This prospectus supplement further supplements
and updates the prospectus dated February 4, 2021, as supplemented by the prospectus supplement dated February 9, 2021,
relating to the resale of up to 198,614,636 shares of our Class A common stock by the selling securityholders named in the
prospectus (including their pledgees, donees, transferees or other successors-in-interest) and the issuance by us of up to 25,010,494
shares of Class A common stock upon the exercise of outstanding warrants, or the Final Prospectus.
This prospectus supplement incorporates
into our prospectus the information (other than information that is furnished and not deemed filed) contained in our attached:
Our Class A common stock is listed
on the New York Stock Exchange, or NYSE, under the symbol “DM” and our warrants are listed on the NYSE under the symbol
“DM.WS”. On February 25, 2021, the closing sale price of our Class A common stock as reported on the NYSE
was $20.66, and the closing sale price of our warrants as reported on the NYSE was $9.15.
We are an “emerging growth company”
under applicable Securities and Exchange Commission rules and, as such, have elected to comply with certain reduced public
company disclosure requirements for our filings with the Securities and Exchange Commission.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of
this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ¨
On
February 16, 2021, pursuant to the Purchase Agreement and Plan of Merger (the “Merger Agreement”), by and
among the Company, EnvisionTEC Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub I”) and
EnvisionTEC US, LLC, a wholly owned subsidiary of the Company (“Merger Sub II”), Envisiontec, Inc.
(“envisionTEC”), Gulf Filtration Systems, Inc. (“Gulf”), 3dbotics, Inc.
(“3dbotics” and together with envisionTEC, Gulf and 3dbotics, and Envisiontec GmbH (“envisionTEC
Germany”), the “envisionTEC Group”), and the Seller, the Company completed its previously announced
acquisition of the envisionTec Group (the “Closing”), with (i) the mergers (the “Mergers”) of
(A) Merger Sub I with and into envisionTEC, with envisionTEC continuing as the surviving corporation, and subsequently,
(B) envisionTEC with and into Merger Sub II, with Merger Sub II continuing as the surviving corporation and a direct,
wholly owned subsidiary of the Company; and (ii) the purchase of all of the issued and outstanding stock of envisionTEC
Germany, Gulf and 3dbotics (the “Share Purchase”).
The transaction
was valued at $300,000,000, with the Seller and certain key employees of the envisionTEC Group receiving $150 million in
cash, as adjusted for, among other things, the amount of cash, debt and working capital in the business on February 16,
2021 and Seller issuing or agreeing to grant a total of 5,511,990 shares of Class A common stock of the Company and
restricted stock awards valued in the aggregate at $150,000,000, based on an agreed per share price of $27.2134 per
share.
A copy of the Merger
Agreement is attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 15, 2021.
The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the full text
of the Merger Agreement.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation
and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the
United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion
on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the combined financial statements are free from material misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
combined financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements
referred to above present fairly, in all material respects, the financial position of EnvisionTEC Group as of December 31,
2019 and 2018, and the results of its operations and its cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
/s/ BDO USA LLP
Troy, Michigan
November 6, 2020
EnvisionTEC Group
Combined Balance Sheets
(in thousands)
December 31,
|
|
2019
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,865
|
|
|
$
|
16,927
|
|
Trade accounts receivable, less allowance for doubtful accounts of $755 and $644 in
2019 and 2018
|
|
|
3,310
|
|
|
|
3,010
|
|
Inventories
|
|
|
8,885
|
|
|
|
9,029
|
|
Prepaid expenses and other current assets
|
|
|
3,660
|
|
|
|
3,490
|
|
Total Current Assets
|
|
|
30,720
|
|
|
|
32,456
|
|
Property and Equipment, Net
|
|
|
1,719
|
|
|
|
1,867
|
|
Intangible Asset, Net
|
|
|
594
|
|
|
|
642
|
|
Total Assets
|
|
$
|
33,033
|
|
|
$
|
34,965
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
2,461
|
|
|
$
|
1,735
|
|
Deferred revenue and customer deposits
|
|
|
2,175
|
|
|
|
3,055
|
|
Income taxes payable
|
|
|
427
|
|
|
|
387
|
|
Related party loan payable
|
|
|
600
|
|
|
|
—
|
|
Accrued expenses and other current liabilities
|
|
|
1,993
|
|
|
|
2,975
|
|
Total Current Liabilities
|
|
|
7,656
|
|
|
|
8,152
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Contributed capital
|
|
|
443
|
|
|
|
443
|
|
Retained earnings
|
|
|
28,517
|
|
|
|
29,074
|
|
Accumulated other comprehensive loss
|
|
|
(3,583
|
)
|
|
|
(2,704
|
)
|
Total Stockholders’ Equity
|
|
|
25,377
|
|
|
|
26,813
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
33,033
|
|
|
$
|
34,965
|
|
See accompanying notes to combined financial
statements.
EnvisionTEC Group
Combined Statements of Operations and
Comprehensive Income
(in thousands)
Year ended December 31,
|
|
2019
|
|
|
2018
|
|
Net Revenue
|
|
$
|
34,582
|
|
|
$
|
34,512
|
|
Cost of Goods Sold
|
|
|
20,874
|
|
|
|
18,777
|
|
Gross Profit
|
|
|
13,708
|
|
|
|
15,735
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
9,839
|
|
|
|
12,742
|
|
Research and development
|
|
|
4,706
|
|
|
|
5,579
|
|
Total Operating Expenses
|
|
|
14,545
|
|
|
|
18,321
|
|
Loss from Operations
|
|
|
(837
|
)
|
|
|
(2,586
|
)
|
Other Income
|
|
|
302
|
|
|
|
225
|
|
Loss Before Taxes
|
|
|
(535
|
)
|
|
|
(2,361
|
)
|
Income Taxes
|
|
|
(22
|
)
|
|
|
(134
|
)
|
Net Loss
|
|
|
(557
|
)
|
|
|
(2,495
|
)
|
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(879
|
)
|
|
|
(878
|
)
|
Comprehensive Loss
|
|
$
|
(1,436
|
)
|
|
$
|
(3,373
|
)
|
See accompanying notes to combined financial
statements.
EnvisionTEC Group
Combined Statements of Changes in Stockholders’
Equity
(in thousands)
|
|
Contributed
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Stockholders’
Equity
|
|
Balance, January 1, 2018
|
|
$
|
43
|
|
|
$
|
31,969
|
|
|
$
|
(1,826
|
)
|
|
$
|
30,186
|
|
Contribution
|
|
|
400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
400
|
|
Distribution to stockholder
|
|
|
—
|
|
|
|
(400
|
)
|
|
|
—
|
|
|
|
(400
|
)
|
Net loss
|
|
|
—
|
|
|
|
(2,495
|
)
|
|
|
—
|
|
|
|
(2,495
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(878
|
)
|
|
|
(878
|
)
|
Balance, December 31, 2018
|
|
|
443
|
|
|
|
29,074
|
|
|
|
(2,704
|
)
|
|
|
26,813
|
|
Net loss
|
|
|
—
|
|
|
|
(557
|
)
|
|
|
—
|
|
|
|
(557
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(879
|
)
|
|
|
(879
|
)
|
Balance, December 31, 2019
|
|
$
|
443
|
|
|
$
|
28,517
|
|
|
$
|
(3,583
|
)
|
|
$
|
25,377
|
|
See accompanying notes to combined financial
statements.
EnvisionTEC Group
Combined Statements of Cash Flows
(in thousands)
Year ended December 31,
|
|
2019
|
|
|
2018
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(557
|
)
|
|
$
|
(2,495
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
719
|
|
|
|
913
|
|
Amortization
|
|
|
49
|
|
|
|
48
|
|
Provision for bad debt
|
|
|
(308
|
)
|
|
|
606
|
|
Loss (gain) on sale of property and equipment
|
|
|
205
|
|
|
|
(67
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
8
|
|
|
|
(557
|
)
|
Inventories
|
|
|
144
|
|
|
|
(1,861
|
)
|
Prepaid expenses and other current assets
|
|
|
(170
|
)
|
|
|
(1,170
|
)
|
Trade accounts payable
|
|
|
726
|
|
|
|
1,239
|
|
Deferred revenue and customer deposits
|
|
|
(880
|
)
|
|
|
105
|
|
Income taxes payable
|
|
|
40
|
|
|
|
152
|
|
Accrued expenses and other current liabilities
|
|
|
(982
|
)
|
|
|
235
|
|
Net cash used in operating activities
|
|
|
(1,006
|
)
|
|
|
(2,852
|
)
|
Investing Activities
|
|
|
|
|
|
|
|
|
Property and equipment purchases
|
|
|
(777
|
)
|
|
|
(381
|
)
|
Distribution to stockholder
|
|
|
—
|
|
|
|
(400
|
)
|
Contribution
|
|
|
—
|
|
|
|
400
|
|
Net cash used in investing activities
|
|
|
(777
|
)
|
|
|
(381
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
Related party loans
|
|
|
600
|
|
|
|
—
|
|
Effect of Currency Translation on Cash and Cash Equivalents
|
|
|
(879
|
)
|
|
|
(765
|
)
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(2,062
|
)
|
|
|
(3,998
|
)
|
Cash and Cash Equivalents, beginning of year
|
|
|
16,927
|
|
|
|
20,925
|
|
Cash and Cash Equivalents, end of year
|
|
$
|
14,865
|
|
|
$
|
16,927
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes, net of refunds
|
|
$
|
149
|
|
|
$
|
1,285
|
|
See accompanying notes to combined financial
statements.
