6.5~~$5.2 million related to sales personnel hiring to support the launch and commercialization of ~~which $1.9 million relates to equity compensation costs and $4.6 million relates to payroll costs, due to headcount growth and higher commissions expenses in line with the increase in sales.~~new products. Additionally, there was growth of $2.6 million in marketing program spend driven primarily by the commercialization of new products and related marketing efforts. We incurred $0.5 million of restructuring charges included in sales and marketing expenses in connection with the Initiative described above.

General and Administrative

General and administrative expenses during the nine months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$46.8~~$62.5 million and ~~$11.0~~$46.8 million, respectively, an increase of ~~$35.8~~$15.7 million, or ~~325%~~34%. The increase in general and administrative expenses was primarily due to ~~$13.7 million of professional fees incurred as a result of merger and acquisition activity and costs~~increased expense related to ~~operating as a public company.~~acquired entities of $15.0 million. Additionally, stock-based compensation costs increased by ~~$8.9~~$6.3 million, attributable to the amendment to the 2022 bonus program and grants to new hires, and personnel costs increased $2.8 million due to new hires. We incurred $0.4 million in restructuring charges included in general and administrative expenses in connection with the Initiative described above. The increase in general and administrative expenses was partially offset by a decrease of ~~which $4.3~~$12.4 million ~~relates~~in accounting, auditing and legal fees due to ~~equity compensation~~a reduction in merger and ~~$4.6 million relates to payroll costs, related to hiring to support public company requirements . Finally, director and officer insurance expense increased by $3.0 million as a public company.~~acquisition activity.

In-Process Research and Development Assets Acquired

~~In-process~~There were no in-process research and development assets acquired during the nine months ended September 30, 2022. We recognized $25.4 million of in-process research and development assets acquired during the nine months ended September 30, 2021, ~~were $25.6 million, compared to no expense for in-process research and development assets acquired during the nine months ended September 30, 2020. The increase is~~ attributable to the Beacon Bio ~~and Meta Additive acquisitions,~~acquisition, in which we paid ~~$25.6~~$10.2 million in cash and share consideration ~~inclusive of transaction costs.~~and the Meta Additive acquisition, in which we paid $15.2 million in cash consideration. As the acquired in-process research and development assets were deemed to have no current or alternative future use, the entire amount was recognized as expense in the consolidated statement of operations for the ~~three~~nine months ended September 30, 2021.

Goodwill Impairment

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Goodwill impairment charge of $229.5 million during the nine months ended September 30, 2022, represents an impairment charge to write down the carrying amount of the goodwill. There was no goodwill impairment charge recorded during the nine months ended September 30, 2021.

Change in Fair Value of Warrant Liability

~~Change~~There was no change in fair value of warrant liability during the nine months ended September 30, ~~2021~~2022, and ~~2020, were~~ a ~~$56.6~~change in fair value of warrant liability of ($56.6) million ~~loss and $0, respectively.~~during the nine months ended September 30, 2021. The ~~decrease~~change in fair value is the result of the remeasurement of the Private Placement Warrant liability prior to the cashless exercise of the Private Placement Warrants. The warrant liability increased $56.6 million as a result of the remeasurement, which resulted in the $56.6 million loss. As of March 2, 2021, all Private Placement Warrants were exercised and there was no outstanding warrant liability.

Interest Expense

Interest expense during the nine months ended September 30, 2022 and 2021 was $1.3 million and ~~2020 was~~ $0.1 million, ~~and $0.2 million,~~ respectively, ~~a decrease~~an increase of ~~$0.1~~$1.2 million. Interest expense ~~decreased primarily~~increased due to the ~~payoff of~~increase in accrued interest on the ~~term loan in June 2021.~~2027 Notes.

Interest and Other Income, Net

Interest and other (expense) income, net during the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and was ($~~3.2)~~8.4) million and ~~$1.0~~($3.2) million, respectively, a decrease of ~~$4.2 million, or 420%. Interest income decreased~~$5.2 million. The decrease is primarily due to a loss on the investment in equity ~~investment, partially offset by~~securities of a publicly-traded company as well as an unrealized ~~gain~~loss on ~~notes receivable.~~other investments.

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Income Taxes

We recorded an income tax benefit of $1.6 million during the nine months ended September 30, 2022, compared to an income tax benefit of $32.8 million during the nine months ended September 30, ~~2021 compared to no provision for the nine months ended September 30, 2020.~~2021. The ~~increase~~decrease was primarily due to the partial release of the valuation allowance related to the deferred tax liability acquired in the EnvisionTEC and Adaptive 3D ~~acquisitions.~~acquisitions during the nine months ended September 30, 2021.

Non-GAAP Financial Information

In addition to our results determined in accordance with GAAP, we believe the below non-GAAP financial measures are useful in evaluating our operational performance. We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance.

The non-GAAP financial information excludes, as applicable, stock-based compensation expense, amortization of acquired intangible assets, ~~included in cost of sales,~~restructuring expenses, acquisition-related and other transactional charges, ~~included~~inventory step-up, in-process research and development assets acquired, goodwill impairment, change in ~~general and administrative expense,~~fair value of investments and change in fair value of warrant liability. These items are normally included in the comparable measures calculated and presented in accordance with GAAP. Our management excludes these items when evaluating our ongoing performance and/or evaluating earnings potential, and therefore excludes them when presenting non-GAAP financial measures. Management uses non-GAAP financial measures to supplement our GAAP results.

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Stock-based compensation is a non-cash expense relating to stock-based awards issued to executive officers, employees, and outside directors, consisting of options and restricted stock units. We exclude this expense because it is a non-cash expense and we assess our internal operations excluding this expense and believe it facilitates comparisons to the performance of other companies in our industry.

Amortization of acquired intangible assets is a non-cash expense that is impacted by the timing and magnitude of our acquisitions. We believe the assessment of our operations excluding these costs is relevant to an understanding of internal operations and to comparisons with the performance of other companies in our industry.

Restructuring expenses are costs related to strategic integration and cost optimization initiatives which include global workforce reductions, facilities consolidation, and other operational savings measures. We believe the assessment of our operations excluding these costs is relevant to an understanding of internal operations and to comparisons with the performance of other companies in our industry.

Acquisition-related and other transactional charges ~~included in general and administrative expenses~~are direct costs related to potential and completed acquisitions, including transaction fees, due diligence costs, severance, professional fees, and integration activities. Other transactional charges include third-party costs related to structuring unusual transactions. The occurrence and amount of these costs will vary depending on the timing and size of acquisitions. We believe excluding acquisition-related costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

In-process research and development assets acquired are direct costs related to assets acquisitions where the intangible assets acquired were determined to have no alternative future use. This is a non-recurring expense and we believe excluding acquired in-process research and development facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

Goodwill impairment is a non-cash charge to write down the carrying amount of goodwill following a quantitative impairment assessment where it was determined that the estimated fair value of the reporting unit was less than its carrying amount. We believe the assessment of our operations excluding this charge is relevant to an understanding of internal operations and to comparisons with the performance of other companies in our industry.

Change in fair value of investments is a non-cash gain or loss impacted by the change in fair value of convertible debt instruments and the equity investment. We believe the assessment of our operations excluding this activity is relevant to ~~our assessment~~an understanding of internal operations and to comparisons with the performance of other companies in our industry.

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Change in fair value of warrant liability is a non-cash gain or loss impacted by the fair value of the Private Placement Warrants. We believe the assessment of our operations excluding this activity is relevant to ~~our assessment~~an understanding of internal operations and to comparisons with the performance of other companies in our industry.

We use the below non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP financial measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals for managing our business and evaluating our performance. We believe that providing non-GAAP financial measures also affords investors a view of our operating results that may be more easily compared to the results of other companies in our industry that use similar financial measures to supplement their GAAP results.

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The items excluded from the non-GAAP financial measures often have a material impact on our financial results and such items often recur. Accordingly, the non-GAAP financial measures included in this Quarterly Report on Form 10-Q should be considered in addition to, and not as a substitute for, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure in our financial statements for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,
(Dollars in thousands)

2021

2020

2021

2020
GAAP gross margin

$
3,955

$
(2,301)

$
5,740

$
(13,409)
Stock-based compensation included in cost of sales

341

68

587

220
Amortization of acquired intangible assets included in cost of sales

2,515

—

5,841

—
Non-GAAP gross margin

$
6,811

$
(2,233)

$
12,168

$
(13,189)

GAAP operating loss

$
(63,594)

$
(19,453)

$
(142,049)

$
(65,769)
Stock-based compensation

9,951

1,894

16,167

4,227
Amortization of acquired intangible assets included in cost of sales

2,515

—

5,841

—
Amortization of acquired intangible assets included in operating expenses

2,089

160

5,330

484
Acquisition-related and other transactional charges included in general and administrative expenses

5,675

—

13,786

—
In-process research and development assets acquired

15,181

—

25,581

—
Non-GAAP operating loss

$
(28,183)

$
(17,399)

$
(75,344)

$
(61,058)

GAAP net loss

$
(66,879)

$
(19,457)

$
(169,167)

$
(65,027)
Stock-based compensation

9,951

1,894

16,167

4,227
Amortization of acquired intangible assets included in cost of sales

2,515

—

5,841

—
Amortization of acquired intangible assets included in operating expenses

2,089

160

5,330

484
Acquisition-related and other transactional charges included in general and administrative expenses

5,675

—

13,786

—
In-process research and development assets acquired

15,181

—

25,581

—
Change in fair value of investments

4,204

—

4,186

—
Change in fair value of warrant liability

—

—

56,576

—
Non-GAAP net loss

$
(27,264)

$
(17,403)

$
(41,700)

$
(60,316)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
GAAP gross margin	$	(309)	$	3,955	$	6,760	$	5,740
Stock-based compensation included in cost of sales⁽¹⁾		734		341		1,892		586
Amortization of acquired intangible assets included in cost of sales		5,877		2,515		17,817		5,841
Restructuring expense in cost of sales		3,085		—		3,126		—
Acquisition-related and other transactional charges included in cost of sales		—		—		1,148		—
Inventory step-up adjustment in cost of sales		—		—		1,496		—
Non-GAAP gross margin	$	9,387	$	6,811	$	32,239	$	12,167

GAAP operating loss	$	(57,819)	$	(63,594)	$	(419,868)	$	(142,049)
Stock-based compensation^(2),(3)		12,040		9,951		41,170		16,167
Amortization of acquired intangible assets		9,069		4,604		28,522		11,172
Restructuring expense		3,085		—		5,086		—
Inventory step-up adjustment in cost of sales		—		—		1,496		—
Acquisition-related and other transactional charges		1,476		5,675		6,633		13,786
In-process research and development assets acquired		—		15,181		—		25,581
Goodwill impairment		—		—		229,500		—
Non-GAAP operating loss	$	(32,149)	$	(28,183)	$	(107,461)	$	(75,343)

GAAP net loss	$	(60,774)	$	(66,879)	$	(427,990)	$	(169,167)
Stock-based compensation^(2),(3)		12,040		9,951		41,170		16,167
Amortization of acquired intangible assets		9,069		4,604		28,522		11,172
Restructuring expense		3,085		—		5,469		—
Inventory step-up adjustment in cost of sales		—		—		1,496		—
Acquisition-related and other transactional charges		1,476		5,675		6,633		13,786
In-process research and development assets acquired		—		15,181		—		25,581
Goodwill impairment		—		—		229,500		—
Change in fair value of investments		2,052		4,204		8,493		4,186
Change in fair value of warrant liability		—		—		—		56,576
Non-GAAP net loss	$	(33,052)	$	(27,264)	$	(106,707)	$	(41,699)

⁽¹⁾ Includes $0.1 million and $0.2 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

⁽²⁾ Includes $7.3 million of stock-based compensation expense associated with the Initiative for the nine months ended September 30, 2022.

