Desktop Metal(DM) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements for Q2 2024 and 2023, covering balance sheets, operations, cash flows, and detailed accounting notes Condensed Consolidated Balance Sheets Balance Sheets show significant decreases in total assets and stockholders' equity from December 2023 to June 2024, primarily due to reduced cash and intangible assets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------------- | :----------------------------- | :-------------------- | :--------- | | Cash and cash equivalents | $45,855 | $83,845 | $(37,990) | -45.3% | | Total current assets | $169,855 | $216,137 | $(46,282) | -21.4% | | Intangible assets, net | $80,390 | $168,259 | $(87,869) | -52.2% | | Total Assets | $306,492 | $458,001 | $(151,509) | -33.1% | | Total current liabilities | $65,451 | $70,104 | $(4,653) | -6.6% | | Total liabilities | $206,651 | $216,349 | $(9,698) | -4.5% | | Total Stockholders' Equity | $99,841 | $241,652 | $(141,811) | -58.7% | Condensed Consolidated Statements of Operations Statements of Operations show increased net loss for Q2 and H1 2024, due to decreased revenues and higher cost of sales, resulting in negative gross profit Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change (3M) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change (6M) | | :-------------------- | :------------------------------- | :------------------------------- | :---------- | :----------------------------- | :----------------------------- | :---------- | | Total revenues | $38,932 | $53,286 | -27.0% | $79,532 | $94,602 | -16.0% | | Total cost of sales | $71,121 | $47,197 | +50.7% | $113,927 | $89,877 | +26.8% | | Gross profit (loss) | $(32,189) | $6,089 | -629.0% | $(34,395) | $4,725 | -828.0% | | Loss from operations | $(101,327) | $(48,518) | +108.8% | $(150,716) | $(100,834) | +49.5% | | Net loss | $(103,440) | $(49,728) | +108.0% | $(155,538) | $(102,369) | +52.0% | | Net loss per share | $(3.13) | $(1.55) | +101.9% | $(4.73) | $(3.20) | +47.8% | Condensed Consolidated Statements of Comprehensive Loss Statements of Comprehensive Loss reflect increased total comprehensive loss for Q2 and H1 2024, due to higher net loss and foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(103,440) | $(49,728) | $(155,538) | $(102,369) | | Foreign currency translation adjustment | $(500) | $(1,316) | $(1,267) | $233 | | Total comprehensive loss | $(103,940) | $(50,896) | $(157,256) | $(101,799) | Condensed Consolidated Statements of Stockholders' Equity Statements of Stockholders' Equity show a significant decrease from January 1 to June 30, 2024, primarily due to net loss, partially offset by stock-based compensation and additional paid-in capital Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | January 1, 2024 | June 30, 2024 | | :-------------------- | :-------------- | :------------ | | Total Stockholders' Equity | $241,652 | $99,841 | | Net loss (6 months) | | $(155,538) | | Stock-based compensation expense (6 months) | | $13,830 | | Other comprehensive loss (6 months) | | $(1,718) | Condensed Consolidated Statements of Cash Flows Statements of Cash Flows indicate a net decrease in cash, cash equivalents, and restricted cash for H1 2024, primarily due to cash used in operating activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(37,432) | $(70,494) | | Net cash provided by investing activities | $1,013 | $110,883 | | Net cash (used in) provided by financing activities | $(534) | $721 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(38,008) | $41,183 | | Cash, cash equivalents, and restricted cash at end of period | $46,682 | $123,096 | Notes to Condensed Consolidated Financial Statements Detailed notes explain significant accounting policies, revenue, debt, and restructuring charges, highlighting the Nano Dimension merger, reverse stock split, and ongoing initiatives - Desktop Metal, Inc., founded in 2015, focuses on 3D printing solutions for manufacturing, offering hardware, software, materials, and services[20] - On July 2, 2024, the Company entered a Merger Agreement with Nano Dimension Ltd., where Desktop Metal will become an indirect wholly owned subsidiary of Nano, and its Common Stock will be delisted[23] - On June 11, 2024, the Company effected a 1-for-10 reverse stock split of its common stock, retroactively adjusting all shares and per-share data[26] - The Company has incurred net losses since inception, with an accumulated deficit of $1.8 billion as of June 30, 2024, raising substantial doubt about its ability to continue as a going concern[31][34] - The Company initiated the 2024 Initiative, including a ~20% global workforce reduction, facility consolidation, and product rationalization, anticipating