EnvisionTEC Group
Notes to Combined Financial Statements
1. Basis of Presentation
The combined financial statements include
the accounts of EnvisionTEC, Inc., a Michigan corporation, which operates the business in North America; EnvisionTEC GmbH, a German
company with limited liability, which operates the business in Germany; 3dBotics, Inc, d.b.a. Virids3D, a Michigan corporation,
which prints 3D sand molds, and Gulf Filtration Systems, a Michigan corporation, which holds certain intellectual property. Collectively,
the combined group is referred to as “the Company” or “EnvisionTEC Group.” The combined financial statements
of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
All material intercompany transactions and balances have been eliminated in combination.
The Company is a leading global provider
of professional 3D printing solutions for the rapid manufacture of mass customized products across a variety of end markets. The
Company’s 3D printing solutions include three proprietary print technologies and a wide range of print materials. The Company’s
3D printing solutions are used by customers for numerous applications, including the development and manufacture of customized
jewelry, hearing aid, dental, biotech and foundry products.
All amounts presented in the accompanying
footnotes are presented in thousands, unless otherwise stated.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of these combined financial
statements requires the Company to make certain judgments, estimates and assumptions regarding uncertainties that affect the reported
amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Areas that require
significant judgments, estimates and assumptions include, the allowance for doubtful accounts; inventories (including slow moving
and obsolete inventory valuation adjustments); product warranty reserves; income taxes; contingencies; and future cash flow estimates
associated with long-lived assets for purposes of impairment testing. The Company bases its estimates on historical experience,
market comparables and on various other assumptions that are believed to be reasonable, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
Revenue Recognition
Revenue from the sale of 3D printers and
consumables is recognized upon transfer of the risks and rewards of ownership to the buyer, which for 3D printers is generally
upon shipment for sales to distributors, or in the case of direct sales of the Company’s 3D printers upon final acceptance
by the customer after completion of the training and installation by the Company’s technicians, or upon shipping for printers
that are installed by the customer. Revenue from the sales of consumables (primarily print materials and replacement parts) is
recorded upon shipment. Revenue for all deliverables in a sales arrangement is recognized, provided that persuasive evidence of
a sales arrangement exists, both title and risk of loss have passed to the customer and collection is reasonably assured. Persuasive
evidence of a sales arrangement exists upon execution of a written sales agreement or signed purchase order that constitutes a
fixed and legally binding commitment between the Company and its customer. Any payments received from a customer prior to meeting
all revenue recognition criteria are recorded as deferred revenue in the combined balance sheets.
The Company enters into sales arrangements
that may provide for multiple deliverables to a customer. Sales may include a combination of 3D printers, ancillary equipment,
consumables, a standard warranty, training and installation. The timing of revenue recognition is generally the same for each component
of the sale as the final requirements for revenue recognition are met at the same time (i.e., customer acceptance or shipment,
whichever is applicable for that sale). The Company evaluates the impact of undelivered items on the functionality of delivered items for each sales transaction
and, where appropriate, defers revenue on delivered items when that functionality has been affected.
EnvisionTEC Group
Notes to Combined Financial Statements
The Company provides customers with a standard
warranty on the sale of its 3D printers, generally covering the one-year period from the sale of the printer. The warranty is not
treated as a separate service because the warranty is an integral part of the sale of the machine. A reserve for estimated warranty
costs is recorded at the time of the sale based on historical warranty experience. After the initial warranty period, the Company
offers customers an optional extended warranty. Extended warranty revenue is deferred and recognized on a straight-line basis over
the period of the contract and the costs associated with these contracts are recognized as incurred.
The Company’s 3D printers include embedded
software which is not sold separately and is not a significant focus of its marketing effort. The Company does not provide post-contract
customer support specific to the software or incur significant costs that are within the scope of FASB Accounting Standard Codification
(“ASC”) 985, Software-Revenue Recognition. Additionally, the functionality that the software provides is
marketed as part of the overall product. The software embedded in the equipment is incidental to the equipment as a whole, such
that ASC 985 is not applicable. Revenue associated with this embedded software is recognized at the same time as the related 3D
printer.
Shipping and handling costs billed to
customers for sales of 3D printers and consumables are included in revenue in the combined statements of operations and
comprehensive income. Costs incurred by the Company associated with shipping and handling are included in cost of sales in
the combined statements of operations and comprehensive income.
The terms of sale for the Company’s
3D printers generally require upfront payment for a portion of the cost of the 3D printer before shipment (usually at the time
of order and/or just prior to shipping), with any remaining balance generally to be paid 30 to 60 days after shipment or installation.
Payment for sales of consumables is generally due 30 to 60 days after shipment to the customer. Customers generally do not
have a right of return, but if accepted they are generally subject to a restocking fee.
Cash and Cash Equivalents
The Company considers all highly liquid instruments
with original maturities of three months or less to be cash equivalents. These instruments are stated at cost, which approximates
fair value because of the short maturity of the instruments. Cash balances are maintained with financial institutions located in
the United States, Germany and Lebanon. The Company believes its risk of loss is limited; however, at times, account balances may
exceed international and federally insured limits. The Company has no history of losses associated with these cash and cash equivalent
balances.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are reported at their
net realizable value. The estimate of the allowance for doubtful accounts related to trade receivables is based on evaluation of
customer accounts with past-due balances or specific accounts for which there is information that the customer may be unable to
meet its financial obligations. Based upon review of these accounts, and management’s analysis and judgment, the Company
records a specific allowance for that customer’s accounts receivable balance to reduce the outstanding receivable balance
to the amount expected to be collected. The allowance is re-evaluated and adjusted periodically as additional information is received
that impacts the allowance amount reserved. The allowance for doubtful accounts at December 31, 2019 and 2018 was $755 and
$644, respectively.
Inventories
All inventories are valued at the lower of
cost or market, as determined using the first-in, first-out (“FIFO”) method. Overhead is allocated to work in progress
and finished goods based on normal capacity of the Company’s production facilities. Fixed overhead associated with production
facilities that are being operated below normal capacity are recognized as a period expense
rather than being capitalized as a product cost. Adjustments for slow-moving and obsolete inventories are provided based on historical
experience and current product demand. These adjustments reduce the cost basis of the respective inventory and are recorded as
a charge to cost of sales in the combined statements of operations and comprehensive income. The adjustments for slow-moving and
obsolete inventories December 31, 2019 and 2018 was $594 and $614, respectively.
EnvisionTEC Group
Notes to Combined Financial Statements
Property and Equipment, Net
Property and equipment are recorded at cost
and depreciated on a straight-line basis over the estimated useful lives of the related assets, generally one to seven years.
Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the contractual
lives of the related leases. Repairs and maintenance are charged to expense as incurred.
The Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may
not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted net cash flows of the
operations related to the assets (asset group) to their carrying amount. An impairment loss would be recognized when the
carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The amount of the impairment
loss to be recorded is calculated as the excess of carrying value of assets (asset group) over their fair value, with fair
value determined using the best information available, which generally is a discounted cash flow model. The determination of
what constitutes an asset group, the associated undiscounted net cash flows, and the estimated useful lives of assets require
significant judgments and estimates by management. The Company recorded no impairment losses during the years ended
December 31, 2019 and 2018.
Intangible Assets, Net
Intangible assets represent acquired intangibles
purchased through acquisitions. Intangible assets with finite lives are amortized using the straight-line method over their estimated
useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated.
Amortization of acquired intangible is included
in cost of sales, research and development expenses and selling, general and administrative expenses in the combined statements
of operations and comprehensive income. For intangibles with finite lives, the Company reviews the carrying amounts for potential
impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset group)
to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the
estimated undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the excess of carrying
value of assets (asset group) over their fair value, with fair value determined using the best information available, which generally
is a discounted cash flow model. The determination of what constitutes an asset group, the associated undiscounted net cash flows,
and the estimated useful lives of assets require significant judgments and estimates by management. The Company recorded no impairment
losses during the years ended December 31, 2019 and 2018.