⁽³⁾ Includes $1.2 million and $3.4 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

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	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
GAAP operating expenses	$	57,510	$	67,549	$	426,628	$	147,789
Stock-based compensation included in operating expenses^(1),(2)		(11,306)		(9,610)		(39,278)		(15,581)
Amortization of acquired intangible assets included in operating expenses		(3,192)		(2,089)		(10,705)		(5,330)
Restructuring expense included in operating expenses		—		—		(1,960)		—
Acquisition-related and other transactional charges included in operating expenses		(1,476)		(5,675)		(5,485)		(13,786)
In-process research and development assets acquired		—		(15,181)		—		(25,581)
Goodwill impairment		—		—		(229,500)		—
Non-GAAP operating expenses	$	41,536	$	34,994	$	139,700	$	87,511

⁽¹⁾ Includes $7.3 million of stock-based compensation expense associated with the Initiative for the nine months ended September 30, 2022.

⁽²⁾ Includes $1.1 million and $3.2 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

We define “EBITDA” as net loss plus net interest income, provision for income taxes, depreciation and amortization expense.

We define “Adjusted EBITDA” as EBITDA adjusted for change in fair value of warrant liability, change in fair value of investments, inventory step-up adjustment, stock-based compensation expense, ~~warrant~~restructuring expense, goodwill impairment and transaction costs associated with acquisitions.

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We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing, capital expenditures, and non-cash expenses such as stock-based compensation and warrants, and provides investors with a means to compare our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware when evaluating EBITDA and Adjusted EBITDA that we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of these measures, especially Adjusted EBITDA, may not be comparable to other similarly titled measures computed by other companies because not all companies calculate these measures in the same fashion.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

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The following table reconciles net loss to EBITDA and Adjusted EBITDA during the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,
(Dollars in thousands)

2021

2020

2021

2020
Net loss attributable to common stockholders

$
(66,879)

$
(19,457)

$
(169,167)

$
(65,027)
Interest (income) expense, net

(104)

12

(286)

(651)
Income tax benefit

(523)

—

(32,761)

—
Depreciation and amortization

6,488

2,050

15,576

6,525
In-process research and development assets acquired

15,181

—

25,581

—
EBITDA

(45,837)

(17,395)

(161,057)

(59,153)
Change in fair value of warrant liability

—

—

56,576

—
Change in fair value of investments

4,204

—

4,186

—
Stock compensation expense

9,951

1,895

16,167

4,228
Warrant expense

—

—

—

211
Transaction costs associated with acquisitions

5,675

—

13,786

—
Adjusted EBITDA

$
(26,007)

$
(15,500)

$
(70,342)

$
(54,714)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Net loss attributable to common stockholders	$	(60,774)	$	(66,879)	$	(427,990)	$	(169,167)
Interest (income) expense, net		680		(104)		1,281		(286)
Income tax expense (benefit)		598		(523)		(1,602)		(32,761)
Depreciation and amortization		12,692		6,488		38,294		15,576
In-process research and development assets acquired		—		15,181		—		25,581
EBITDA		(46,804)		(45,837)		(390,017)		(161,057)
Change in fair value of warrant liability		—		—		—		56,576
Change in fair value of investments		2,052		4,204		8,493		4,186
Inventory step-up adjustment		—		—		1,496		—
Stock-based compensation expense^(1),(2)		12,040		9,951		41,170		16,167
Restructuring expense		3,085		—		5,469		—
Goodwill impairment		—		—		229,500		—
Acquisition-related and other transactional charges		1,476		5,675		6,633		13,786
Adjusted EBITDA	$	(28,151)	$	(26,007)	$	(97,256)	$	(70,342)

⁽¹⁾ Includes $7.3 million of stock-based compensation expense associated with the Initiative for the nine months ended September 30, 2022.

⁽²⁾ Includes $1.2 million and $3.4 million of liability-award stock-based compensation for the three and nine months ended September 30, 2022, respectively.

Liquidity and Capital Resources

We have incurred a net loss in each of our annual periods since our ~~inception.~~inception, and we have an accumulated deficit of $996.6 million as of September 30, 2022. We incurred net losses of ~~$169.2~~$428.0 million and ~~$65.0~~$169.2 million during the nine months ended September 30, 2022 and 2021, respectively. We expect to continue to incur additional losses and ~~2020, respectively.~~negative cash flows from operations in the near term. As of September 30, ~~2021,~~2022, we had ~~$423.9~~$217.3 million in cash, cash equivalents, and short-term investments. We completed the Business Combination in December 2020, receiving $534.6 million net cash proceeds as a result of the transaction. Additionally, during the nine months ended September 30, 2021, we received $170.7 million in net cash proceeds from the exercise of public warrants. We expect both to support our operations and investments in the near term.

Since inception, we have received cumulative net proceeds from the Business Combination, the exercise of warrants, and the sale of our preferred and common stock of $973.4 million to fund our ~~operations.~~operations, and in May 2022 we received aggregate net proceeds of $111.4 million from the sale of 6.0% Convertible Senior Notes due 2027 as described below. As of September 30, ~~2021,~~2022, our principal sources of liquidity were our cash, cash equivalents, and short-term investments of ~~$423.9~~$217.3 million which are principally invested in money market funds and fixed income instruments.

In June 2018, we entered into a three-year, $20.0 million term loan, which provided $10.0 million immediately with the remaining principal balance available to be drawn in up to three draws of not less than $2.0 million for 12 months from close of the facility. We entered into this loan to fund capital expenditures associated with our corporate office. The loan was repaid in full in June 2021.

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In April 2020, we received loan proceeds in the amount of approximately $5.4 million under the Paycheck Protection Program, or the “PPP”. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, provides for loans to qualifying businesses. We repaid the loan in full on May 13, 2020.

In connection with the acquisition of EnvisionTEC, we acquired $1.2 million in PPP loans. Under the terms of the CARES Act, PPP loan recipients can apply for forgiveness for all or a portion of the loan which is dependent upon the Company having initially qualified for the loan. Furthermore, the loan is subject to forgiveness to the extent loan proceeds are used for payroll costs, certain rents, utilities, and mortgage interest expense. The PPP loan has a maturity date of April 3, 2022 and an interest rate of 1%. Principal and interest are payable monthly commencing on a date determined by the lender following the determination of the amount of the PPP loan to be forgiven or potentially earlier, as determined under applicable Small Business Administration rules. The outstanding borrowings may be prepaid by the Company at any time prior to maturity with no prepayment penalties. On May 14, 2021, the outstanding loan balance was communicated as forgiven. There was no outstanding PPP loan balance for EnvisionTEC as of September 30, 2021.

In connection with the acquisition of Adaptive 3D, we acquired $0.3 million in PPP loans. As of September 30, 2021, $0.3 million of the PPP loans is classified as a current liability on the consolidated balance sheet. Subsequent to September 30, 2021, $0.3 million of the loan was forgiven, and an immaterial loan remains outstanding.

In connection with the acquisition of Dental Arts Labs, we acquired $3.4 million in PPP loans. On September 30, 2021, the entire balance of PPP loans was forgiven. There was no outstanding PPP loan balance for Dental Arts Labs as of September 30, 2021.

In connection with the acquisition of Dental Arts Labs, we acquired a thirteen-month equipment financing agreement, or the Financing Agreement, in the amount of $0.5 million. The Financing Agreement provides for an advance payment of $0.5 million to secure equipment. Payments are made monthly under the Financing Agreement. As of September 30, ~~2021,~~2022, we ~~had~~have made ~~immaterial~~ payments of $0.3 million on the Financing Agreement. ~~The Financing Agreement will mature in June 2023.~~

In connection with the acquisition of A.I.D.R.O., we acquired three loans, the Bank Loans, totaling $1.1 million in aggregate. The Bank Loans have term of 4.5 years and mature from September 2024 through September 2025, with interest rates ranging from 1.70% to 2.10%. Payments of principal and interest are made quarterly. As of September 30, ~~2021,~~2022, we had paid ~~$0.2~~$0.5 million and ~~$0.9~~$0.6 million remains outstanding.

In May 2022, we issued $115.0 million principal amount of our 6.0% Convertible Senior Notes due 2027 (“2027 Notes”). The 2027 Notes were issued pursuant to, and are governed by, an indenture, dated as of May 13, 2022, between us and U.S. Bank Trust Company, National Association, as trustee. Pursuant to the purchase agreement between us and the initial purchasers of the Notes, we granted the initial purchasers an option to purchase up to an additional $15.0 million principal amount of 2027 Notes, which was exercised on May 19, 2022. We received aggregate net proceeds of $111.4 million from the sale of the 2027 Notes.

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Our material cash requirements have consisted of operating activities, research and development costs, purchase price for acquisitions, transaction costs and capital expenditures. We expect our cash expenditures to increase in connection with our ongoing activities, particularly as we continue to develop and launch new products. As of September 30, 2022, we had inventory purchase commitments of $64.3 million, with the majority payable within 12 months. In addition, as of September 30, 2022, we had lease payment obligations of $24.2 million, with $5.4 million payable within 12 months.

Capital expenditures for the nine months ended September 30, 2022, totaled $8.2 million and consisted primarily of lab equipment and leasehold improvements. As of September 30, 2022, we had capital expenditure commitments of $0.3 million, all payable within 12 months. As of September 30, 2022, we had $67.0 million in cash and cash equivalents, and $150.3 million in short-term liquid investments. This liquid asset balance significantly exceeds our current liabilities of $98.3 million as of the same date. Our future cash requirements will depend on many factors including our revenue, research and development efforts, investments in, or acquisitions of, complementary or enhancing technologies or businesses, the impacts of the COVID-19 pandemic, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and the introduction of new products.

We expect to continue to incur net losses and negative cash flows from operations, particularly as we continue to invest in commercialization and new product development. Additionally, we may engage in future acquisitions which may require additional capital, and we may also dispose of assets or certain of our businesses. We believe that our existing capital resources will be sufficient to support our operating plan and cash commitments for at least the next 12 months. AsThis belief is based on assumptions that may change as a result of ~~September 30, 2021,~~many factors currently unknown to us; however, we ~~had $131.7 million in cash and cash equivalents, and $292.3 million in short-term liquid investments. This liquid asset balance significantly exceeds~~expect that we may need to further increase our ~~current liabilities~~capital resources by issuing additional shares of ~~$49.8 million as~~our capital stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity, or shares of ~~the same date.~~preferred stock. There is no assurance that sources of financing will be available on a timely basis, or on satisfactory terms, or at all. If we ~~anticipate that~~are unable to raise additional funds or reduce costs when needed, we may be required to delay, reduce, or terminate our ~~actual results will differ from our operating plan, we believe we~~product development and commercialization efforts, or forego attractive acquisition opportunities.