at least $50 million in annualized cost savings[129] - A Photopolymer Initiative, approved March 14, 2024, to review strategic alternatives, led to $68.3 million and $80.3 million in incremental depreciation and amortization as restructuring charges for Q2 and H1 2024[131] Restructuring Charges (in thousands) | Category | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :----------------------------- | | Cost of sales | $37,852 | $44,613 | | Research and development | $4,497 | $7,003 | | Sales and marketing | $19,132 | $22,508 | | General and administrative | $9,567 | $11,101 | | Total restructuring charges | $71,048 | $85,225 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, including business overview, recent developments (Nano Dimension merger, restructuring), key performance factors, financial comparisons, non-GAAP measures, liquidity, and going concern uncertainty Business Overview Desktop Metal pioneers Additive Manufacturing 2.0 for volume production of end-use parts, offering comprehensive 3D printing solutions across hardware, software, materials, and services, with continuous R&D investment - Desktop Metal focuses on Additive Manufacturing 2.0 for volume production of end-use parts, offering integrated solutions across hardware, software, materials, and services[136] - The company has invested significantly in R&D, holding over 800 patents or pending patent applications, to develop easy-to-use, economic, and scalable additive manufacturing solutions[137] - Solutions offer advantages like breakthrough print speeds, competitive part costs, accessible workflows, turnkey solutions, and support for an extensive library of qualified materials, generating recurring revenue[138] Operating Results For Q2 and H1 2024, Desktop Metal reported revenues of $38.9 million and $79.5 million, with net losses of $103.4 million and $155.5 million, using $37.4 million cash from operations and ending with $46.1 million in cash, cash equivalents, and short-term investments Operating Results (in millions) | Metric (in millions) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :----------------------------- | | Revenues | $38.9 | $79.5 | | Net losses | $103.4 | $155.5 | | Cash used in operating activities (6 months) | | $37.4 | | Cash, cash equivalents, and short-term investments (as of June 30, 2024) | | $46.1 | Recent Developments Recent developments include a proposed merger with Nano Dimension, a 1-for-10 reverse stock split, ongoing strategic integration and cost optimization initiatives, and the termination of the Stratasys merger in September 2023 - Proposed Merger with Nano Dimension Ltd.: On July 2, 2024, Desktop Metal entered an agreement to merge with Nano Dimension, becoming an indirect wholly owned subsidiary, with its stock to be delisted[143] - Reverse Stock Split: A 1-for-10 reverse stock split was effected on June 11, 2024, retroactively adjusting all share and per-share data[145] - Strategic Integration and Cost Optimization Initiatives: The 2022 Initiative achieved $100 million in annualized cost savings by December 31, 2023; the 2024 Initiative includes a ~20% global workforce reduction aiming for at least $50 million in annualized cost savings[148][150] - Photopolymer Initiative: Approved on March 14, 2024, this plan reviews strategic alternatives for the photopolymer business, resulting in significant incremental depreciation and amortization charges[152] - Termination of Merger with Stratasys Ltd.: The merger agreement with Stratasys was terminated on September 28, 2023, with Stratasys paying Desktop Metal a $10.0 million reimbursement fee[154] Key Factors Affecting Operating Results Operating results are influenced by additive manufacturing adoption, pricing, product costs, innovation investment, and acquisition integration; macroeconomic conditions also impact customer capital investment and purchasing decisions, leading to extended sales cycles and pricing pressure - Performance depends on the adoption of additive manufacturing solutions, with financial results fluctuating as businesses shift from conventional to additive manufacturing[156] - Pricing, product cost, and margins are critical, with financial performance influenced by product mix and the ability to introduce cost-effective solutions amidst price competition[157] - Continued investment in R&D and innovation is essential to meet evolving customer requirements and maintain leadership in the additive manufacturing industry, though it may impact near-term profitability[158] - Macroeconomic conditions, such as inflation and rising interest rates, are causing customers to delay purchase decisions and reduce capital expenditures, negatively impacting revenue[162] Results of Operations