Advertising
Advertising costs are expensed as incurred
and were approximately $186 and $640 for the years ended December 31, 2019 and 2018, respectively.
Shipping and Handling Costs
Shipping and handling costs are classified
as cost of goods sold in the combined statements of operations and comprehensive income.
EnvisionTEC Group
Notes to Combined Financial Statements
Research and Development Costs
Research and development costs consist primarily
of employee compensation expenses, materials, laboratory supplies, costs for related software, and costs for facilities and equipment.
Expenditures for research and development are expensed as incurred.
Income Taxes
The Company’s U.S. operating entity,
EnvisionTEC, Inc., and its U.S. IP holding company, Gulf Filtration Systems Inc., as well as Viridis3D are organized as Michigan
corporations that are treated as S corporations for U.S. federal income tax purposes. Under the provisions of the Internal Revenue
Code and similar state provisions, each entity is taxed as a flow-through entity and is not liable for income taxes. Its earnings
and losses are included in the individual tax return of its sole shareholder. Therefore, the combined financial statements do not
reflect a provision for U.S. federal or state income taxes relating to these entities.
The German operating entity, EnvisionTEC
GmbH, is taxed as a corporation under the applicable tax regulations of Germany. As a result, the accompanying combined statements
of operations and comprehensive income include tax expense related to Germany.
The Company recognizes deferred tax assets
and liabilities for the differences between the financial statement carrying amounts and the tax basis of assets and liabilities
of EnvisionTEC GmbH using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes
in the level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits,
may materially impact the effective tax rate.
The Company estimates liabilities related
to uncertain tax positions. As of December 31, 2019 and 2018, the Company had a liability of $427 and $387, respectively,
related to uncertain tax positions in certain states and foreign jurisdictions. The calculation of the liability for uncertain
tax positions requires management to make estimates and assumptions. The Company believes that its assumptions and estimates are
reasonable, although actual results may have a material positive or negative impact on the balances of current or deferred tax
assets and liabilities and net income.
Variable Interest Entities
A variable interest entity (VIE) is an entity
that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial
support or (ii) has equity investors who lack the characteristics of a controlling financial interest. Implicit variable interests
may result in the absorption or receipt of variability in a legal entity. A VIE is consolidated by its primary beneficiary. The
primary beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the
VIE. An entity has the power to direct the activities of another entity when its management has the ability to make key operating
decisions, such as decisions regarding capital or product investment or manufacturing production schedules. The Company has evaluated
certain entities, including certain related parties and entities under common control, and concluded that the Company has no VIEs
subject to consolidation.
EnvisionTEC Group
Notes to Combined Financial Statements
Stockholders’ Equity
The EnvisionTEC Group is presented in
combined form based on the existence of common control for all periods presented. All of the companies combined within
EnvisionTEC Group (listed below) are each 100% owned by the same individual, therefore, profits, losses and distributions are
allocated as such. The shares issued and outstanding for each of the individual entities included in the combined financial
statements as of December 31, 2019 and 2018, respectively, were as follows:
|
|
Common
Stock
Issued and
Outstanding
|
|
EnvisionTEC, Inc.
|
|
|
10
|
|
EnvisionTEC GmbH
|
|
|
22
|
|
Viridis3D
|
|
|
60
|
|
Gulf Filtration Systems, Inc.
|
|
|
1
|
|
Foreign Currency
The local currency is the functional currency
for significant operations outside of the United States. The determination of the functional currency of an operation is made based
upon the appropriate economic and management indicators.
Foreign currency assets and liabilities
are translated into their U.S. dollar equivalents based upon year-end exchange rates, and are included in stockholders’
equity as a component of comprehensive loss. Revenue and expenses are translated at average exchange rates. Transaction gains
and losses that arise from exchange rate fluctuations are charged to operations as incurred, except for gains and losses
associated with intercompany receivables and payables for which settlement is not planned or anticipated in the foreseeable
future, which are included in other comprehensive income in the combined statement of operations and comprehensive
income.
New Accounting Standards or Updates Recently Adopted
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts
with Customers (Topic 606), which supersedes the current revenue recognition requirements in Topic 605, Revenue
Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract. The new guidance will be effective for the Company’s year ending December 31, 2020 as
the Company has elected to use the limited deferral of the effective date of Topic 606 provided by ASU 2020-05, Revenue
from Contracts with Customers (Topic 606) and Leases (Topic 842) — Effective Dates
for Certain Entities (“ASU 2020-05”). Topic 606 permits application of the new revenue recognition guidance
using one of two retrospective application methods. The Company has not yet determined which application method it will use.
While the Company is continuing to assess
all potential impacts of the standard, it currently believes that there could be potential impact to 3D printer sales and the timing
of revenue recognition of the various components described in revenue recognition policy.
In June 2016, the FASB issued ASU No.
2016-13, Financial Instruments — Credit Losses (Topic 326), amending how entities
will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through
net income. The guidance requires the application of a current expected credit loss model which is a new impairment model based
on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience,
current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until
it is probably a loss has been incurred. This ASU is effective for interim and annual reporting periods beginning after December 15, 2022. The Company
is currently evaluating the impact of the guidance on the combined financial statements and related disclosures. This ASU applies
to trade accounts receivable.
EnvisionTEC Group
Notes to Combined Financial Statements
The FASB issued ASU No. 2016-02, Leases (Topic
842), which will supersede the current lease requirements in ASC 840. The ASU requires lessees to recognize a right-to-use asset
and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either
finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently,
leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of
lease-related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The
new lease guidance will be effective for the Company’s year ending December 31, 2021 unless the Company elects to use
the limited one year deferral of the effective date provided by ASU 2020-05, at which time the guidance would be effective for
the Company’s calendar year. The guidance will be applied using a modified retrospective transition method to either the
beginning of the earliest period presented or the beginning of the year of adoption. The Company is still evaluating which method
it will apply, and whether it will elect the deferral of the effective date.
While the Company is continuing to assess
all potential impacts of the standard, the effects on the results of operations are not expected to be material.
3. Inventories
Inventories consist of the following:
December 31,
|
|
2019
|
|
|
2018
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Raw materials and components
|
|
$
|
6,737
|
|
|
$
|
6,423
|
|
Work in progress
|
|
|
71
|
|
|
|
173
|
|
Finished goods
|
|
|
2,077
|
|
|
|
2,433
|
|
Total
|
|
$
|
8,885
|
|
|
$
|
9,029
|
|
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
|
|
2019
|
|
|
2018
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Prepaid import taxes
|
|
$
|
2,942
|
|
|
$
|
2,808
|
|
Other receivables
|
|
|
2
|
|
|
|
16
|
|
Other
|
|
|
716
|
|
|
|
666
|
|
Total
|
|
$
|
3,660
|
|
|
$
|
3,490
|
|
EnvisionTEC Group
Notes to Combined Financial Statements
5. Property and Equipment, Net
Property and equipment, net, consist of the following:
December 31
|
|
2019
|
|
|
2018
|
|
|
Useful Life
(in years)
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
$
|
3,333
|
|
|
$
|
3,517
|
|
|
|
3 – 7
|
|
Computer equipment and software
|
|
|
1,022
|
|
|
|
1,032
|
|
|
|
3
|
|
Leasehold improvements
|
|
|
695
|
|
|
|
706
|
|
|
|
1
|
|
Other
|
|
|
271
|
|
|
|
264
|
|
|
|
1 – 25
|
|
Property and Equipment
|
|
|
5,321
|
|
|
|
5,519
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
(3,602
|
)
|
|
|
(3,652
|
)
|
|
|
|
|
Property and Equipment, Net
|
|
$
|
1,719
|
|
|
$
|
1,867
|
|
|
|
|
|
Depreciation expense was $719 and $913 in 2019 and 2018, respectively.
6. Intangible Assets, Net
Intangible Assets, net, consist of the following:
December 31
|
|
2019
|
|
|
2018
|
|
|
Weighted
Average
Useful Life
(in years)
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Technology
|
|
$
|
781
|
|
|
$
|
781
|
|
|
|
12
|
|
Less: accumulated amortization
|
|
|
(187
|
)
|
|
|
(138
|
)
|
|
|
|
|
Intangible Assets, Net
|
|
$
|
594
|
|
|
$
|
643
|
|
|
|
|
|
Amortization expense was $49 and $48 in 2019 and 2018, respectively.
Estimated future amortization expense is
$49 annually for each of the next five years and $349 in the years thereafter.