We have, ~~sufficient capabilities~~and intend to continue to, enact cost savings measures during 2022 to preserve capital.

In June 2022, we announced a strategic integration and cost optimization initiative that includes a global workforce reduction of approximately 12%, facilities consolidation, and other operational savings measures. We have commenced workforce reductions in the United States and are reviewing workforce changes in other countries, the timing of which will vary according to local regulatory requirements. In October 2022, we further reduced our United States workforce. We are also conducting a facility rationalization assessment and assessing other operational savings measures. We are currently evaluating other potential specific initiatives we may undertake to reduce our operating expenses and manage our cash flows. We expect ~~net losses~~that these initiatives could include: disposing of certain of our assets, rationalizing our product portfolio, workforce adjustments based on changes to ~~continue~~the business, manufacturing consolidation, improving our supply chain and logistics, improving our inventory management and consolidating certain of our facilities. We expect to incur costs in the near term in connection with ~~our ongoing activities, particularly as we continue~~these initiatives, including severance costs, lease termination costs and other costs to invest in ~~commercialization~~operational improvements. These initiatives may not be successful, and ~~new product development. Additionally,~~they may not generate the cost savings we expect. Certain future events, such as a global recession, a material supply chain disruption or other events outside our control, may ~~engage in future acquisitions which~~occur and could negatively impact our operating results and cash position and may require us to use our existing capital resources more quickly than we currently anticipate. These events may cause us to undertake additional ~~capital.~~cost savings measures or seek additional sources of financing.

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Cash Flows

Since inception, we have primarily used proceeds from the Business Combination, issuances of preferred stock and debt instruments to fund our operations and complete acquisitions. The following table sets forth a summary of cash flows for the nine months ended September 30, ~~2021~~2022, and ~~2020:~~2021:


	For the Nine Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2022		2021
Net cash used in operating activities	$	(110,059)	$	(58,927)	$	(150,789)	$	(110,059)
Net cash (used in) provided by investing activities		(407,122)		30,267
Net cash provided by (used in) financing activities		165,452		(145)
Net cash provided by (used in) investing activities						42,427		(407,122)
Net cash provided by financing activities						113,766		165,452
Effect of exchange rate changes on cash, cash equivalents and restricted cash						(1,491)		(56)
Net change in cash, cash equivalents, and restricted cash	$	(351,729)	$	(28,805)	$	3,913	$	(351,785)

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Operating Activities

Net cash used in operating activities was $150.8 million for the nine months ended September 30, 2022, primarily consisting of $427.2 million of net losses, adjusted for non-cash items, which primarily included goodwill impairment of $229.5 million, depreciation and amortization expense of $38.3 million and stock-based compensation expense of $37.8 million, as well as a $33.7 million increase in cash consumed by working capital. This increase in cash consumed by working capital was primarily driven by an increase in inventory to support new product launches and commercialization of existing products.

Net cash used in operating activities was $110.1 million for the nine months ended September 30, 2021, primarily consisting of $169.2 million of net losses, adjusted for non-cash items, which primarily included loss on change in fair value of warrant liability of $56.6 million, acquisition of in-process research and development of $25.6 million, depreciation and amortization expense of $15.6 million and stock-based compensation expense of $16.2 million, as well as a $33.8 million increase in cash consumed by working capital. The increase in cash consumed by working capital was primarily driven by an increase in certain assets including accounts receivable, inventory and prepaid expenses and other current assets, alongside a decrease in certain liabilities including accounts payable, customer deposits, and deferred revenue. This increase in cash consumed by working capital was partially offset by a decrease in certain assets including prepaid expenses and other current assets and an increase in certain liabilities including accrued expenses and other current liabilities.

Investing Activities

Net cash ~~used in operating~~provided by investing activities was ~~$58.9~~$42.4 million for the nine months ended September 30, ~~2020,~~2022, primarily consisting of ~~$65.0~~proceeds from sales and maturities of marketable securities of $205.7 million, of net losses, adjusted for certain non-cash items, which primarily included depreciation and amortization expense of $6.2 million and stock-based compensation expense of $4.2 million, as well as a $5.0 million increase in cash consumed by working capital. The increase in cash consumed by working capital was primarily driven by an increase in certain assets including inventory and a decrease in certain liabilities including accounts payable, inventory, and deferred revenue. This increase in cash consumed by working capital was partially offset by ~~a decrease in certain assets including accounts receivable~~purchases of marketable securities of $158.4 million. We also purchased $8.2 million of property and ~~prepaid expenses~~equipment, and received proceeds from other ~~current assets and an increase in certain liabilities including accrued expenses and other current liabilities.~~

~~Investing Activities~~investments of $3.1 million.

Net cash used in investing activities was $407.1 million for the nine months ended September 30, 2021, primarily consisting of purchases of marketable securities of $330.9 million, offset by proceeds from sales and maturities of marketable securities of $163.9 million. We also paid $191.9 million for acquisitions, and $21.2 million to acquire in-process research and development, net of cash acquired. We invested $20.0 million in an equity investment and $3.6 million in other investments, and purchased $4.1 million of property and equipment.

Financing Activities

Net cash provided by ~~investing~~financing activities was ~~$30.3~~$113.8 million for the nine months ended September 30, ~~2020,~~2022, consisting primarily ~~consisting~~of $115.0 million of proceeds from ~~sales and maturities~~the issuance of ~~marketable securities of $94.1 million,~~the 2027 Notes, partially offset by ~~purchases~~$3.6 million of ~~marketable securities~~convertible note costs incurred in connection with the issuance of ~~$62.8~~the 2027 Notes. We also received $3.0 million ~~as well as purchases~~in proceeds from the exercise of ~~property and equipment for $1.0 million.~~stock options.

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Net cash provided by financing activities was $165.5 million for the nine months ended September 30, 2021, consisting primarily of $170.6 million in proceeds from the exercise of public warrants and $5.2 million in proceeds from the exercise of stock options, offset by the repayment of the term loan for $10.0 million.

Net cash used in financing activities was $0.1 million for the September 30, 2020, consisting primarily of deferred financing costs paid of $0.4 million, partially offset by $0.3 million in proceeds from the exercise of stock options of proceeds from the exercise of stock options.

Critical Accounting Policies and Significant Estimates

~~Other than as described below, there~~There were no material changes in the first nine months of ~~2021~~2022 to the information provided under the heading “Critical Accounting Policies and Estimates” included in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020.~~2021.

~~Business Combinations~~

We account for business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at their respective estimated fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. While we use our best estimates and judgments, our estimates are inherently uncertain and subject to refinement. During the measurement period, which may

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be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period.

The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated useful life of each asset, can materially impact the consolidated statements of operations of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. In determining the estimated fair value for intangible assets, we typically utilize the income approach, which discounts the projected future net cash flow using a discount rate deemed appropriate by management that reflects the risks associated with such projected future cash flow. Significant estimates and assumptions include revenue growth rates, royalty rates, discount rates, and tax amortization benefit. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.

Off-Balance Sheet Arrangements

In the normal course of operations, ExOne’s German subsidiary, ExOne GmbH, issues short-term financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security through a credit facility with a German bank. At September 30, 2022, total outstanding financial guarantees and letters of credit issued were $4.0 million. For further discussion related to financial guarantees and letters of credit, refer to Note 17 in our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

We have no other off-balance sheet arrangements and do not utilize any “structured debt,” “special purpose” or similar unconsolidated entities for liquidity or financing purposes.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is included in ~~“Note~~Note 2. Summary of Significant Accounting ~~Policies”~~Policies to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks from fluctuations in interest rates and foreign currency translation, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through regular operating and financing activities and, if we consider it to be appropriate, through the use of derivative financial instruments. We do not purchase, hold or sell derivative financial instruments for trading or speculative purposes.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our cash, cash equivalents and short-term investment portfolio. Our investment strategy is focused on preserving capital and supporting our liquidity requirements, while earning a reasonable market return. We invest in a variety of U.S. government securities, corporate debt securities, asset-backed securities, and commercial paper. The market value of our marketable securities may decline if current market interest rates rise. As of September 30, ~~2021,~~2022, the fair value of our cash, cash equivalents, and short-term investments was ~~$423.9~~$217.3 million. A 10% change in interest rates would have an immaterial impact on the fair value of our investment portfolio. Our marketable securities are recorded at fair value, and gains and losses from these securities are recognized within other comprehensive income as they occur.

Foreign Currency Risk

The majority of our operations in Europe and Asia use the local currency as the functional currency. We translate the financial statements of the operations in Europe in Asia to United States dollars and as such we are exposed to foreign currency risk. Currently, we do not use foreign currency forward contracts to manage exchange rate risk, as the amount subject to foreign currency risk is not material to our overall operations and results.

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Item 4. Controls and Procedures

~~Background and Remediation of Material Weakness~~

In connection with our evaluation of disclosure controls and procedures covering our consolidated financial statements as of December 31, 2020, we identified material weaknesses in our internal control over financial reporting. We have concluded that material weaknesses exist in our evaluation of disclosure controls and procedures, including internal control over financial reporting, as we do not have the necessary business processes, personnel and related internal controls to operate in a manner to satisfy the accounting and financial reporting requirements of a public company. These material weaknesses primarily manifested in the improper segregation of duties relating to the recording of journal entries and the reconciliation of key accounts, as well as the analysis of certain transactions and accounts, and the safeguarding of assets. We identified an additional material weakness related to the design and operating effectiveness of controls over our accounting for significant and complex accounting matters.

We are focused on designing and implementing effective internal controls measures to improve our evaluation of disclosure controls and procedures, including internal control over financial reporting, and remediate the material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions:

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~~the hiring and continued hiring of additional accounting, finance and legal resources with public company experience; and~~

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~~implementation of additional review controls and processes requiring timely account reconciliation and analyses of certain transactions and accounts.~~

These actions and planned actions are subject to ongoing evaluation by management and will require testing and validation of design and operating effectiveness of internal controls over financial reporting over future periods. We are committed to the continuous improvement of our internal control over financial reporting and will continue to review the internal controls over financial reporting.

Evaluation of Disclosure Controls and Procedures

Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. ~~Based~~As described in our Annual Report on ~~this evaluation,~~Form 10-K for the year ended December 31, 2021, we identified material weaknesses in our internal control over financial reporting. As a result of these material weaknesses, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2022, our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act is recorded, processed, summarized and reported as and when required.

Notwithstanding these material weaknesses noted above, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America.

Changes in Internal Control Over Financial Reporting

~~We acquired Dental Arts Labs on July 30, 2021, A.I.D.R.O. on September 7,~~As a result of acquisitions during 2021, and ~~Meta Additive on~~related material weaknesses identified, we continue to review the internal controls of each of these subsidiaries and make appropriate changes as deemed necessary.