Details financial performance for Q2 and H1 2024 vs. 2023, showing significant revenue decrease due to macroeconomic conditions, increased cost of sales from Photopolymer Initiative amortization, leading to negative gross profit, and varied operating expense changes Comparison of the three months ended June 30, 2024, and June 30, 2023 Q2 2024 saw total revenue decrease by 27% to $38.9 million, product revenue down 34%, services revenue up 28%; cost of sales rose 51% to $71.1 million due to Photopolymer Initiative amortization, resulting in $(32.2) million negative gross profit and (83)% gross margin Revenue Comparison (in thousands) | Metric (in thousands) | Q2 2024 Revenue | Q2 2023 Revenue | Change ($) | Change (%) | | :-------------------- | :-------------- | :-------------- | :--------- | :--------- | | Products Revenue | $31,411 | $47,398 | $(15,987) | (34)% | | Services Revenue | $7,521 | $5,888 | $1,633 | 28% | | Total Revenue | $38,932 | $53,286 | $(14,354) | (27)% | Gross Profit Comparison (in thousands) | Metric (in thousands) | Q2 2024 Gross Profit | Q2 2023 Gross Profit | Change ($) | Change (%) | | :-------------------- | :------------------- | :------------------- | :--------- | :--------- | | Products Gross Profit | $(35,798) | $4,174 | $(39,972) | (958)% | | Services Gross Profit | $3,609 | $1,915 | $1,694 | 88% | | Total Gross Profit | $(32,189) | $6,089 | $(38,278) | (629)% | Operating Expenses Comparison (in thousands) | Metric (in thousands) | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | R&D Expenses | $17,143 | $21,223 | $(4,080) | (19)% | | Sales and Marketing | $25,802 | $10,440 | $15,362 | 148% | | G&A Expenses | $26,193 | $22,944 | $3,249 | 14% | Comparison of the six months ended June 30, 2024 and 2023 H1 2024 saw total revenue decrease by 16% to $79.5 million, product revenue down 20%, services revenue up 19%; cost of sales rose 27% to $113.9 million due to Photopolymer Initiative amortization, resulting in $(34.4) million negative gross profit and (43)% gross margin Revenue Comparison (in thousands) | Metric (in thousands) | H1 2024 Revenue | H1 2023 Revenue | Change ($) | Change (%) | | :-------------------- | :-------------- | :-------------- | :--------- | :--------- | | Products Revenue | $67,042 | $84,095 | $(17,053) | (20)% | | Services Revenue | $12,490 | $10,507 | $1,983 | 19% | | Total Revenue | $79,532 | $94,602 | $(15,070) | (16)% | Gross Profit Comparison (in thousands) | Metric (in thousands) | H1 2024 Gross Profit | H1 2023 Gross Profit | Change ($) | Change (%) | | :-------------------- | :------------------- | :------------------- | :--------- | :--------- | | Products Gross Profit | $(39,186) | $1,980 | $(41,166) | (2,079)% | | Services Gross Profit | $4,791 | $2,745 | $2,046 | 75% | | Total Gross Profit | $(34,395) | $4,725 | $(39,120) | (828)% | Operating Expenses Comparison (in thousands) | Metric (in thousands) | H1 2024 | H1 2023 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | R&D Expenses | $36,956 | $44,367 | $(7,411) | (17)% | | Sales and Marketing | $36,955 | $20,047 | $16,908 | 85% | | G&A Expenses | $42,410 | $41,145 | $1,265 | 3% | Non-GAAP Financial Information Desktop Metal uses non-GAAP measures (gross margin, operating loss, EBITDA) to evaluate operational performance, excluding non-cash and non-recurring items like stock-based compensation and restructuring expenses, for a clearer view of core results and industry comparisons - Non-GAAP measures exclude stock-based compensation, amortization of acquired intangible assets, restructuring expenses, acquisition-related charges, inventory step-up, R&D assets acquired, goodwill impairment, and changes in fair value of investments and warrant liability[197] Non-GAAP Gross Margin (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP gross margin | $(32,189) | $6,089 | $(34,395) | $4,725 | | Adjustments | $43,549 | $10,340 | $95,973 | $16,043 | | Non-GAAP gross margin | $11,361 | $16,529 | $61,578 | $23,968 | Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(103,440) | $(49,728) | $(155,538) | $(102,369) | | EBITDA | $(29,547) | $(35,066) | $(56,167) | $(74,018) | | Adjusted EBITDA | $(13,208) | $(15,047) | $(26,826) | $(39,482) | Liquidity and Capital Resources Desktop Metal has an accumulated deficit of $1,787.8 million as of June 30, 2024, with $46.1 million in liquidity, expecting continued losses and negative cash flows; a $20.0 million Nano Dimension Bridge Loan is proposed, but substantial doubt exists about going concern without additional financing - As of June 30, 2024, Desktop Metal had an accumulated deficit of $1,787.8 million and $46.1 million in cash, cash equivalents, and short-term investments[214][216] - The company