7. Accrued Expenses and Other Current
Liabilities
Accrued expenses and other current liabilities consist of the
following:
December 31,
|
|
2019
|
|
|
2018
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Other tax withholdings
|
|
$
|
37
|
|
|
$
|
77
|
|
Warranty
|
|
|
482
|
|
|
|
467
|
|
Payroll related liabilities
|
|
|
528
|
|
|
|
571
|
|
Customer deposits and other
|
|
|
946
|
|
|
|
1,860
|
|
Total
|
|
$
|
1,993
|
|
|
$
|
2,975
|
|
8. Income Taxes
For the years ended
December 31, 2019 and 2018, EnvisionTEC, Inc., the Company’s U.S. operating entity, and Gulf Filtration Systems
Inc., the Company’s U.S. intellectual property holding company were S corporations for U.S. federal and state income
tax purposes. As S corporations, the taxable income or loss of these entities was passed through to and included in the
individual tax returns of each corporation’s stockholder. Therefore, no provision has been recorded for U.S.
federal tax and most state jurisdictions. The Company’s German operating entity, EnvisionTEC GmbH, is taxed as a corporation
under the taxing regulations of Germany. The Company reported pre-tax book loss from Germany of approximately ($1,449) and ($351)
in 2019 and 2018, respectively. The Company’s U.S. entities reported pre-tax book income (loss) of approximately $914 and
($2,010) in 2019 and 2018, respectively.
EnvisionTEC Group
Notes to Combined Financial Statements
The components of income taxes for the years ended December 31,
2019 and 2018 are as follows:
December 31,
|
|
2019
|
|
|
2018
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State and local
|
|
|
21
|
|
|
|
148
|
|
Foreign
|
|
|
—
|
|
|
|
(14
|
)
|
Total Income Taxes
|
|
$
|
22
|
|
|
$
|
134
|
|
The Company has a liability for uncertain
tax positions of approximately $427 and $387 at December 31, 2019 and 2018, respectively, which is recorded in income tax
payable on the combined balance sheet.
9. Related Party Transactions
The Company has a lease arrangement with
ATMRE LLC, a leasing company in which Mr. El Siblani, CEO and owner of EnvisionTEC Group, is the sole member, for its headquarters
located in Dearborn, Michigan. This lease terminated on December 31, 2016 and the company is currently leasing the facility
on a month to month basis. For the years ended December 31, 2019 and 2018, the Company paid $144 and $144 to ATMRE, LLC,
respectively.
In March 2005, the Company entered into
a lease agreement with JES Besitzgesellschaft mbH, a leasing company that is controlled by members of the immediate family of Mr. El
Siblani, for its original facilities located in Gladbeck, Germany. Pursuant to the lease agreement, the Company pays a base rent
of €8 per month. For the years ended December 31, 2019 and 2018 the Company paid JES Besitzgesellschaft GmbH $113
and $44, respectively.
In June 2015, the Company entered into
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. Pursuant to the lease agreement, the Company pays a base rent of €9 per month. For the years
ended December 31, 2019 and 2018 the Company paid Sitraco (UK) Limited $128 and $99, respectively.
In June 2008, the Company entered
into 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. Pursuant to the distribution agreement with Sibco Europe Ltd.,
the Company had sales to Sibco Europe Ltd. for the years ended December 31, 2019 and 2018 of
$ — 0- and $2, respectively. Accounts receivable due from Sibco Europe Ltd. at December 31, 2019 and
2018 was $3 and $51, respectively, and is included in trade accounts receivable on the Company’s combined balance
sheets. In addition, Sibco Europe Ltd. provides sales and marketing support for EnvisionTEC GmbH. For the years ended
December 31, 2019 and 2018, Sibco Europe Ltd. billed the Company $ — 0- and $37, respectively, for
services. These amounts are included in selling, general and administrative expenses on the Company’s combined
statements of operations and comprehensive income. No accounts payable was due to Sibco Europe Ltd. at December 31,2019
and 2018.
During 2019, Sibco Europe Ltd. Loaned EnvisionTec
Inc. $400 which was repaid in September 2020. Additionally, ATMRE, LLC loaned EnvisionTec $200 during 2019. The balance is
outstanding.
EnvisionTec, Inc. entered into a term loan
agreement with EvnsisionTec GmbH dated July 11, 2019 in the amount of €600 or $673 USD. The interest rate is 0.5% plus
LIBOR. The repayment date is June 30, 2020.
EnvisionTEC Group
Notes to Combined Financial Statements
10. Commitments and Contingencies
Operating Lease Commitments
The Company leases various manufacturing
facilities, offices and warehouse spaces under operating lease arrangements expiring at various dates through 2023. Future minimum
lease payments of operating lease arrangements at December 31, 2019 are approximately $725 in 2020, $478 in 2021, $252 in
2022 and $252 in 2023. Rent expense under operating lease arrangements was approximately $694 and $619 for the years ended
December 31, 2019 and 2018, respectively.
Legal Matters
The Company records an estimated loss from
a loss contingency when information available prior to issuance of its financial statements indicates that it is probable that
an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss
or liability can be reasonably estimated. Accounting for contingencies, such as legal matters, requires the Company to use its
judgment.
11. Subsequent Events
The financial statements and related disclosures
include evaluation of events up through and including November 6, 2020, which is the date the financial statements were available
to be issued.
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan,
China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its
point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain
as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results
of operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not
able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal
year 2020.
We are unable to predict the impact that
COVID-19 will have on future periods due to numerous uncertainties. While COVID-19 so far has not unfavorably affected our operations
to date, the extent of the impact in the future, if any, will depend on future developments, which are highly uncertain, cannot
be predicted and could have a material adverse impact on our financial position, operating results and cash flows. A prolonged
outbreak could, among other things, strain our business continuity plans, create delays in our growth and strategic initiatives,
reduce our sales and marketing activities, limit our access to financing on favorable terms, increase our exposure to potential
impairment charges related to long-lived and intangible assets, hinder our ability to support our customers and operate our business
effectively, heighten the risk of disruption to our information and reporting systems and internal controls, including those over
financial reporting and other risk management systems, or require us to incur substantial costs. We are closely monitoring the
impact of COVID-19 on all aspects of our business and may take further actions as may be required by federal, state or local authorities,
or that we determine are in the best interests of our employees, customers and partners. As the conditions surrounding COVID-19
continue to evolve rapidly, we will continue to actively manage our response in collaboration with customers, government officials
and stakeholders, and assess any potential impacts to our financial position and operating results, as well as adverse developments
in our business.
EnvisionTEC Group
Notes to Combined Financial Statements
On March 27, 2020, the Coronavirus Aid, Relief, and
Economic Security Act (“CARES Act”) was signed into law. The CARES Act is aimed at providing emergency assistance
and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S.
economy. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the
employer portion of social security payments, net operating loss carryback periods, modifications to the net interest
deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. We are
analyzing the various aspects of the CARES Act to determine the impact specific provisions may have on us.
Exhibit 99.3
ENVISIONTEC
GROUP
COMBINED
BALANCE SHEETS (UNAUDITED)
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,987
|
|
|
$
|
14,865
|
|
Trade accounts receivable, less allowance for doubtful accounts of
$836 and $755 in 2020 and 2019
|
|
|
5,480
|
|
|
|
3,310
|
|
Inventories
|
|
|
8,973
|
|
|
|
8,885
|
|
Prepaid expenses and other current assets
|
|
|
1,083
|
|
|
|
3,660
|
|
Total Current Assets
|
|
|
40,523
|
|
|
|
30,720
|
|
Property, Plant and Equipment, Net
|
|
|
1,676
|
|
|
|
1,719
|
|
Related party loan receivable
|
|
|
1,980
|
|
|
|
—
|
|
Intangible Asset, Net
|
|
|
557
|
|
|
|
594
|
|
Total Assets
|
|
$
|
44,736
|
|
|
$
|
33,033
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,580
|
|
|
$
|
2,461
|
|
Deferred revenue
|
|
|
2,042
|
|
|
|
2,175
|
|
Accrued expenses and other current liabilities
|
|
|
2,943
|
|
|
|
2,420
|
|
Related party loan payable
|
|
|
200
|
|
|
|
600
|
|
Total Current Liabilities
|
|
|
6,765
|
|
|
|
7,656
|
|
Long-term debt
|
|
|
1,176
|
|
|
|
—
|
|
Total Liabilities
|
|
|
7,941
|
|
|
|
7,656
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Contributed capital
|
|
|
443
|
|
|
|
443
|
|
Retained earnings
|
|
|
38,588
|
|
|
|
28,517
|
|
Accumulated other comprehensive loss
|
|
|
(2,236
|
)
|
|
|
(3,583
|
)
|
Total Stockholders’ Equity
|
|
|
36,795
|
|
|
|
25,377
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
44,736
|
|
|
$
|
33,033
|
|
See accompanying notes to combined financial
statements.