During the nine months ended September ~~9, 2021. We are~~30, 2022, we continued to implement certain internal controls in ~~the process of integrating these acquisitions, as well as EnvisionTEC, into our system of internal control over financial reporting. Except for~~connection with remediation efforts related to the material weaknesses identified in our Annual Report on Form 10-K for the year ended December 31, 2021. Except as noted ~~above and~~in the ~~acquisitions of Dental Arts Labs, A.I.D.R.O. and Meta Additive,~~preceding paragraph, there were no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the ~~quarter~~nine months ended September 30, ~~2021~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter

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how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within the Company have been or will be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. We recognize provisions for claims or pending litigation when we determine that an unfavorable outcome is probable, and the amount of loss can be reasonably estimated. Due to the inherent uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any current legal proceedings will have a material adverse impact on the Company’s condensed consolidated financial statements.

As previously disclosed, between September 2021 and the closing of the ExOne Merger on November 12, 2021, twelve putative class action complaints were filed by purported ExOne shareholders against ExOne and the former ExOne Board of Directors alleging violations of federal securities laws in connection with the S-4 filed by ExOne for the ExOne Merger. All have been dismissed.

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As previously disclosed, on November 8, 2021, another purported stockholder, Leo Lissoq Goldstein, filed a Section 220 complaint in Delaware Chancery Court against ExOne (Goldstein v. The ExOne Company, Case No. 2021-0958-KSJM). Mr. Goldstein seeks to discover certain books and records of the company related to the ExOne Merger purportedly in order to investigate, among other things, the events leading up to and the disclosures made in connection with the ExOne Merger. Mr. Goldstein has also moved to intervene and stay the Campanella action, discussed below, until his Section 220 action is complete.

As previously disclosed, on November 22, 2021, purported stockholder Pietro Campanella filed a class action lawsuit against ExOne, Desktop Metal, Inc., and former ExOne directors and officers alleging breach of fiduciary duties and aiding and abetting breach of fiduciary duties in connection with the ExOne Merger (Campanella v. The ExOne Company et al., Case No. 2021-1013, Case No. 2021-1013-LWW). In particular, Mr. Campanella alleges that ExOne’s proxy statement and supplemental disclosures did not adequately disclose information related to a whistleblower investigation at one of Desktop Metal’s subsidiaries, EnvisionTEC, and the resignation of EnvisionTEC’s CEO.

As previously disclosed, on December 21, 2021, January 14, 2022, February 2, 2022, and February 22, 2022, four alleged shareholders of Desktop Metal stock filed purported securities class action complaints in the United States District Court for the District of Massachusetts. (Luongo v. Desktop Metal, D. Mass., Case No. 1:21-cv-12099-IT; Hathaway v. Desktop Metal, D. Mass., Case No. 1:22-cv-10059-IT; Guzman-Martinez v. Desktop Metal, D. Mass, Case No. 1:22-cv-10173, Xie v. Desktop Metal, Case No. 1:22-cv-10297-IT). Each complaint alleges that Desktop Metal and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities and Exchange Act by making false or misleading statements regarding EnvisionTEC’s manufacturing and product compliance practices and procedures. On February 4, 2022, the court issued an order consolidating the first three District of Massachusetts securities class actions. On July 7, 2022, the court appointed Sophia Zhou lead plaintiff for the class period of February 17, 2021 through November 15, 2021. The court also vacated its earlier order consolidating the Xie action with the other lawsuits and will allow that action to proceed separately, with a new notice to investors, based on a class period of January 15, 2021 to February 16, 2021. On September 29, 2022, the Court re-consolidated the Xie action with the other actions for all pre-trial proceedings.

The Company believes that these complaints are all without merit and intends to defend against them vigorously.

Item 1A. Risk Factors

Summary of Risk Factors

Our business is subject to numerous risks. Below is a summary of the principal factors that could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found under the heading “Risk Factors” immediately following this section and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC, before making an investment decision regarding our Class A common stock.

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~~We are an early-stage company with a history of losses. We have not been profitable historically and may not achieve or maintain profitability in the future.~~

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As part of our growth strategy, we intend to acquire or make investments in other businesses, patents, technologies, products or services. Our efforts to do so, or our failure to do so successfully could disrupt our business and have an adverse impact on our financial condition.

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~~We may experience difficulties in integrating the operations of acquired companies into our business and in realizing the expected benefits of these acquisitions.~~

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~~We may experience significant delays in the design, production and launch of our additive manufacturing solutions, and we may be unable to successfully commercialize products on our planned timelines.~~

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If demand for our products does not grow as expected, or if market adoption of additive manufacturing does not continue to develop, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected.

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The additive manufacturing industry in which we operate is characterized by rapid technological change, which requires us to continue to develop new products and innovations to meet constantly evolving customer demands and which could adversely affect market adoption of our products.

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Future sales, or the perception of future sales, of our Class A common stock by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.

• We may experience significant delays in the design, production and launch of our additive manufacturing solutions, and we may be unable to successfully commercialize products on our planned timelines.

• If demand for our products does not grow as expected, or if market adoption of additive manufacturing does not continue to develop, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected.

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~~We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors.~~

• The additive manufacturing industry in which we operate is characterized by rapid technological change, which requires us to continue to develop new products and innovations to meet constantly evolving customer demands and which could adversely affect market adoption of our products.

• As part of our growth strategy, we intend to acquire or make investments in other businesses, patents, technologies, products or services. Our efforts to do so, or our failure to do so successfully could disrupt our business and have an adverse impact on our financial condition.

• We may experience difficulties in integrating the operations of ExOne, EnvisionTEC and other acquired companies into our business and in realizing the expected benefits of these acquisitions.

• We are an early-stage company with a history of losses. We have not been profitable historically and may not achieve or maintain profitability in the future.

• Future sales, or the perception of future sales, of our Class A common stock by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.

Risk Factors

Our business is subject to numerous risks. You should carefully consider the risks and uncertainties described below and the other information in this Quarterly Report on Form 10-Q before making an investment decision regarding our Class A common stock. Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our Class A common stock could decline, and you could lose all or part of your investment. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

Risks Related to Our ~~Financial Position~~Business and ~~Need for Additional Capital~~Industry

We ~~are an early-stage company with a history of losses. We have not been profitable historically and~~ may ~~not achieve or maintain profitability~~experience significant delays in the ~~future.~~

~~We experienced net losses in each year from~~design, production and launch of our inception, including net losses of $90.4 million and $103.6 million for the years ended December 31, 2020 and 2019, respectively. We believe we will continue to incur operating losses and negative cash flow in the near-term as we continue to invest significantly in our business, in particular across our research and development efforts and sales and marketing programs. These investments may not result in increased revenue or growth in our business.

In addition, as a public company, we incur significant additional legal, accounting and other expenses that we did not incur as a private company. As we acquire and integrate private companies, we will also incur additional legal, accounting and other expenses. These increased expenditures may make it harder for us to achieve and maintain future profitability. Revenue growth and growth in our customer base may not be sustainable,additive manufacturing solutions, and we may ~~not achieve sufficient revenue~~be unable to ~~achieve or maintain profitability. While we have generated revenue in the past, we have only recently begun commercial shipments of several~~successfully commercialize products on our planned timelines.

Several of our announced additive manufacturing solutions ~~some~~are yet to be commercially released. There are often delays in the design, testing, manufacture and commercial release of ~~which are expected to generate a substantial portion~~new products, and any delay in the launch of our ~~revenue going forward,~~products could materially damage our brand, business, growth prospects, financial condition and ~~it is difficult for us to predict our future~~ operating results. WeEven if we successfully complete the design, testing and manufacture for one or all of our products under development, we may ~~incur significant losses in~~fail to develop a commercially successful product on the ~~future~~timeline we expect for a number of reasons, ~~including~~including:

• misalignment between the products and customer needs;

• lack of innovation of the product;

• failure of the product to perform in accordance with the customer’s expectations or industry standards;

• ineffective distribution and marketing;

• delay in obtaining any required regulatory approvals;

• unexpected production costs; or

• release of competitive products.

Our success in the market for the products we develop will depend largely on our ability to prove our products’ capabilities in a timely manner. Upon demonstration, our customers may not believe that our products and/or technology have the capabilities they

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were designed to have or that we believe they have. Furthermore, even if we do successfully demonstrate our products’ capabilities, potential customers may be more comfortable doing business with another larger and more established company or may take longer than expected to make the decision to order our products. Significant revenue from new product investments may not be achieved for a number of years, if at all. If the timing of our launch of new products and/or of our customers’ acceptance of such products is different than our assumptions, our revenue and results of operations may be adversely affected.

We may experience significant delays or other obstacles in the design, production, launch and/or maintenance of produced parts offerings, and we may be unable to successfully commercialize said offerings.

We are building out produced parts offerings for customers, and produced parts is an existing offering of some of our recently-acquired businesses. These offerings present similar challenges and risks to those outlined herein with respect to the design, production, launch and profitability of new additive manufacturing solutions. We have a limited history operating in the direct manufacturing and produced parts businesses, and as a result we may face challenges in designing or delivering parts that meet customer specifications, both on time and cost-effectively. Additionally, our produced parts in the healthcare and dental industry may be subject to regulatory approvals and controls, which may delay the design, production or launch of products. In particular, we may fail to develop commercially successful produced parts offerings if we are unable to meet customer needs or industry standards, if we fail to meet our desired gross margins or customer price expectations, or if our marketing and distribution strategy proves ineffective. If we are unsuccessful in establishing such offerings, sales of our additive manufacturing solutions and our overall operating results could suffer.

Our business activities may be disrupted due to the ongoing impact of the COVID-19 pandemic.

We face various risks and uncertainties related to the ongoing impact of the COVID-19 pandemic, including the delta and omicron variants, recent resurgences, public health measures and related government-imposed restrictions. The COVID-19 pandemic has led to disruption and volatility in the global economy and capital markets, which increases the cost of capital and adversely impacts access to capital. Government-enforced travel bans and business closures around the world have significantly impacted our ability to sell, install and service our additive manufacturing systems at customers around the world. It has, and may continue to, disrupt our third-party contract manufacturers and supply chain. We currently anticipate customer payment delays for our products which could negatively impact our results of operations. We have also experienced some delays in installation of our products at customers’ facilities, which has and could lead to postponed revenue recognition for those transactions. In addition, installation delays could prevent us from achieving anticipated consumables revenues due to systems being put into operation later, or at lower utilization, than expected. Furthermore, if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures, remote working or other restrictions in connection with the COVID-19 pandemic, our operations will likely be adversely impacted.

If the COVID-19 pandemic continues for a prolonged duration, we or our customers may be unable to perform fully on our contracts, which will likely result in increases in costs and reduction in revenue. These cost increases may not be fully recoverable or adequately covered by insurance. The long-term effects of COVID-19 to the global economy and to us are difficult to assess or predict and may include a further decline in the market prices of our products, risks ~~described~~to employee health and safety, risks for the deployment of our products and services and reduced sales in ~~this Quarterly Report~~geographic locations impacted. Any prolonged restrictive measures put in place in order to control COVID-19 or other adverse public health developments in any of our targeted markets may have a material and adverse effect on ~~Form 10-Q,~~our business operations and results of operations.

We may not be able to realize the expected savings from future cost savings measures.