expects to incur additional losses and negative cash flows from operations in the near term[214] - Nano Dimension agreed to provide a multi-draw term loan credit facility (Bridge Loan Facility) of up to $20.0 million, available after January 7, 2025, to supplement working capital if the merger closes[217] - Existing capital resources are expected to support operations until Q2 2025, but substantial doubt exists about the company's ability to continue as a going concern without additional financing[221] Cash Flows For H1 2024, net cash used in operating activities was $37.4 million (improved from $70.5 million), investing activities provided $1.0 million (down from $110.9 million), and financing activities used $0.5 million for tax payments and loan repayments Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(37,432) | $(70,494) | | Net cash provided by investing activities | $1,013 | $110,883 | | Net cash (used in) provided by financing activities | $(534) | $721 | | Net change in cash, cash equivalents, and restricted cash | $(38,008) | $41,183 | - Operating activities used $37.4 million, primarily due to net losses, offset by non-cash items like $96.0 million in depreciation and amortization and $14.3 million in stock-based compensation[227] - Investing activities provided $1.0 million, mainly from property and equipment sales ($1.7 million) offsetting purchases ($0.7 million)[229] - Financing activities used $0.5 million, primarily for tax payments related to restricted stock units ($0.4 million) and loan repayments ($0.2 million)[232] Critical Accounting Policies and Significant Estimates No material changes occurred to critical accounting policies and estimates during Q1 2024, as previously disclosed in the Annual Report on Form 10-K for 2023 - No material changes to critical accounting policies and estimates in Q1 2024[234] Off-Balance Sheet Arrangements ExOne GmbH has $0.1 million in short-term financial guarantees and letters of credit as of June 30, 2024; Desktop Metal uses no other off-balance sheet arrangements or structured debt - ExOne GmbH has $0.1 million in outstanding financial guarantees and letters of credit as of June 30, 2024[235] - The company does not utilize other off-balance sheet arrangements or structured debt[236] Recent Accounting Pronouncements Recent accounting pronouncements are detailed in Note 2, Summary of Significant Accounting Policies, within the condensed consolidated financial statements - Recent accounting pronouncements are detailed in Note 2 of the financial statements[237] Item 3. Quantitative and Qualitative Disclosures About Market Risk Desktop Metal faces market risks from interest rate and foreign currency fluctuations; interest rate risk is managed with cash and investments (10% change immaterial), while foreign currency risk from European/Asian operations is not hedged as it is not material - Exposure to market risks includes interest rate fluctuations and foreign currency translation[238] - Interest rate risk is managed through cash, cash equivalents, and short-term investments; a 10% change in interest rates would have an immaterial impact[239] - Foreign currency risk, primarily from European and Asian operations, is not currently hedged as it is not material[240][241] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were not effective as of June 30, 2024, due to material weaknesses in internal control over financial reporting, though financial statements are deemed fair; no material changes occurred in H1 2024, but inherent control limitations exist - Disclosure controls and procedures were deemed not effective as of June 30, 2024, due to material weaknesses in internal control over financial reporting[242] - Despite material weaknesses, financial statements are concluded to present fairly the financial position, results of operations, and cash flows[243] - No material changes to internal control over financial reporting occurred during the six months ended June 30, 2024[244] PART II. OTHER INFORMATION Item 1. Legal Proceedings Desktop Metal is involved in legal proceedings, including a class action related to the ExOne Merger and securities class actions regarding EnvisionTEC; the company believes these are without merit and expects no material adverse financial impact - The company faces a class action complaint (Campanella v. Rockwell, et al.) alleging breach of fiduciary duty related to the ExOne Merger, with a hearing scheduled for October 16, 2024[248][249] - Securities class action complaints allege violations of the Securities and Exchange Act regarding EnvisionTEC's manufacturing and product compliance, with an appeal hearing scheduled for September 10, 2024[250] - Management believes all complaints