ENVISIONTEC
GROUP
COMBINED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
September 30,
|
|
2020
|
|
|
2019
|
|
Net Revenue
|
|
$
|
32,611
|
|
|
$
|
24,419
|
|
Cost of Goods Sold
|
|
|
13,557
|
|
|
|
14,678
|
|
Gross Profit
|
|
|
19,054
|
|
|
|
9,741
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,186
|
|
|
|
3,425
|
|
Selling, general and administrative
|
|
|
5,889
|
|
|
|
7,623
|
|
Total Operating Expenses
|
|
|
9,075
|
|
|
|
11,048
|
|
Operating Profit (Loss)
|
|
|
9,979
|
|
|
|
(1,307
|
)
|
Other Income
|
|
|
511
|
|
|
|
268
|
|
Income (Loss) Before Taxes
|
|
|
10,490
|
|
|
|
(1,039
|
)
|
Income Taxes
|
|
|
(420
|
)
|
|
|
(45
|
)
|
Net Income (Loss)
|
|
|
10,070
|
|
|
|
(1,084
|
)
|
Other Comprehensive Gain (Loss)
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
1,348
|
|
|
|
(616
|
)
|
Comprehensive Income (Loss)
|
|
$
|
11,418
|
|
|
$
|
(1,700
|
)
|
See accompanying notes to combined financial
statements.
ENVISIONTEC
GROUP
COMBINED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
|
|
Contributed
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Stockholders’
Equity
|
|
Balance, January 1, 2019
|
|
$
|
443
|
|
|
$
|
29,074
|
|
|
$
|
(2,704
|
)
|
|
$
|
26,813
|
|
Net loss
|
|
|
—
|
|
|
|
(1,084
|
)
|
|
|
—
|
|
|
|
(1,084
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(616
|
)
|
|
|
(616
|
)
|
Balance, September 30, 2019
|
|
$
|
443
|
|
|
$
|
27,990
|
|
|
$
|
(3,320
|
)
|
|
$
|
25,113
|
|
Balance, January 1, 2020
|
|
$
|
443
|
|
|
$
|
28,518
|
|
|
$
|
(3,584
|
)
|
|
$
|
25,377
|
|
Net income
|
|
|
—
|
|
|
|
10,070
|
|
|
|
—
|
|
|
|
10,070
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
1,348
|
|
|
|
1,348
|
|
Balance, September 30, 2020
|
|
$
|
443
|
|
|
$
|
38,588
|
|
|
$
|
(2,236
|
)
|
|
$
|
36,795
|
|
See accompanying notes to combined financial
statements.
ENVISIONTEC
GROUP
COMBINED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine months ended September 30,
|
|
2020
|
|
|
2019
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
10,070
|
|
|
$
|
(1,084
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
304
|
|
|
|
497
|
|
Amortization
|
|
|
37
|
|
|
|
37
|
|
Provision for bad debt
|
|
|
135
|
|
|
|
69
|
|
Loss on sale of property and equipment
|
|
|
6
|
|
|
|
132
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(2,550
|
)
|
|
|
(1,316
|
)
|
Inventories
|
|
|
(87
|
)
|
|
|
(2,002
|
)
|
Prepaid expenses and other current assets
|
|
|
2,576
|
|
|
|
(112
|
)
|
Trade accounts payable
|
|
|
(881
|
)
|
|
|
947
|
|
Deferred revenue and customer deposits
|
|
|
(133
|
)
|
|
|
(15
|
)
|
Income taxes payable
|
|
|
28
|
|
|
|
28
|
|
Accrued expenses and other current liabilities
|
|
|
419
|
|
|
|
(149
|
)
|
Net cash provided by (used in) operating activities
|
|
|
10,224
|
|
|
|
(2,968
|
)
|
Investing Activities
|
|
|
|
|
|
|
|
|
Property and equipment purchases
|
|
|
(246
|
)
|
|
|
(434
|
)
|
Advance to related party
|
|
|
(1,980
|
)
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(2,226
|
)
|
|
|
(434
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
1,176
|
|
|
|
—
|
|
Proceeds from related party loans
|
|
|
—
|
|
|
|
600
|
|
Payment of related party loans
|
|
|
(400
|
)
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
|
776
|
|
|
|
600
|
|
Effect of Currency Translation on Cash and Cash Equivalents
|
|
|
1,348
|
|
|
|
(616
|
)
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
10,122
|
|
|
|
(3,418
|
)
|
Cash and Cash Equivalents, beginning of period
|
|
|
14,865
|
|
|
|
16,927
|
|
Cash and Cash Equivalents, end of period
|
|
$
|
24,987
|
|
|
$
|
13,509
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes, net of refunds
|
|
$
|
(2,584
|
)
|
|
$
|
162
|
|
See accompanying notes to combined financial
statements.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
The combined financial statements include
the accounts of EnvisionTEC, Inc., a Michigan corporation, which operates the business in North America; EnvisionTEC GmbH, a German
company with limited liability, which operates the business in Germany; 3dBotics, Inc, d.b.a. Virids3D, a Michigan corporation,
which prints 3D sand molds, and Gulf Filtration Systems, a Michigan corporation, which holds certain intellectual property. Collectively,
the combined group is referred to as “the Company” or “EnvisionTEC Group.” The combined financial statements
of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
All material intercompany transactions and balances have been eliminated in combination.
The Company is a leading global provider
of professional 3D printing solutions for the rapid manufacture of mass customized products across a variety of end markets. The
Company’s 3D printing solutions include three proprietary print technologies and a wide range of print materials. The Company’s
3D printing solutions are used by customers for numerous applications, including the development and manufacture of customized
jewelry, hearing aid, dental, biotech and foundry products.
All amounts presented in the accompanying
footnotes are presented in thousands, unless otherwise stated.
COVID-19 Pandemic and CARES Act
In March 2020, the World Health Organization
declared the novel strain of Coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide.
The full impact of the COVID-19 outbreak continues to evolve. As such, it is uncertain as to the full magnitude that the pandemic
will have on the Company’s financial condition, liquidity, and future results of operations.
We are unable to predict the impact
that COVID-19 will have on future periods due to numerous uncertainties. While COVID-19 so far has not unfavorably affected
our operations to date, the extent of the impact in the future, if any, will depend on future developments, which are highly
uncertain, cannot be predicted and could have a material adverse impact on our financial position, operating results and cash
flows. A prolonged outbreak could, among other things, strain our business continuity plans, create delays in our growth and
strategic initiatives, reduce our sales and marketing activities, limit our access to financing on favorable terms, increase
our exposure to potential impairment charges related to long-lived and intangible assets, hinder our ability to support our
customers and operate our business effectively, heighten the risk of disruption to our information and reporting systems and
internal controls, including those over financial reporting and other risk management systems, or require us to incur
substantial costs. We are closely monitoring the impact of COVID-19 on all aspects of our business and may take further
actions as may be required by federal, state or local authorities, or that we determine are in the best interests of our
employees, customers and partners. As the conditions surrounding COVID-19 continue to evolve rapidly, we will continue to
actively manage our response in collaboration with customers, government officials and stakeholders, and assess any potential
impacts to our financial position and operating results, as well as adverse developments in our business.
On March 27, 2020, the Coronavirus Aid, Relief,
and Economic Security Act (“CARES Act”) was signed into law. The CARES Act is aimed at providing emergency assistance
and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy.
The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion
of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and
technical corrections to tax depreciation methods for qualified improvement property.
As more fully described in Note 8, on April
3, 2020 under the CARES Act the Company applied for and obtained a loan under the Paycheck Protection Program (“PPP”)
in the amount of approximately $1,176. 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.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
2.
|
Summary of Significant Accounting Policies
|
Use of Estimates
The preparation of these combined financial
statements requires the Company to make certain judgments, estimates and assumptions regarding uncertainties that affect the reported
amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Areas that require
significant judgments, estimates and assumptions include, the allowance for doubtful accounts; inventories (including slow moving
and obsolete inventory valuation adjustments); product warranty reserves; income taxes; contingencies; and future cash flow estimates
associated with long-lived assets for purposes of impairment testing. The Company bases its estimates on historical experience,
market comparables and on various other assumptions that are believed to be reasonable, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
Revenue Recognition
Revenue from the sale of 3D printers and
consumables is recognized upon transfer of the risks and rewards of ownership to the buyer, which for 3D printers is generally
upon shipment for sales to distributors, or in the case of direct sales of the Company’s 3D printers upon final acceptance
by the customer after completion of the training and installation by the Company’s technicians, or upon shipping for printers
that are installed by the customer. Revenue from the sales of consumables (primarily print materials and replacement parts) is
recorded upon shipment. Revenue for all deliverables in a sales arrangement is recognized, provided that persuasive evidence of
a sales arrangement exists, both title and risk of loss have passed to the customer and collection is reasonably assured. Persuasive
evidence of a sales arrangement exists upon execution of a written sales agreement or signed purchase order that constitutes a
fixed and legally binding commitment between the Company and its customer. Any payments received from a customer prior to meeting
all revenue recognition criteria are recorded as deferred revenue in the combined balance sheets.