We implemented cost savings initiatives during 2022 to preserve capital, and intend to implement additional cost savings measures in the future. We expect to incur costs in connection with these cost savings initiatives. Our ability to achieve the anticipated cost savings and other benefits from these initiatives within the expected time frame is subject to many estimates and assumptions. There can be no assurance that the anticipated cost savings will be achieved, or that they will not be significantly and materially less than anticipated, or that the completion of such cost savings initiatives will be effectively accomplished. In addition, our ability to realize the anticipated cost savings are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, such as operating difficulties, supply chain disruptions, local regulations, employment laws or general economic or industry conditions. If we fail to realize the anticipated cost savings it could have a material negative impact on our results of operations and financial position.

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Changes in our product mix may impact our gross margins and financial performance.

Our financial performance may be affected by the mix of products and services we sell during a given period. Our products are sold, and will continue to be sold, at different price points. Sales of certain of our products have, or are expected to have, higher gross margins than others. If our product mix shifts too far into lower gross margin products, and we ~~may encounter unforeseen expenses, difficulties, complications and delays~~are not able to sufficiently reduce the engineering, production and other ~~unknown events. As~~costs associated with those products or substantially increase the sales of our higher gross margin products, our profitability could be reduced. Additionally, the introduction of new products or services may further heighten quarterly fluctuations in gross profit and gross profit margins due to manufacturing ramp-up and start-up costs. We may experience significant quarterly fluctuations in gross profit margins or operating income or loss due to the impact of the mix of products, channels or geographic areas in which we sell our products from period to period. Our financial performance also depends on the portion of our produced parts revenue supplied using additive manufacturing processes, which may enable higher gross margins and operational efficiencies as compared to conventional manufacturing technologies.

If we fail to meet our customers’ price expectations, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer.

Demand for our product lines is sensitive to price. We believe our competitive pricing has been an important factor in our results to date. Therefore, changes in our pricing strategies can have a ~~result,~~significant impact on our ~~losses~~business and ability to generate revenue. Many factors, including our production and personnel costs and our competitors’ pricing and marketing strategies, can significantly impact our pricing strategies. If we fail to meet our customers’ price expectations in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer.

The industrial manufacturing market, which today is dominated by conventional manufacturing processes that do not involve 3D printing technology, is undergoing a shift towards additive manufacturing. We may not be able to develop effective strategies to raise awareness among potential customers of the benefits of additive manufacturing technologies or our products may not address the specific needs or provide the level of functionality or economics required by potential customers to encourage the continuation of this shift towards additive manufacturing. If additive manufacturing technology does not continue to gain broader market acceptance as an alternative to conventional manufacturing processes, or does so more slowly than anticipated, ~~we may incur significant losses for~~or if the ~~foreseeable future, and we may not achieve profitability when expected, or at all, and even if we do,~~marketplace adopts additive manufacturing technologies that differ from our technologies, we may not be able to ~~maintain~~increase or ~~increase profitability. Furthermore,~~sustain the level of sales of our products, and our operating results would be adversely affected as a result.

Declines in the prices of our products and services, or in our volume of sales, together with our relatively inflexible cost structure, may adversely affect our financial results.

Our business is subject to price competition. Such price competition may adversely affect our results of operation, especially during periods of decreased demand. Decreased demand also adversely impacts the volume of our systems sales. If our business is not able to offset price reductions resulting from these pressures, or decreased volume of sales due to contractions in the market, by improved operating efficiencies and reduced expenditures, then our operating results will be adversely affected.

Certain of our operating costs are fixed and cannot readily be reduced, which diminishes the positive impact of our restructuring programs on our operating results. To the extent the demand for our products slows, or the additive manufacturing market contracts, we may be faced with excess manufacturing capacity and related costs that cannot readily be reduced, which will adversely impact our financial condition and results of operations.

Our business model is predicated, in part, on building a customer base that will generate a recurring stream of revenues through the sale of our consumables and service contracts. If that recurring stream of revenues does not develop as expected, or if our business model changes as the industry evolves, our operating results may be adversely affected.

Our business model is dependent, in part, on our ability to maintain and increase sales of our proprietary consumables and service contracts as they generate recurring revenues. Existing and future customers of our systems may not purchase our consumables or related service contracts at the rate we expect for certain product lines or at the same rate at which customers currently purchase those

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consumables and services. In addition, our entry-level systems focused on low-volume production generally use a lower volume of consumables relative to our volume throughput systems focused on high-volume production. If our current and future customers purchase a lower volume of our consumable materials or service contracts, or if our entry-level systems represent an increasing percentage of our future installed customer base, resulting overall in lower purchases of consumables and service contracts on average than our current installed customer base or than we expect, our recurring revenue stream relative to our total revenues would be reduced and our operating results would be adversely affected.

Reservations for our Production System P-50 solution may not convert to purchase orders.

Prior to commencing shipments of our Production System P-50 in the first quarter of 2022, we accepted reservations for the product, most of which are accompanied by a financial deposit. Given the anticipated lead times between reservations and the date of delivery of the Production System P-50s, there is a risk that customers who have placed reservations may ultimately decide not to convert such reservations into purchase orders and take delivery of their reserved Production System P-50 due to potential changes in customer preferences, competitive developments or other factors. As a result, no assurance can be made that reservations will result in the purchase of our Production System P-50s, and any such failure to convert these reservations could harm our business, prospects, financial condition and operating results.

Defects in new products or in enhancements to our existing products that give rise to product returns or warranty or other claims could result in material expenses, diversion of management time and attention and damage to our reputation.

Our additive manufacturing solutions are complex and may contain undetected defects or errors when first introduced or as enhancements are released that, despite testing, are not discovered until after a machine has been used. This could result in delayed market acceptance of those products or claims from resellers, customers or others, which may result in litigation, increased end user warranty, support and repair or replacement costs, damage to our reputation and business, or significant costs and diversion of support and engineering personnel to correct the defect or error. We may from time to time become subject to warranty or product liability claims related to product quality issues that could lead us to incur significant expenses.

We attempt to include provisions in our agreements with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products. However, it is possible that these limitations may not be effective as a result of unfavorable judicial decisions or laws enacted in the future.

The sale and support of our products entails the risk of product liability claims. Any product liability claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, damage to our business and reputation and brand, and cause us to fail to retain existing customers or to fail to attract new customers.

Our operations could suffer if we are unable to attract and retain key management or other key employees.

We believe our success has depended, and continues to depend, on the efforts and talents of our senior management and other key personnel, including, in particular, our Co-Founder, Chief Executive Officer, and Chairman, Ric Fulop. Our executive team is critical to the management of our business and operations, as well as to the development of our strategy. Members of our senior management team may resign at any time. The loss of the services of any members of our senior management team, especially Mr. Fulop, could delay or prevent the successful implementation of our strategy or our commercialization of new applications for our systems or other products, or could otherwise adversely affect our ability to manage our company effectively and carry out our business plan. There is no assurance that if any senior executive leaves in the future, we will be able to rapidly replace him or her and transition smoothly towards his or her successor, without any adverse impact on our operations.

To support the continued growth of our business, we must also effectively recruit, hire, integrate, develop, motivate and retain additional new employees. High demand exists for senior management and other key personnel (including scientific, technical, engineering, financial and sales personnel) in the additive manufacturing industry, and there can be no assurance that we will be able to retain our current key personnel. We experience intense competition for qualified personnel. While we intend to continue to provide competitive compensation packages to attract and retain key personnel, some of our competitors for these employees have greater resources and more experience, making it difficult for us to compete successfully for key personnel. Moreover, new employees may not become as productive as we expect since we may face challenges in adequately integrating them into our workforce and culture. If we cannot attract and retain sufficiently qualified technical employees for our research product development activities, as well as

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experienced sales and marketing personnel, we may be unable to develop and commercialize new products or new applications for existing products. Furthermore, possible shortages of key personnel, including engineers, in the regions surrounding our Boston facility could require us to pay more to hire and retain key personnel, thereby increasing our costs. Since March 2020, we have had many employees working remotely to protect the health and safety of our employees, contractors, customers and visitors. We also shifted customer, industry and other stakeholder events to virtual-only experiences, and may similarly alter, postpone or cancel other events in the future. Given our limited history with remote operations, the long-term impacts are uncertain.

Departing employees’ knowledge of our business and industry can be extremely difficult to replace and provides their future employers with a competitive advantage. Where applicable law permits, we generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with us or working for our competitors or clients while they work for us, and in some cases, for a limited period after they cease working for us. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work, and it may be difficult for us to restrict our competitors from benefiting from the expertise that our former employees or consultants developed while working for us. If we cannot demonstrate that our legally protectable interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

If we fail to grow our business as anticipated, our net sales, gross margin and operating margin will be adversely affected. If we grow as anticipated but fail to manage our growth and expand our operations accordingly, our business may be harmed and our results of operation may suffer.

Over the past several years, we have experienced rapid growth, and we are attempting to continue to grow our business substantially. To this end, we have made, and expect to continue to make, significant investments in our business, including investments in our infrastructure, technology, marketing and sales efforts. These investments include dedicated facilities expansion and increased staffing, both domestic and international. If our business does not generate the level of revenue required to support our investment, our net sales and profitability will be adversely affected.

Our ability to effectively manage our anticipated growth and expansion of our operations will also require us to enhance our operational, financial and management controls and infrastructure, human resources policies and reporting systems. These enhancements and improvements will require significant capital expenditures, investments in additional headcount and other operating expenditures and allocation of valuable management and employee resources. Our future financial performance and our ability to execute on our business plan will depend, in part, on our ability to effectively manage any future growth and expansion. There are no guarantees we will be able to do so in an efficient or timely manner, or at all.

We may experience significant delays or obstacles to realizing the success of our newly-launched Desktop Health business line.

In March 2021, we launched our Desktop Health business, which aims to leverage our proprietary additive manufacturing technologies and materials to grow the market for existing applications in the dental market and identify, develop and/or commercialize future solutions in the healthcare and dental markets for personalized patient care spanning dentistry, orthodontics, dermatology, orthopedics, cardiology, plastic surgery and printed regenerative tissues and grafts. This business operates in a highly competitive space which may make it difficult for us to implement business plans and expectations and identify and realize opportunities. In addition, this business and its technology, products, materials and applications may be subject to strict regulatory requirements in the United States and other countries. The regulatory approval or clearance process may be lengthy and costly, and regulatory requirements may impact the timing of, or our ability to, commercialize the regulated technology, products, materials and applications. The success of this business will also depend on our ability to attract, hire and retain qualified personnel, establish sales, marketing and distribution infrastructure, and establish and maintain supply and manufacturing relationships.

Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating ~~performance fail~~results. Our business is subject to ~~meet investor or analyst expectations, or~~risks associated with selling machines and other products in non-United States locations.

Our products and services are distributed in more than 65 countries around the world, and we derive a substantial percentage of our sales from these international markets. In 2021, we derived approximately 32% of our revenues from countries outside the United States. Accordingly, we face significant operational risks from doing business internationally.