are without merit and intends to defend vigorously, not expecting a material adverse impact on financial statements[247][251] Item 1A. Risk Factors Outlines numerous risks to Desktop Metal's business, including going concern doubt, product commercialization delays, slow market adoption, intense competition, acquisition integration challenges, Nano Dimension merger risks, macroeconomic conditions, supply chain disruptions, and regulatory compliance Summary of Risk Factors Principal risk factors include negative cash flows and going concern doubt, product launch delays, slow additive manufacturing adoption, rapid technological change, uncertain restructuring benefits, acquisition integration difficulties, historical unprofitability, and potential stock price decline - Negative cash flows and current lack of financial resources raise substantial doubt about the company's ability to continue as a going concern[253] - Significant delays in the design, production, and launch of additive manufacturing solutions may occur[253] - Demand for products may stagnate or decline if market adoption of additive manufacturing does not grow as expected[253] - The additive manufacturing industry is characterized by rapid technological change, requiring continuous product development[253] - Restructuring activities and cost savings measures are not guaranteed to achieve intended results[253] - Difficulties in integrating acquired businesses may adversely affect future results[253] - The company has a history of losses and may not achieve or maintain profitability[253] - Future sales, or the perception of future sales, of Class A common stock could cause the market price to decline[253] Risks Related to Our Financial Position and Need for Additional Capital Desktop Metal faces substantial doubt about its going concern ability due to negative cash flows and an accumulated deficit of $1.8 billion; historical losses necessitate additional capital, which may lead to dilution or operational limitations, with bank failures also posing a liquidity risk - Substantial doubt exists about the company's ability to continue as a going concern due to negative cash flows and an accumulated deficit of $1,787.8 million as of June 30, 2024[255] - The company has a history of net losses since inception and expects to continue incurring operating losses and negative cash flow in the near-term[257] - Additional capital may be required for business growth, but there is no assurance it will be available on acceptable terms, potentially leading to significant dilution for existing stockholders or restrictive debt covenants[268][269] Risks Related to the Proposed Merger with Nano The proposed Nano Dimension merger may not be completed, potentially impacting stock price, business, and incurring termination fees; the Per Share Merger Consideration is uncertain due to potential downward adjustments from bridge loans and transaction expenses, and merger provisions could discourage competing acquirers - The merger with Nano Dimension may not be completed due to unfulfilled conditions or termination, which could adversely affect the stock price and business operations[271][275] - Stockholders cannot be certain of the exact Per Share Merger Consideration ($5.50 initially) as it is subject to downward adjustment based on bridge loan amounts and unpaid transaction expenses, potentially reducing it to $4.07 per share[273][274] - The Merger Agreement contains 'no shop' provisions and potential termination fees ($7.875 million) that could discourage competing acquirers[272][277] Risks Related to Our Business and Industry Business risks include product design delays, produced parts challenges, COVID-19 disruptions, uncertain restructuring benefits, product mix impact on margins, slow additive manufacturing adoption, price competition, and reliance on consumables; global operations face currency, regulatory, and geopolitical risks, while rapid technological change and intense competition demand continuous innovation - Significant delays in the design, production, and launch of additive manufacturing solutions or produced parts offerings could materially damage the business[279][281] - Restructuring activities and cost savings measures may not achieve intended results, and changes in product mix could negatively impact gross margins[285][287] - Slow market adoption of additive manufacturing, price competition, and failure to grow recurring revenue from consumables could adversely affect financial results[289][290][292] - Global operations expose the company to volatility in currency exchange rates, regulatory changes, and geopolitical conditions, which could adversely impact business and operating results[303][304][310] - The