The Company enters into sales arrangements
that may provide for multiple deliverables to a customer. Sales may include a combination of 3D printers, ancillary equipment,
consumables, a standard warranty, training and installation. The timing of revenue recognition is generally the same for each component
of the sale as the final requirements for revenue recognition are met at the same time (i.e., customer acceptance or shipment,
whichever is applicable for that sale). The Company evaluates the impact of undelivered items on the functionality of delivered
items for each sales transaction and, where appropriate, defers revenue on delivered items when that functionality has been affected.
The Company provides customers with a standard
warranty on the sale of its 3D printers, generally covering the one-year period from the sale of the printer. The warranty is not
treated as a separate service because the warranty is an integral part of the sale of the machine. A reserve for estimated warranty
costs is recorded at the time of the sale based on historical warranty experience. After the initial warranty period, the Company
offers customers an optional extended warranty. Extended warranty revenue is deferred and recognized on a straight-line basis over
the period of the contract and the costs associated with these contracts are recognized as incurred.
The Company’s 3D printers include embedded
software which is not sold separately and is not a significant focus of its marketing effort. The Company does not provide post-contract
customer support specific to the software or incur significant costs that are within the scope of FASB Accounting Standard Codification
(“ASC”) 985, Software — Revenue Recognition. Additionally, the functionality that the
software provides is marketed as part of the overall product. The software embedded in the equipment is incidental to the equipment as a whole, such that ASC 985 is not applicable.
Revenue associated with this embedded software is recognized at the same time as the related 3D printer.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
Shipping and handling costs billed to customers
for sales of 3D printers and consumables are included in revenue in the combined statements of operations and comprehensive income.
Costs incurred by the Company associated with shipping and handling are included in cost of sales in the combined statements of
operations and comprehensive income.
The terms of sale for the Company’s
3D printers generally require upfront payment for a portion of the cost of the 3D printer before shipment (usually at the time
of order and/or just prior to shipping), with any remaining balance generally to be paid 30 to 60 days after shipment or installation.
Payment for sales of consumables is generally due 30 to 60 days after shipment to the customer. Customers generally do not
have a right of return, but if accepted they are generally subject to a restocking fee.
Cash and Cash Equivalents
The Company considers all highly liquid instruments
with original maturities of three months or less to be cash equivalents. These instruments are stated at cost, which approximates
fair value because of the short maturity of the instruments. Cash balances are maintained with financial institutions located in
the United States, Germany and Lebanon. The Company believes its risk of loss is limited; however, at times, account balances may
exceed international and federally insured limits. The Company has no history of losses associated with these cash and cash equivalent
balances.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are reported at their
net realizable value. The estimate of the allowance for doubtful accounts related to trade receivables is based on evaluation of
customer accounts with past-due balances or specific accounts for which there is information that the customer may be unable to
meet its financial obligations. Based upon review of these accounts, and management’s analysis and judgment, the Company
records a specific allowance for that customer’s accounts receivable balance to reduce the outstanding receivable balance
to the amount expected to be collected. The allowance is re-evaluated and adjusted periodically as additional information is received
that impacts the allowance amount reserved. The allowance for doubtful accounts at September 30, 2020 and December 31, 2019 were
$835 and $755, respectively.
Inventories
All inventories are valued at the lower
of cost or market, as determined using the first-in, first-out (“FIFO”) method. Overhead is allocated to work in progress
and finished goods based on normal capacity of the Company’s production facilities. Fixed overhead associated with production
facilities that are being operated below normal capacity are recognized as a period expense rather than being capitalized as a
product cost. Adjustments for slow-moving and obsolete inventories are provided based on historical experience and current product
demand. These adjustments reduce the cost basis of the respective inventory and are recorded as a charge to cost of sales in the
combined statements of operations and comprehensive income. The adjustments for slow-moving and obsolete inventories at September
30, 2020 and December 31, 2019 were $615 and $594, respectively.
Property and Equipment, Net
Property and equipment are recorded at cost
and depreciated on a straight-line basis over the estimated useful lives of the related assets, generally one to seven years.
Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the contractual
lives of the related leases. Repairs and maintenance are charged to expense as incurred.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
The Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may
not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted
net cash flows of the operations related to the assets (asset group) to their carrying amount. An impairment loss would be recognized
when the carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The amount of the impairment
loss to be recorded is calculated as the excess of carrying value of assets (asset group) over their fair value, with fair value
determined using the best information available, which generally is a discounted cash flow model. The determination of what constitutes
an asset group, the associated undiscounted net cash flows, and the estimated useful lives of assets require significant judgments
and estimates by management. The Company recorded no impairment losses during the nine months ended September 30, 2020
and 2019.
Intangible Assets, Net
Intangible assets represent acquired intangibles
purchased through acquisitions. Intangible assets with finite lives are amortized using the straight-line method over their estimated
useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated.
Amortization of acquired intangible is included
in cost of sales, research and development expenses and selling, general and administrative expenses in the combined statements
of operations and comprehensive income. For intangibles with finite lives, the Company reviews the carrying amounts for potential
impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset group)
to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the
estimated undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the excess of carrying
value of assets (asset group) over their fair value, with fair value determined using the best information available, which generally
is a discounted cash flow model. The determination of what constitutes an asset group, the associated undiscounted net cash flows,
and the estimated useful lives of assets require significant judgments and estimates by management. The Company recorded no impairment
losses during the nine months ended September 30, 2020 and 2019.
Advertising
Advertising costs are expensed as incurred
and were approximately $169 and $149 for the nine months ended September 30, 2020 and 2019, respectively.
Shipping and Handling Costs
Shipping and handling costs are classified
as cost of goods sold in the combined statements of operations and comprehensive income.
Research and Development Costs
Research and development costs consist primarily
of employee compensation expenses, materials, laboratory supplies, costs for related software, and costs for facilities and equipment.
Expenditures for research and development are expensed as incurred.
Income Taxes
The Company’s U.S. operating entity,
EnvisionTEC, Inc., and its U.S. IP holding company, Gulf Filtration Systems Inc., as well as Viridis3D are organized as Michigan
corporations that are treated as S corporations for U.S. federal income tax purposes. Under the provisions of the Internal Revenue
Code and similar state provisions, each entity is taxed as a flow-through entity and is not liable for income taxes. Its earnings
and losses are included in the individual tax return of its sole shareholder. Therefore, the combined financial statements do not
reflect a provision for U.S. federal or state income taxes relating to these entities.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
The German operating entity, EnvisionTEC
GmbH, is taxed as a corporation under the applicable tax regulations of Germany. As a result, the accompanying combined statements
of operations and comprehensive income include tax expense related to Germany.
The Company recognizes deferred tax assets
and liabilities for the differences between the financial statement carrying amounts and the tax basis of assets and liabilities
of EnvisionTEC GmbH using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes
in the level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits,
may materially impact the effective tax rate.
The Company estimates liabilities related
to uncertain tax positions. As of September 30, 2020 and December 31, 2019, the Company had a liability of $455 and $427, respectively,
related to uncertain tax positions in certain states and foreign jurisdictions. The calculation of the liability for uncertain
tax positions requires management to make estimates and assumptions. The Company believes that its assumptions and estimates are
reasonable, although actual results may have a material positive or negative impact on the balances of current or deferred tax
assets and liabilities and net income.
Variable Interest Entities
A variable interest entity (VIE) is an entity
that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial
support or (ii) has equity investors who lack the characteristics of a controlling financial interest. Implicit variable interests
may result in the absorption or receipt of variability in a legal entity. A VIE is consolidated by its primary beneficiary. The
primary beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the
VIE. An entity has the power to direct the activities of another entity when its management has the ability to make key operating
decisions, such as decisions regarding capital or product investment or manufacturing production schedules. The Company has evaluated
certain entities, including certain related parties and entities under common control, and concluded that the Company has no VIEs
subject to consolidation.
Stockholders’ Equity
The EnvisionTEC Group is presented in combined
form based on the existence of common control for all periods presented. All of the companies combined within EnvisionTEC Group
(listed below) are each 100% owned by the same individual, therefore, profits, losses and distributions are allocated as such.