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Our operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency transaction risks. We incur currency transaction risks if we were to enter into either a purchase or a sale transaction using a different currency from the currency in which we report revenues. In such cases we may suffer an exchange loss because we do not currently engage in currency swaps or other currency hedging strategies to address this risk. As we realize our strategy to expand internationally, our exposure to currency risks may increase. Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have ~~future negative cash flow or losses resulting~~an adverse effect on our results of operations.

Other risks and uncertainties we face from our global operations include:

• difficulties in staffing and managing foreign operations;

• limited protection for the enforcement of contract and intellectual property rights in certain countries where we may sell our products or work with suppliers or other third parties;

• potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable;

• costs and difficulties of customizing products for foreign countries;

• challenges in providing solutions across a significant distance, in different languages and among different cultures;

• laws and business practices favoring local competition;

• being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations;

• specific and significant regulations, including the European Union’s General Data Protection Regulation, or GDPR, which imposes compliance obligations on companies who possess and use data of EU residents;

• uncertainty and resultant political, financial and market instability arising from the United Kingdom’s exit from the European Union;

• compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S. Foreign Corrupt Practices Act;

• tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;

• operating in countries with a higher incidence of corruption and fraudulent business practices;

• changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns;

• potential adverse tax consequences arising from global operations;

• seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year end globally;

• rapid changes in government, economic and political policies and conditions; and

• political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events.

In addition, additive manufacturing has been identified by the U.S. government as an emerging technology and is currently being further evaluated for national security impacts. We expect additional regulatory changes to be implemented that will result in

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increased and/or new export controls related to 3D printing technologies, components and related materials and software. These changes, if implemented, may result in our being required to obtain additional approvals and/or licenses to sell 3D printers in the global market.

Additionally, we have teams that are engaged in marketing, selling, and supporting our products internationally, and we must hire and train experienced personnel to staff and manage our foreign operations. To the extent that we experience difficulties in recruiting, training, managing and retaining international employees, particularly managers and other members of our international sales team, we may experience difficulties in sales productivity in international markets.

Our failure to effectively manage the risks and uncertainties associated with our global operations could limit the future growth of our business and adversely affect our business and operating results.

Global economic, political and social conditions and uncertainties in the markets that we serve may adversely impact our business.

Our performance depends on the financial health and strength of our customers, which in turn is dependent on the economic conditions of the markets in which we and our customers operate. A decline in the global economy, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors all affect the spending behavior of potential customers. The economic uncertainty in Europe, the United States, India, China and other countries may cause end-users to further delay or reduce technology purchases.

We also face risks from financial difficulties or other uncertainties experienced by our suppliers, distributors or other third parties on which we rely. If third parties are unable to supply us with required materials or components or otherwise assist us in operating our business, our business could be harmed.

For example, the possibility of an ongoing trade war between the United States and China may impact the cost of raw materials, finished products or components used in our products and our ability to sell our products in China. Other changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment could also adversely affect our business. In addition, the United Kingdom’s exit from the European Union on January 31, 2020 may result in ~~acquiring customers~~the imposition of tariffs or ~~expanding~~other trade barriers that could have an adverse impact on our ~~operations,~~results of operation. Additionally, uncertainty surrounding this transition may have an effect on global economic conditions and the stability of global financial markets, which in turn could have a material adverse effect on our business, financial condition and results of operations. In extreme cases, we could experience interruptions in production due to the processing of customs formalities or reduced customer spending in the wake of weaker economic performance. If global economic conditions remain volatile for a prolonged period or if European economies experience further disruptions, our results of operations could be adversely affected.

~~Our limited operating history~~In the future, some of our arrangements for additive manufacturing solutions may contain customer-specific provisions that may impact the period in which we recognize the related revenues under GAAP.

Some customers that purchase additive manufacturing solutions from us may require specific, customized factors relating to their intended use of the solution or the installation of the product in the customers’ facilities. These specific, customized factors are occasionally required by the customers to be included in our commercial agreements relating to the purchases. As a result, our responsiveness to our customers’ specific requirements has the potential to impact the period in which we recognize the revenue relating to that additive manufacturing system sale.

Similarly, some of our customers must build or prepare facilities to install a subset of our additive manufacturing solutions, and ~~rapid growth makes evaluating~~the completion of such projects can be unpredictable, which can impact the period in which we recognize the revenue relating to that additive manufacturing solution sale.

We rely on our ~~current~~information technology systems to manage numerous aspects of our business and ~~future prospects difficult and may increase the risk~~a disruption of ~~your investment.~~these systems could adversely affect our business.

~~Much~~We rely on our information technology systems to manage numerous aspects of our ~~growth has occurred in recent periods. Our limited operating history may make it difficult for you~~business, including to ~~evaluate~~efficiently purchase products from our ~~current business~~suppliers, provide procurement and logistic services, ship products to our ~~future prospects, as we continue to grow~~customers, manage our ~~business. Our ability to forecast our future operating results is subject to a number of uncertainties,~~accounting and financial functions, including our ~~ability to plan for~~internal controls, and ~~model future growth. We have encountered,~~maintain our research and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, as we continue to grow our business. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer, and the trading price of our stock may decline. We intend to derive a substantial portion of our revenues from the sales of a number of products which began commercial shipments in late 2020, and we continue to develop additional products which are in the late stages of development and scheduled to begin commercial shipments in the second half of 2021. There are no assurances that we will be able to secure future business with customers or that such products will begin commercial shipments on our planned timelines.data. Our information technology

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~~It is difficult~~systems are an essential component of our business and any disruption could significantly limit our ability to ~~predict~~manage and operate our ~~future revenues~~business efficiently. A failure of our information technology systems to perform properly could disrupt our supply chain, product development and ~~appropriately budget for~~customer experience, which may lead to increased overhead costs and decreased sales and have an adverse effect on our ~~expenses,~~reputation and our financial condition. In addition, during the COVID-19 pandemic, a substantial portion of our employees have conducted work remotely, making us more dependent on potentially vulnerable communications systems and making us more vulnerable to cyberattacks.

Although we ~~have limited insight into trends that~~take steps and incur significant costs to secure our information technology systems, including our computer systems, intranet and internet sites, email and other telecommunications and data networks, our security measures may ~~emerge~~not be effective, and ~~affect~~ our ~~business. If actual results differ~~systems may be vulnerable to damage or interruption. Disruption to our information technology systems could result from power outages, computer and telecommunications failures, computer viruses, cyber-attack or other security breaches, catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war, terrorism and usage errors by our ~~estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.~~employees.

Our ~~operating results~~reputation and financial condition ~~may fluctuate from period to period.~~could be adversely affected if, as a result of a significant cyber-event or otherwise:

• our operations are disrupted or shut down;

~~Our operating results~~• our confidential, proprietary information is stolen or disclosed;

• we incur costs or are required to pay fines in connection with stolen customer, employee or other confidential information;

• we must dedicate significant resources to system repairs or increase cyber security protection; or

• we otherwise incur significant litigation or other costs.

If our computer systems are damaged or cease to function properly, or, if we do not replace or upgrade certain systems, we may incur substantial costs to repair or replace them and may experience an interruption of our normal business activities or loss of critical data. Any such disruption could adversely affect our reputation and financial condition.

Additionally, some of the companies we acquire may not have the same level of information technology systems which may require that we invest significant resources to get those systems to the level of security we require.

We also rely on information technology systems maintained by third parties, including third-party cloud computing services and the computer systems of our suppliers for both our internal operations and our customer-facing infrastructure related to our additive manufacturing solutions. These systems are also vulnerable to the types of interruption and damage described above but we have less ability to take measures to protect against such disruptions or to resolve them if they were to occur. Information technology problems faced by third parties on which we rely could adversely impact our business and financial condition ~~fluctuate from quarter-to-quarter and year-to-year and~~as well as negatively impact our brand reputation.

If we fail to implement or are ~~likely to continue to vary due to a number~~delayed in the implementation of ~~factors, many of which will not be within~~ our ~~control. Both our business and the additive manufacturing industry are changing and evolving rapidly, and our historical operating results~~new ERP system platform, we may not be ~~useful~~able to effectively transact our business or produce our financial statements on a timely basis and without incurrence of additional costs, which would adversely affect our business, results of operations and cash flows.

We are currently implementing Oracle Enterprise Resource Planning, or ERP, to manage enterprise functions for our significant subsidiaries. This integration involves significant complexity, requiring us to move and reconfigure all of our current system processes, transactions, data and controls to a new platform. Due to this complexity and the scope and volume of changes involved in ~~predicting~~this implementation, we may experience delays and higher than planned resource needs in our ~~future operating results.~~migration efforts. Although we will conduct testing, assessments and validation to ensure that our internal financial and accounting controls will be effective post-implementation, we may nevertheless experience difficulties in transacting our business due to system challenges, delays or process deficiencies following the initial launch of the system, which could impair our ability to conduct our business or to produce accurate financial statements on a timely basis. If our ~~operating results do not meet the guidance that we provide~~ability to the marketplace or the expectations of securities analysts or investors, the market price of our Class A common stock will likely decline. Fluctuations in our operating results and financial condition may be due to a number of factors, including:

●

~~the degree of market acceptance of our products and services;~~

●

~~our ability to compete with competitors and new entrants into our markets;~~

●

~~the mix of products and services that we sell during any period;~~

●

~~the timing of our sales and deliveries of our products to customers;~~

●

~~the geographic distribution of our sales;~~

●

~~changes in our pricing policies or those of our competitors, including our response to price competition;~~

●

~~changes in the amount that we spend to develop and manufacture new products or technologies;~~

●

~~changes in the amounts that we spend to promote our products and services;~~

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~~changes in the cost of satisfying our warranty obligations and servicing our installed customer base;~~

●

~~expenses and/or liabilities resulting from litigation;~~

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~~delays between our expenditures to develop and market new or enhanced solutions and the generation of revenue from those solutions;~~

●

~~unforeseen liabilities or difficulties in integrating our acquisitions or newly acquired businesses;~~

●

~~disruptions to our information technology systems or our third-party contract manufacturers;~~

●

~~general economic and industry conditions that effect customer demand;~~

●

~~the impact of the COVID-19 pandemic on our customers, suppliers, manufacturers and operations; and~~

●

~~changes in accounting rules and tax laws.~~

In addition, our revenues and operating results may fluctuate from quarter-to-quarter and year-to-year due to our sales cycle and seasonality among our customers. Generally, our additive manufacturing solutions are subject to the adoption and capital expenditure cycles of our customers. As a result, we typically conduct ~~a larger portion of~~ our business ~~during the fourth quarter~~or to produce accurate financial statements on a timely basis is impaired, our business, results of our fiscal year relative to the other quarters. Additionally, for our more complex solutions, which may require customers to make additional facilities investment, potential customers may spend a substantial amount of time performing internal assessments prior to making a purchase decision. This may cause us to devote significant effort in advance of a potential sale without any guarantee of receiving any relatedoperations and cash flows would be adversely affected.

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~~revenues.~~Our current levels of insurance may not be adequate for our potential liabilities.