additive manufacturing industry's rapid technological change and intense competition require continuous innovation, with risks of products becoming obsolete or uneconomical[329][331] Risks Related to Acquisitions Acquisitions (EnvisionTEC, ExOne) pose risks like integration difficulties, loss of key employees, business disruption, and failure to realize benefits; future acquisitions may divert management, incur costs, dilute shareholders, and introduce unknown liabilities, harming financial results - Difficulties in integrating acquired companies (e.g., EnvisionTEC, ExOne) could lead to loss of key employees, business disruption, and failure to realize anticipated benefits or cost synergies[335][336] - Future acquisitions may divert management's attention, incur significant costs, dilute existing shareholders, and introduce unknown liabilities or impairment charges[339][341] Risks Related to Third Parties Desktop Metal faces risks from product liability claims, misuse of additive manufacturing solutions, and dependence on limited resellers and third-party manufacturers; disruptions from these parties or natural disasters could severely impact operations, customer relationships, and financial performance - Potential for product liability claims from defective products and liability if additive manufacturing solutions are used to print dangerous objects (e.g., weapons)[344][348] - Heavy reliance on a global network of resellers for sales, installation, and support services; underperformance or termination of these relationships could adversely affect sales and reputation[346] - Dependence on a limited number of third-party contract manufacturers and suppliers for production and materials, posing risks of delays, disruptions, quality control problems, and increased costs[349][354] - Facilities and those of third-party partners are vulnerable to disruption from natural disasters, climate-related events, strikes, and other uncontrollable events, impacting production and revenue recognition[355] Risks Related to Our Class A Common Stock Issuance of additional Class A common stock or convertible securities could dilute equity and affect stock price; future sales by stockholders or their perception could cause decline; significant control by insiders, anti-takeover provisions, and no foreseeable dividends are also risks - Issuance of additional Class A common stock or convertible securities may dilute investors' equity interest and adversely affect the stock price[356][357] - Future sales, or the perception of future sales, of Class A common stock by the company or existing stockholders could cause the market price to decline[358][359] - Directors, executive officers, and affiliated stockholders own a significant percentage (13.9% as of Dec 31, 2023) of Class A common stock, enabling them to exert significant control over shareholder approval matters[360] - Anti-takeover provisions in governing documents and Delaware law could make an acquisition more difficult, limit attempts to replace management, and affect the market price of Class A common stock[361][362][363] - The company does not intend to pay dividends on its Class A common stock for the foreseeable future, retaining funds for business development and growth[418] Risks Related to Our Indebtedness Desktop Metal's $115.0 million in 6.0% Convertible Senior Notes due 2027 and future indebtedness could limit cash flow, increase vulnerability to adverse conditions, and restrict financing; the company may struggle to repurchase notes or pay cash upon conversion, and indenture provisions could delay takeovers - Indebtedness, including $115.0 million in 6.0% Convertible Senior Notes due 2027, could limit cash flow, increase vulnerability to adverse conditions, and restrict additional financing[366] - The company may be unable to raise funds to repurchase the 2027 Notes or pay cash upon conversion following a fundamental change, potentially leading to default[369] - Provisions in the indenture governing the 2027 Notes could delay or prevent an otherwise beneficial takeover[370] Risks Related to Compliance Matters Global operations expose Desktop Metal to risks of non-compliance with anti-corruption laws and trade restrictions, potentially leading to fines and reputational damage; environmental, health, and safety laws also pose liabilities, while increasing ESG attention and evolving data privacy regulations could raise costs and harm business - Failure to comply with anti-corruption laws (e.g., U.S. FCPA, U.K. Bribery Act) and trade restrictions (e.g., sanctions, export controls) could result in substantial fines, sanctions, and reputational damage[371][372] - Subject to environmental, health, and safety laws, with