The shares issued and outstanding for each of the individual entities included in the combined financial statements as of September 30,
2020 were as follows:
|
|
Common
Stock
Issued and
Outstanding
|
|
EnvisionTEC, Inc.
|
|
|
10
|
|
EnvisionTEC GmbH
|
|
|
22
|
|
Viridis3D
|
|
|
60
|
|
Gulf Filtration Systems, Inc.
|
|
|
1
|
|
Foreign Currency
The local currency is the functional currency
for significant operations outside of the United States. The determination of the functional currency of an operation is made
based upon the appropriate economic and management indicators.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
Foreign currency assets and liabilities are
translated into their U.S. dollar equivalents based upon year-end exchange rates, and are included in stockholders’ equity
as a component of comprehensive loss. Revenue and expenses are translated at average exchange rates. Transaction gains and losses
that arise from exchange rate fluctuations are charged to operations as incurred, except for gains and losses associated with intercompany
receivables and payables for which settlement is not planned or anticipated in the foreseeable future, which are included in other
comprehensive income in the combined statement of operations and comprehensive income.
New Accounting Standards or Updates Recently Adopted
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts
with Customers (Topic 606), which supersedes the current revenue recognition requirements in Topic 605, Revenue
Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract. The new guidance will be effective for the Company’s year ending December 31, 2020 as
the Company has elected to use the limited deferral of the effective date of Topic 606 provided by ASU No. 2020-05, Revenue
from Contracts with Customers (Topic 606) and Leases (Topic 842) — Effective Dates
for Certain Entities (“ASU 2020-05”). Topic 606 permits application of the new revenue recognition guidance
using one of two retrospective application methods. The Company has not yet determined which application method it will use.
While the Company is continuing to assess
all potential impacts of the standard, it currently believes that there could be potential impact to 3D printer sales and the timing
of revenue recognition of the various components described in revenue recognition policy.
In June 2016, the FASB issued ASU No. 2016-13, Financial
Instruments — Credit Losses (Topic 326), amending how entities will measure credit losses for most
financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the
application of a current expected credit loss model which is a new impairment model based on expected losses. Under this model,
an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted
information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred.
This ASU is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently
evaluating the impact of the guidance on the combined financial statements and related disclosures. This ASU applies to trade accounts
receivable.
The FASB issued ASU No. 2016-02, Leases (Topic
842), which will supersede the current lease requirements in ASC 840. The ASU requires lessees to recognize a right-to-use asset
and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either
finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently,
leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of
lease-related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The
new lease guidance will be effective for the Company’s year ending December 31, 2021 unless the Company elects to use
the limited one year deferral of the effective date provided by ASU 2020-05, at which time the guidance would be effective for
the Company’s calendar year. The guidance will be applied using a modified retrospective transition method to either the
beginning of the earliest period presented or the beginning of the year of adoption. The Company is still evaluating which method
it will apply, and whether it will elect the deferral of the effective date. The Company is continuing to assess all potential
impacts of the standard.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
Inventories consist of the following:
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Raw materials and components
|
|
$
|
5,678
|
|
|
$
|
6,737
|
|
Work in progress
|
|
|
122
|
|
|
|
71
|
|
Finished goods
|
|
|
3,173
|
|
|
|
2,077
|
|
Total
|
|
$
|
8,973
|
|
|
$
|
8,885
|
|
4.
|
Prepaid Expenses and Other Current Assets
|
Prepaid expenses and other current assets consist of the following:
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Prepaid import taxes
|
|
$
|
—
|
|
|
$
|
2,942
|
|
Other receivables
|
|
|
372
|
|
|
|
2
|
|
Other
|
|
|
711
|
|
|
|
716
|
|
Total
|
|
$
|
1,083
|
|
|
$
|
3,660
|
|
5.
|
Property and Equipment, Net
|
Property and equipment, net, consist of the following:
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
Useful Life
(in years)
|
|
Machinery and equipment
|
|
$
|
3,624
|
|
|
$
|
3,333
|
|
|
|
3 – 7
|
|
Computer equipment and software
|
|
|
1,053
|
|
|
|
1,022
|
|
|
|
3
|
|
Leasehold improvements
|
|
|
652
|
|
|
|
695
|
|
|
|
1
|
|
Other
|
|
|
312
|
|
|
|
271
|
|
|
|
1 – 25
|
|
Property and Equipment
|
|
|
5,641
|
|
|
|
5,321
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
(3,965
|
)
|
|
|
(3,602
|
)
|
|
|
|
|
Property and Equipment, Net
|
|
$
|
1,676
|
|
|
$
|
1,719
|
|
|
|
|
|
Depreciation expenses were $304 and $497 at September 30,
2020 and 2019, respectively.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
6.
|
Intangible Assets, Net
|
Intangible Assets, net, consist of the following:
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
Weighted
Average
Useful Life
(in years)
|
|
Acquired Technology
|
|
$
|
781
|
|
|
$
|
781
|
|
|
|
12
|
|
Less: accumulated amortization
|
|
|
(224
|
)
|
|
|
(187
|
)
|
|
|
|
|
Intangible Assets, Net
|
|
$
|
557
|
|
|
$
|
594
|
|
|
|
|
|
Amortization expenses were $37 and $37 for
the nine months ended September 30, 2020 and 2019, respectively.
Estimated future amortization expense is
$12 for the remainder of 2020, $49 annually for each of the next four years, and $349 in the years thereafter.
7.
|
Accrued Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities consist of the
following:
(in thousands)
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Other tax withholdings
|
|
$
|
1,333
|
|
|
$
|
464
|
|
Warranty
|
|
|
284
|
|
|
|
482
|
|
Payroll related liabilities
|
|
|
217
|
|
|
|
528
|
|
Customer deposits and other
|
|
|
1,109
|
|
|
|
946
|
|
Total
|
|
$
|
2,943
|
|
|
$
|
2,420
|
|
Under the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”), the Company applied for and obtained a loan under the Paycheck Protection Program (“PPP”)
in the amount of approximately $1,176 on April 3, 2020. 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.
For the nine months ended September 30,
2020 and 2019, EnvisionTEC, Inc., the Company’s U.S. operating entity, and Gulf Filtration Systems Inc., the Company’s
U.S. intellectual property holding company were S corporations for U.S. federal and state income tax purposes. As S corporations,
the taxable income or loss of these entities was passed through to and included in the individual tax returns of each corporation’s
stockholder. Therefore, no provision has been recorded for U.S. federal tax and most state jurisdictions. The Company’s German
operating entity, EnvisionTEC GmbH, is taxed as a corporation under the taxing regulations of Germany. The Company reported pre-tax
book income (loss) from Germany of approximately $255 and $(1,320) for the nine months ended September 30, 2020 and 2019,
respectively. The Company’s U.S. entities reported pre-tax book income of approximately $10,235 and $281 for the nine months
ended September 30, 2020 and 2019, respectively.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
The components of income taxes for the nine months
ended September 30, 2020 and 2019 are as follows:
September 30,
(in thousands)
|
|
2020
|
|
|
2019
|
|
U.S. federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State and local
|
|
|
415
|
|
|
|
45
|
|
Foreign
|
|
|
5
|
|
|
|
0
|
|
Total Income Taxes
|
|
$
|
420
|
|
|
$
|
45
|
|
The Company has a liability for uncertain
tax positions of approximately $455 and $427 as of September 30, 2020 and December 31, 2019, respectively, which is recorded
in accrued expenses and other current liabilities on the combined balance sheet.
10.
|
Related Party Transactions
|
The Company has a lease arrangement
with ATMRE LLC, a leasing company in which Mr. El-Siblani, CEO and owner of EnvisionTEC Group, is the sole member, for
its headquarters located in Dearborn, Michigan. This lease terminated on December 31, 2016 and the company is currently
leasing the facility on a month to month basis. For the nine months ended September 30, 2020 and 2019, the Company
paid $108 and $108 to ATMRE, LLC, respectively.
In March 2005, the Company entered into
a lease agreement with JES Besitzgesellschaft mbH, a leasing company that is controlled by members of the immediate family of Mr. El-Siblani,
for its original facilities located in Gladbeck, Germany. Pursuant to the lease agreement, the Company pays a base rent of €8
per month. For the nine months ended September 30, 2020 and 2019, the Company paid JES Besitzgesellschaft GmbH $86 and
$85, respectively.
In June 2015, the Company entered into
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. Pursuant to the lease agreement, the Company pays a base rent of €9 per month. For the nine months
ended September 30, 2020 and 2019, the Company paid Sitraco (UK) Limited $98 and $96, respectively.