We maintain insurance to cover our potential exposure for most claims and losses, including potential product and non-product related claims, lawsuits and administrative proceedings seeking damages or other remedies arising out of our commercial operations. However, our insurance coverage is subject to various exclusions, self-retentions and deductibles. We may be faced with types of liabilities that are not covered under our insurance policies, such as environmental contamination or terrorist attacks, or that exceed our policy limits. Even a partially uninsured claim of significant size, if successful, could have an adverse effect on our financial condition.

In addition, we may not be able to continue to obtain insurance coverage on commercially reasonable terms, or at all, our existing policies may be cancelled or otherwise terminated by the insurer, and/or the companies that we acquire may not be eligible for certain types or limits of insurance. Maintaining adequate insurance and successfully accessing insurance coverage that may be due for a claim can require a significant amount of our management’s time, and we may be forced to spend a substantial amount of money in that process.

Due to our acquisition activity, the existing information technology systems and cyber controls of the acquired entities and integration efforts with respect thereto, as well as the state of the cyber insurance market generally, the costs for our cyber insurance increased significantly in 2021, and the cost of such insurance could continue to increase for future policy periods. Our cyber insurance coverage does not extend to all of our group companies and while we are working to implement better cyber controls and infrastructure for these entities, we may continue to be unable to secure cyber risk coverage for them for future periods. Moreover, the scope and limits of our cyber insurance coverage may not be sufficient or available to cover all expenses or other losses, including fines, or all types of claims that may arise in connection with cyberattacks, security compromises, and other related incidents.

Uncertainty and instability resulting from the conflict between Russia and Ukraine could negatively impact our business, financial condition and operations.

The ongoing war in Ukraine could negatively impact global and regional financial markets which could result in businesses postponing spending in response to tighter credit, higher unemployment, financial market volatility, negative financial news, and other factors. In addition, our suppliers and contractors may have staff, operations, materials or equipment located in the Ukraine or Russia which could impact our supply chain or services being provided to us. Moreover, we outsource some of our software development and design to third-party contractors that have employees and consultants located in Ukraine, Russia and/or Belarus. Poor relations between the United States and Russia, sanctions by the United States and the European Union against Russia, and any escalation of political tensions or economic instability in the area could have an adverse impact on our third-party contractors. In particular, Russia’s invasion of Ukraine and the increased tensions among the United States, the North Atlantic Treaty Organization and Russia could increase the scope of armed conflict, cyberwarfare and economic instability that could disrupt or delay the operations of these resources in Russia, Belarus and/or Ukraine, disrupt or delay communication with such resources or the flow of funds to support their operations, or otherwise render our resources unavailable.

Our revenues are derived from the sale of additive manufacturing systems, produced parts, and consumables and services. We have encountered and will continue to encounter challenges experienced by growing companies in a market subject to rapid innovation and technological change. While we intend to invest substantial resources to remain on the forefront of technological development, continuing advances in additive manufacturing technology, changes in customer requirements and preferences and the emergence of new standards, regulations and certifications could adversely affect adoption of our products either generally or for particular applications. Our ability to compete in the additive manufacturing market depends, in large part, on our success in developing and introducing new additive manufacturing systems and technology, in improving our existing products and technology and qualifying new materials which our systems can support. We believe that we must continuously enhance and expand the functionality and features of our products and technologies in order to remain competitive. However, we may not be able to:

• develop cost-effective new products and technologies that address the increasingly complex needs of prospective customers;

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• enhance our existing products and technologies;

• respond to technological advances and emerging industry standards and certifications on a cost-effective and timely basis;

• adequately protect our intellectual property as we develop new products and technologies;

• identify the appropriate technology or product to which to devote our resources; or

• ensure the availability of cash resources to fund research and development.

Even if we successfully introduce new additive manufacturing products and technologies and enhance our existing products and technologies, it is possible that these will eventually supplant our existing products or that our competitors will develop new products and technologies that will replace our own. As a result, ~~revenues~~any of our products may be rendered obsolete or uneconomical by our or our competitors’ technological advances, leading to a loss in market share, decline in revenue and adverse effects to our business and prospects.

The additive manufacturing industry is competitive. We expect to face increasing competition in many aspects of our business, which could cause our operating results to suffer.

The additive manufacturing industry in which we operate is fragmented and competitive. We compete for customers with a wide variety of producers of additive manufacturing and/or 3D printing equipment that creates 3D objects and end-use parts, as well as with providers of materials and services for this equipment. Some of our existing and potential competitors are researching, designing, developing and marketing other types of products and services that may render our existing or future products obsolete, uneconomical or less competitive. Existing and potential competitors may also have substantially greater financial, technical, marketing and sales, manufacturing, distribution and other resources than we do, including name recognition, as well as experience and expertise in intellectual property rights and operating ~~results~~within certain international markets, any of which may enable them to compete effectively against us. For example, a number of companies that have substantial resources have announced that they are beginning production of 3D printing systems, which will further enhance the competition we face.

Future competition may arise from the development of allied or related techniques for ~~future periods~~equipment, materials and services that are ~~difficult~~not encompassed by our patents, from the issuance of patents to ~~predict with any significant degree~~other companies that may inhibit our ability to develop certain products and from improvements to existing technologies.

We intend to continue to follow a strategy of ~~certainty, which could lead~~continuing product development and distribution network expansion to ~~adverse effects on~~enhance our ~~inventory levels and overall financial condition.~~

~~Due~~competitive position to the ~~foregoing factors,~~extent practicable. But we cannot assure you that we will be able to maintain our current position or continue to compete successfully against current and future sources of competition. If we do not keep pace with technological change and introduce new products and technologies, demand for our products may decline, and our operating results may suffer.

Because the ~~other risks discussed~~additive manufacturing market is rapidly evolving, forecasts of market growth in this Quarterly Report on Form 10-Q ~~you~~may not be accurate.

Market opportunity estimates and growth forecasts included in this Quarterly Report on Form 10-Q are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The forecasts and estimates in this Quarterly Report on Form 10-Q relating to the expected size and growth of the markets for additive manufacturing technology and other markets in which we participate may prove to be inaccurate. Even if these markets experience the forecasted growth described in this Quarterly Report on Form 10-Q, we may not grow our business at similar rates, or at all. Our future growth is subject to many factors, including market adoption of our products, which is subject to many risks and uncertainties. Accordingly, the forecasts and estimates of market size and growth described in this Quarterly Report on Form 10-Q, including our estimates that the size of the total addressable market is expected to be more than $100 billion in 2030, should not ~~rely on quarter-over-quarter and year-over-year comparisons of our operating results~~be taken as ~~an indicator~~indicative of our future ~~performance.~~

~~We may require additional capital to support business growth,~~growth. In addition, these forecasts do not consider the impact of the current global COVID-19 pandemic, and ~~this capital might~~we cannot assure you that these forecasts will not be ~~available on acceptable terms, if at all.~~

~~We intend to continue to make investments to support our business growth~~materially and may require additional funds to respond to business challenges and opportunities, including the need to develop new features or enhance our products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds if our existing sourcesadversely affected as a result.

Table of cash and any funds generated from operations do not provide us with sufficient capital. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges and opportunities could be significantly impaired, and our business may be adversely affected.Contents

Risks Related to ~~Acquisitions~~Our Business and Industry

~~The failure to successfully integrate the businesses and operations of Desktop Metal and ExOne~~We may experience significant delays in the ~~expected time frame may adversely affect the combined company’s future results.~~

~~In November 2021, we acquired The ExOne Company, or ExOne, pursuant to an Agreement~~design, production and Plan of Merger dated August 12, 2021, or the ExOne Acquisition. We and ExOne have operated independently and there can be no assurances that the businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Desktop Metal or ExOne employees, the loss of customers, the disruptionlaunch of our ~~ongoing businesses, inconsistencies in standards, controls, procedures~~additive manufacturing solutions, and policies, unexpected integration issues, higher than expected integration costs and an overall integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Desktop Metal and ExOne in order to realize the anticipated benefits of the ExOne Acquisition so the combined company performs as expected:

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~~combining the companies’ operations and corporate functions;~~

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combining the businesses of Desktop Metal and ExOne and meeting the capital requirements of the combined company, in a manner that permits the combined company to achieve any cost savings or other synergies anticipated to result from the ExOne Acquisition, the failure of which would result in the anticipated benefits of the ExOne Acquisition not being realized in the time frame currently anticipated or at all;

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integrating personnel from the two companies, especially in the COVID-19 environment which has required many Desktop Metal employees and a portion of ExOne employees to work remotely in many locations;

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~~integrating and unifying the offerings and services available to customers;~~

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~~identifying and eliminating redundant and underperforming functions and assets;~~

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~~harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;~~

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maintaining existing agreements with customers, suppliers, distributors and vendors, avoiding delays in entering into new agreements with prospective customers, suppliers, distributors and vendors, and leveraging relationships with such third parties for the benefit of the combined company;

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~~addressing possible differences in business backgrounds, corporate cultures and management philosophies;~~

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~~consolidating the companies’ administrative and information technology infrastructure;~~

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~~coordinating distribution and marketing efforts;~~

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~~coordinating geographically dispersed organizations; and~~

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~~effecting actions that may be required in connection with obtaining regulatory or other governmental approvals.~~

In addition, at times the attention of certain our management may be focused on the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to us, which may disrupt our ongoing business.

~~Following the ExOne Acquisition,~~ we may not be able to retain customers, suppliers or distributors, or customers, suppliers or distributors may seek to modify contractual relationships with us, which could have an adverse effect on our business and operations. Third parties may terminate or alter existing contracts or relationships with Desktop Metal or ExOne.

As a result of the ExOne Acquisition, the combined company may experience impacts on relationships with customers, suppliers and distributors that may harm our business and results of operations. Certain customers, suppliers or distributors may seek to terminate or modify contractual obligations whether or not contractual rights are triggered as a result of the ExOne Acquisition. There can be no guarantee that customers, suppliers and distributors will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms. If any customers, suppliers or distributors seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then our business and results of operations may be harmed. Furthermore, we will not have long-term arrangements with many of the significant suppliers to the combined company. If suppliers were to seek to terminate or modify an arrangement with us, then the combined company may be unable to ~~procure necessary supplies from other suppliers~~successfully commercialize products on our planned timelines.

Several of our announced additive manufacturing solutions are yet to be commercially released. There are often delays in the design, testing, manufacture and commercial release of new products, and any delay in the launch of our products could materially damage our brand, business, growth prospects, financial condition and operating results. Even if we successfully complete the design, testing and manufacture for one or all of our products under development, we may fail to develop a commercially successful product on the timeline we expect for a number of reasons, including:

• misalignment between the products and customer needs;

• lack of innovation of the product;

• failure of the product to perform in accordance with the customer’s expectations or industry standards;

• ineffective distribution and marketing;

• delay in obtaining any required regulatory approvals;

• unexpected production costs; or

• release of competitive products.