potential for significant compliance costs, liabilities for improper disposal of chemicals, and fines for non-compliance[374][375] - Increasing attention to ESG initiatives could raise costs, harm reputation, and impact access to capital or insurance[377][378] - Evolving data privacy, use, and security regulations (GDPR, UK GDPR, CCPA) increase compliance costs and risks, with potential for significant fines and reputational damage for non-compliance[379][380][381][382][383] Risks Related to Intellectual Property Desktop Metal faces risks from third-party IP infringement lawsuits, leading to substantial costs and operational disruptions; inadequate protection or enforcement of its own IP could allow competitors to use similar technologies or develop compatible consumables, reducing revenue and profitability - Third-party lawsuits alleging infringement of patents, trade secrets, or other intellectual property rights could have a significant adverse effect on financial condition[387] - Substantial costs may be incurred in enforcing and defending intellectual property rights, with disputes being costly and disruptive to business operations[388][393] - Inadequate protection or enforcement of intellectual property rights could allow competitors to use similar technologies or develop compatible consumables, reducing revenue and profitability[389][391][392] General Risk Factors Class A common stock price may be volatile and decline due to market conditions and company announcements; failure to meet NYSE listing requirements could lead to delisting; public company compliance requires significant resources, with identified material weaknesses in internal control; ongoing litigation and no foreseeable dividends are also risks - The Class A common stock price is likely to be volatile and may decline regardless of operating performance due to various market and industry factors[400][403] - Failure to meet NYSE continued listing requirements (e.g., minimum price) could lead to delisting, adversely impacting trading, liquidity, and market price of common stock[397][399] - Being a public company involves significant expenses and requires substantial resources and management attention for compliance, potentially diverting from business operations[406][407] - Material weaknesses in internal control over financial reporting have been identified, which could impair the ability to produce timely and accurate financial statements and lead to adverse regulatory consequences[411][415][416] - The company is subject to ongoing litigation, which can be costly and divert management resources, and does not intend to pay dividends on its Class A common stock for the foreseeable future[417][418] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities All unregistered equity sales for Q2 2024 were reported in a Form 8-K; the company also purchased 6,099 shares of common stock, primarily withheld from employees for tax obligations related to restricted stock unit vesting - All unregistered sales of equity securities for Q2 2024 were previously reported in a Form 8-K[420] Issuer Purchases of Equity Securities (Three Months Ended June 30, 2024) | Period | Total number of shares purchased | Average price paid per share | | :-------------------------------- | :------------------------------- | :--------------------------- | | April 1, 2024 through April 30, 2024 | 570 | $8.52 | | May 1, 2024 through May 31, 2024 | 5,467 | $6.51 | | June 1, 2024 through June 30, 2024 | 62 | $5.81 | | Total | 6,099 | | - Shares purchased were withheld from employees for minimum tax withholding obligations related to Class A common stock issuance[421] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[422] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[423] Item 5. Other Information No other information was reported under this item - No other information was reported[423] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including the Nano Dimension Merger Agreement, Loan Term Sheet, CEO/CFO certifications, and Inline XBRL documents; certain exhibits and schedules are omitted but available upon request - Exhibits include the Agreement and Plan of Merger with Nano Dimension (Exhibit 2.1) and the Loan Term Sheet (Exhibit 10.1), both filed on July 3, 2024[427] - Certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1) are filed with this report[427] - Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are included[427] Signatures The report is signed by Ric Fulop, CEO, and Jason Cole, CFO, on July 30, 2024, certifying its submission pursuant to the Securities Exchange Act of 1934 - The report is signed by Ric Fulop, Chief Executive Officer, and Jason Cole, Chief Financial Officer, on July 30, 2024[433]