Our success in the market for the products we develop will depend largely on our ability to prove our products’ capabilities in a timely ~~and efficient manner and on acceptable terms, or at all.~~

Prior to the closing of the ExOne Acquisition, Desktop Metal and ExOne also each had contracts with vendors, landlords, licensors and other business partners which may contain consent requirements or limitations applicable to such contracts as result of the ExOne Acquisition. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs and lose rights that may be material tomanner. Upon demonstration, our ~~business.~~

~~The ExOne Acquisition~~customers may not ~~be accretive, and may be dilutive, to~~believe that our ~~earnings per share, which may negatively affect~~products and/or technology have the ~~market price of our Class A common stock.~~

We currently anticipate that the ExOne Acquisition will be initially dilutive to our forecasted earnings per share on a standalone basis. This expectation is based on preliminary estimates, which may materially change. We may also have additional transaction-related costs, may fail to realize all of the benefits anticipated in the ExOne Acquisition or may be subject to other factors that affect preliminary estimates or our ability to realize operational efficiencies or other anticipated synergies. Any of these factors could cause a decrease in our earnings per share or decrease or delay the expected effect of the ExOne Acquisition and contribute to a decrease in the price of our Class A common stock.

~~Our future results following the ExOne Acquisition may be adversely impacted if we do not effectively manage our expanded operations.~~

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~~costs~~were designed to have or that we believe they have. Furthermore, even if we do successfully demonstrate our products’ capabilities, potential customers may be more comfortable doing business with another larger and ~~complexity. Our management~~more established company or may take longer than expected to make the decision to order our products. Significant revenue from new product investments may not be ~~successful,~~achieved for a number of years, if at all. If the timing of our launch of new products and/or of our customers’ acceptance of such products is different than our assumptions, our revenue and results of operations may be adversely affected.

We may experience significant delays or other obstacles in the design, production, launch and/or maintenance of produced parts offerings, and we may ~~not realize the expected operating efficiencies, cost savings~~be unable to successfully commercialize said offerings.

We are building out produced parts offerings for customers, and ~~other benefits that were anticipated from the ExOne Acquisition.~~

~~As part~~produced parts is an existing offering of some of our ~~growth~~recently-acquired businesses. These offerings present similar challenges and risks to those outlined herein with respect to the design, production, launch and profitability of new additive manufacturing solutions. We have a limited history operating in the direct manufacturing and produced parts businesses, and as a result we may face challenges in designing or delivering parts that meet customer specifications, both on time and cost-effectively. Additionally, our produced parts in the healthcare and dental industry may be subject to regulatory approvals and controls, which may delay the design, production or launch of products. In particular, we may fail to develop commercially successful produced parts offerings if we are unable to meet customer needs or industry standards, if we fail to meet our desired gross margins or customer price expectations, or if our marketing and distribution strategy proves ineffective. If we ~~intend to continue to acquire or make investments~~are unsuccessful in other businesses, patents, technologies, products or services. Our efforts to do so, or our failure to do so successfully, could disrupt our business and have an adverse impact on our financial condition.

~~As part~~establishing such offerings, sales of our additive manufacturing solutions and our overall operating results could suffer.

Our business ~~strategy, we are acquiring~~activities may be disrupted due to the ongoing impact of the COVID-19 pandemic.

We face various risks and ~~investing in other companies, patents, technologies, products and/or services. To~~uncertainties related to the ~~extent we seek~~ongoing impact of the COVID-19 pandemic, including the delta and omicron variants, recent resurgences, public health measures and related government-imposed restrictions. The COVID-19 pandemic has led to grow our business through acquisitions, we may not be able to successfully identify attractive acquisition opportunities or consummate any such acquisitions if we cannot reach an agreement on commercially favorable terms, if we lack sufficient resources to finance the transaction on our owndisruption and cannot obtain financing at a reasonable cost or if regulatory authorities prevent such transaction from being consummated. The identification of potential targets, negotiation with targets and due diligence may divert management’s attention from their day-to-day responsibilities and require the incurrence of related costs. In addition, competition for acquisitionsvolatility in the global economy and capital markets, in which ~~we operate during recent~~ ~~years~~increases the cost of capital and adversely impacts access to capital. Government-enforced travel bans and business closures around the world have significantly impacted our ability to sell, install and service our additive manufacturing systems at customers around the world. It has, ~~increased,~~ and may continue to, ~~increase,~~disrupt our third-party contract manufacturers and supply chain. We currently anticipate customer payment delays for our products which could negatively impact our results of operations. We have also experienced some delays in installation of our products at customers’ facilities, which has and could lead to postponed revenue recognition for those transactions. In addition, installation delays could prevent us from achieving anticipated consumables revenues due to systems being put into operation later, or at lower utilization, than expected. Furthermore, if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures, remote working or other restrictions in connection with the COVID-19 pandemic, our operations will likely be adversely impacted.

If the COVID-19 pandemic continues for a prolonged duration, we or our customers may be unable to perform fully on our contracts, which will likely result in ~~an increase~~increases in costs and reduction in revenue. These cost increases may not be fully recoverable or adequately covered by insurance. The long-term effects of COVID-19 to the global economy and to us are difficult to assess or predict and may include a further decline in the ~~costs~~market prices of ~~acquisitions~~our products, risks to employee health and safety, risks for the deployment of our products and services and reduced sales in geographic locations impacted. Any prolonged restrictive measures put in place in order to control COVID-19 or ~~cause us to refrain from making certain acquisitions.~~ other adverse public health developments in any of our targeted markets may have a material and adverse effect on our business operations and results of operations.

We may not be able to ~~complete~~realize the expected savings from future ~~acquisitions on favorable terms, if at all.~~cost savings measures.

~~If we do complete future acquisitions, we cannot assure you~~We implemented cost savings initiatives during 2022 to preserve capital, and intend to implement additional cost savings measures in the future. We expect to incur costs in connection with these cost savings initiatives. Our ability to achieve the anticipated cost savings and other benefits from these initiatives within the expected time frame is subject to many estimates and assumptions. There can be no assurance that ~~they~~the anticipated cost savings will ~~ultimately strengthen our competitive position~~be achieved, or that they will not be ~~viewed positively by customers, financial markets~~significantly and materially less than anticipated, or ~~investors. Furthermore, future acquisitions could pose numerous additional risks~~that the completion of such cost savings initiatives will be effectively accomplished. In addition, our ability to realize the anticipated cost savings are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our ~~operations, including:~~

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~~diversion of management’s attention from their day-to-day responsibilities;~~

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~~unanticipated costs or liabilities associated with the acquisition;~~

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~~incurrence of acquisition-related costs, which would be recognized as a current period expense;~~

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~~problems integrating the purchased business, products or technologies;~~

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~~challenges in achieving strategic objectives, cost savings and other anticipated benefits;~~

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~~inability to maintain relationships with key customers, suppliers, vendors and other third parties on which the purchased business relies;~~

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~~the difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand;~~

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~~difficulty in maintaining controls, procedures and policies during the transition and integration;~~

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~~challenges in integrating the new workforce and the potential loss of key employees, particularly those of the acquired business; and~~

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~~use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.~~

control, such as operating difficulties, supply chain disruptions, local regulations, employment laws or general economic or industry conditions. If we ~~proceed with a particular acquisition, we may have~~fail to ~~use cash, issue new equity securities with dilutive effects on existing shareholders, incur indebtedness, assume contingent liabilities or amortize assets or expenses in a manner that might~~realize the anticipated cost savings it could have a material ~~adverse effect~~negative impact on our ~~financial condition and~~ results of ~~operations. Acquisitions will also require us to record certain acquisition-related costs~~operations and other items as current period expenses, which would have the effect of reducing our reported earnings in the period in which an acquisition is consummated. In addition, we could also face unknown liabilities or write-offs due to our acquisitions, which could result in a significant charge to our earnings in the period in which they occur. We will also be required to record goodwill or other long-lived asset impairment charges (if any) in the periods in which they occur, which could result in a significant charge to our earnings in any such period.financial position.

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~~Achieving~~Changes in our product mix may impact our gross margins and financial performance.

Our financial performance may be affected by the mix of products and services we sell during a given period. Our products are sold, and will continue to be sold, at different price points. Sales of certain of our products have, or are expected to have, higher gross margins than others. If our product mix shifts too far into lower gross margin products, and we are not able to sufficiently reduce the engineering, production and other costs associated with those products or substantially increase the sales of our higher gross margin products, our profitability could be reduced. Additionally, the introduction of new products or services may further heighten quarterly fluctuations in gross profit and gross profit margins due to manufacturing ramp-up and start-up costs. We may experience significant quarterly fluctuations in gross profit margins or operating income or loss due to the impact of the mix of products, channels or geographic areas in which we sell our products from period to period. Our financial performance also depends on the portion of our produced parts revenue supplied using additive manufacturing processes, which may enable higher gross margins and operational efficiencies as compared to conventional manufacturing technologies.

If we fail to meet our customers’ price expectations, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer.

Demand for our product lines is sensitive to price. We believe our competitive pricing has been an important factor in our results to date. Therefore, changes in our pricing strategies can have a significant impact on our business and ability to generate revenue. Many factors, including our production and personnel costs and our competitors’ pricing and marketing strategies, can significantly impact our pricing strategies. If we fail to meet our customers’ price expectations in any given period, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer.

The industrial manufacturing market, which today is dominated by conventional manufacturing processes that do not involve 3D printing technology, is undergoing a shift towards additive manufacturing. We may not be able to develop effective strategies to raise awareness among potential customers of the benefits of additive manufacturing technologies or our products may not address the specific needs or provide the level of functionality or economics required by potential customers to encourage the continuation of this shift towards additive manufacturing. If additive manufacturing technology does not continue to gain broader market acceptance as an alternative to conventional manufacturing processes, or does so more slowly than anticipated, or if the marketplace adopts additive manufacturing technologies that differ from our technologies, we may not be able to increase or sustain the level of sales of our products, and our operating results would be adversely affected as a result.

Declines in the prices of our products and services, or in our volume of sales, together with our relatively inflexible cost structure, may adversely affect our financial results.

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Reservations for our Production System P-50 solution may not convert to purchase orders.

Our operations could suffer if we are unable to attract and retain key management or other key employees.

We believe our success has depended, and continues to depend, on the efforts and talents of our senior management and other key personnel, including, in particular, our Co-Founder, Chief Executive Officer, and Chairman, Ric Fulop. Our executive team is critical to the management of our business and operations, as well as to the development of our strategy. Members of our senior management team may resign at any time. The loss of the services of any members of our senior management team, especially Mr. Fulop, could delay or prevent the successful implementation of our strategy or our commercialization of new applications for our systems or other products, or could otherwise adversely affect our ability to manage our company effectively and carry out our business plan. There is no assurance that if any senior executive leaves in the future, ~~acquisitions~~we will be able to rapidly replace him or her and transition smoothly towards his or her successor, without any adverse impact on our operations.

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Our ability to effectively manage our anticipated growth and expansion of our operations will also require us to enhance our operational, financial and management controls and infrastructure, human resources policies and reporting systems. These enhancements and improvements will require significant capital expenditures, investments in additional headcount and other operating expenditures and allocation of valuable management and employee resources. Our future financial performance and our ability to execute on our business plan will depend, in part, ~~upon~~on our ability to ~~integrate~~effectively manage any future growth and expansion. There are no guarantees we will be able to do so in an efficient or timely manner, or at all.

We may experience significant delays or obstacles to realizing the success of our newly-launched Desktop Health business line.

Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating results. Our business is subject to risks associated with selling machines and other products in non-United States locations.