In June 2008, the Company entered into
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. Pursuant to the distribution agreement with Sibco Europe Ltd., the Company
did not have any sales to Sibco Europe Ltd. for the nine months ended September 30, 2020 and 2019 and did not have accounts
receivable due from Sibco Europe Ltd. at September 30, 2020 and 2019. Accounts receivables due from Sibco Europe Ltd. at September
30, 2020 and December 31, 2019, respectively, was $0 and $3. In addition, Sibco Europe Ltd. provides sales and marketing support
for EnvisionTEC GmbH. For the nine months ended September 30, 2020 and 2019, Sibco Europe Ltd. billed the Company $2
and $0, respectively, for services. The amount is included in selling, general and administrative expenses on the Company’s
combined statements of operations and comprehensive income. No accounts payable was due to Sibco Europe Ltd. at September 30,
2020 and 2019.
During 2019, Sibco Europe Ltd. loaned EnvisionTec
Inc. $400 which was repaid in September 2020.
In September 2020, EnvisionTec, Inc.
entered into a loan agreement to loan $1,980 to Sibco Inc., a company based in Michigan owned by Mr. El-Siblani. The balance
is outstanding as of September 30, 2020. Any remaining unpaid amounts are due in full on September 23, 2023. Interest
of 2% is due annually on December 31.
Additionally, ATMRE, LLC loaned EnvisionTec
$200 during 2019. The balance is outstanding as of September 30, 2020.
EnvisionTEC Group
Notes to Combined Financial Statements
(Unaudited)
11.
|
Commitments and Contingencies
|
Operating Lease Commitments
The Company leases various manufacturing
facilities, offices and warehouse spaces under operating lease arrangements expiring at various dates through 2023. Future minimum
lease payments of operating lease arrangements at September 30, 2020 are approximately $181 for the remainder of 2020, $479
in 2021, $252 in 2022, and $252 in 2023. Rent expense under operating lease arrangements was approximately $544 and $521 for the
nine months ended September 30, 2020 and 2019, respectively.
Legal Matters
The Company records an estimated loss from
a loss contingency when information available prior to issuance of its financial statements indicates that it is probable that
an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss
or liability can be reasonably estimated. Accounting for contingencies, such as legal matters, requires the Company to use its
judgment.
The financial statements and related disclosures
include evaluation of events up through and including January 15, 2021, which is the date the financial statements were available
to be issued.
Purchase Agreement and Plan of Merger
On January 15, 2021, the Company entered
into a Purchase Agreement and Plan of Merger with Desktop Metal, Inc. (“Desktop Metal”), a Massachusetts-based company
that offers a portfolio of integrated additive manufacturing solutions for engineers, designers, and manufacturers comprised of
hardware, software, materials and services. The Company will be sold for an equal combination of cash and common stock of Desktop
Metal of $300 million, subject to working capital adjustments. The Purchase Agreement and Plan of Merger is subject to customary
considerations prior to closing.
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION OF DESKTOP METAL AND ENVISIONTEC
Introduction
The following tables present unaudited pro forma
condensed combined financial information about Desktop Metal, Inc. ("Desktop Metal," "we," "us," and "our") consolidated balance sheet and statements of income, after giving
effect to the merger with EnvisionTEC Group (“EnvisionTEC”). The unaudited pro forma condensed combined financial
information is derived from and should be read in conjunction with the historical consolidated financial statements and related
notes of Desktop Metal and the combined financial statements of EnvisionTEC, referred to below.
On January 15, 2021, we entered into
the Purchase Agreement and Plan of Merger by and among Desktop Metal, Inc., EnvisionTEC Merger Sub, Inc., EnvisionTEC US LLC,
Envisiontec, Inc., Gulf Filtration Systems, Inc., 3dbotics, Inc., and Ali El-Siblani, or the EnvisionTEC Merger
Agreement, pursuant to which we acquired EnvisionTEC, or the EnvisionTEC Acquisition. The aggregate purchase price for the
EnvisionTEC Acquisition was (i) $150 million in cash, with such cash amount being subject to customary adjustments based on,
among other things, the amount of cash, debt and working capital in the EnvisionTEC business at the closing date and (ii)
stock consideration equal to a number of shares of Class A common stock, or the Shares, determined by dividing $150 million
by the average volume-weighted trading price on the New York Stock Exchange for one share of our Class A common stock for the
ten full trading days ending on and including the full trading day two days prior to the closing of the EnvisionTEC
Acquisition, subject to a customary collar that allowed for adjustment if the 10-day closing price average was 10% greater or
10% less than the 10-day signing price average. The completion of the EnvisionTEC Acquisition was subject to, among other
things, the expiration of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and other customary closing conditions. On February 16, 2021, we completed the EnvisionTEC
Acquisition.
Legacy Desktop Metal was incorporated
in Delaware on August 25, 2015 and became a wholly owned subsidiary of Desktop Metal upon the closing of the merger of
Legacy Desktop Metal into a wholly owned subsidiary of Trine Acquisition Corp., or Trine Business Combination. Desktop Metal
is pioneering a new generation of additive manufacturing technologies focused on the production of end-use parts. It offers a
portfolio of integrated additive manufacturing solutions for engineers, designers, and manufacturers comprised of hardware,
software, materials and services. Desktop Metal is headquartered in Burlington, Massachusetts.
Legacy Desktop Metal and Trine, a blank
check company incorporated in Delaware on September 26, 2018, entered into a business combination agreement that was accounted
for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Legacy Desktop
Metal has been determined to be the accounting acquirer. The following unaudited pro forma condensed combined balance sheet as
of September 30, 2020 assumes that the Legacy Desktop Metal and Trine business combination occurred on September 30, 2020.
EnvisionTEC consists of EnvisionTEC, Inc.,
a Michigan corporation operating in the U.S.; EnvisionTEC GmbH, a German company with limited liability, which operates in Germany;
3dBotics, Inc, d.b.a Virids3D, a Michigan corporation, which prints 3D sand molds, and Gulf Filtration Systems, a Michigan corporation,
which holds certain intellectual property. The company is a leading global provider of professional-grade 3D printing solutions
for the rapid manufacture of mass customized products across a variety of end markets. The company’s 3D printing solutions
include three proprietary print technologies and wide range of print materials. The company’s 3D printing solutions are
used by customers for numerous applications, including the development and manufacture of customized jewelry, hearing aid, dental,
biotech and foundry products.
The unaudited pro forma condensed
combined balance sheet as of September 30, 2020 and the unaudited pro forma condensed combined statements of income
for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively, are presented
herein. The unaudited pro forma condensed combined balance sheet combines the unaudited consolidated balance sheets of
Desktop Metal and EnvisionTEC as of September 30, 2020 and gives effect to the merger as if it had been completed on
January 1, 2019. The unaudited pro forma condensed combined statements of income combine the historical results of
Desktop Metal and the combined balance sheet of EnvisionTEC for the nine months ended September 30, 2020, and the
year ended December 31, 2019 and gives effect to the merger as if it occurred on January 1, 2019.
The unaudited pro forma condensed combined
financial information presented is based on the assumptions and adjustments described in the accompanying notes. The unaudited
pro forma condensed combined financial information is presented for illustrative purposes and does not purport to represent
what the financial position or results of operations would actually have been if the merger occurred as of the dates indicated
or what financial position or results would be for any future periods. The unaudited pro forma condensed combined financial
information is based upon the respective historical consolidated financial statements of Desktop Metal and the combined financial
statements of EnvisionTEC as described further in Note 1 — Basis of Pro Forma Presentation.
The merger will be accounted for as a business
combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business
Combinations” (ASC 805), with Desktop Metal representing the accounting acquirer under this guidance. The following unaudited
pro forma condensed combined financial information primarily gives effect to:
• Application of the acquisition method of accounting in
connection with the merger; and
• Transaction costs in connection with the merger.
The unaudited pro forma condensed
combined financial information includes adjustments which are preliminary and may be revised. There can be no assurance that
such revisions will not result in material changes. The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only and is not necessarily indicative of the results or financial position that actually
would have occurred or that may occur in the future had the merger been completed on the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of Desktop Metal after the merger. Future
results may vary significantly from the results reflected because of various factors, including those discussed in filings
made by Desktop Metal with the Securities and Exchange Commission.
Desktop Metal, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2020
(In thousands, assuming no redemptions)
|
|
As of September 30, 2020
|
|
|
|
|
|
|
|
As of September 30, 2020
|
|
|
|
Desktop Metal,Trine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Combined
|
|
|
EnvisionTEC
|
|
|
Transaction
|
|
|
|
|
|
|
|
|
(Historical)
(US GAAP)
|
|
|
(Historical)
(US GAAP
|
|
|
Accounting
Adjustments
|
|
|
(Note 4
References)
|
|
Pro Forma Combined
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
566,731
|
|
|
$
|
24,987
|
|
|
$
|
(150,000
|
)
|
|
A
|
|
$
|
441,718
|
|
Short-term investments
|
|
|
53,180
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
53,180
|
|
Accounts receivable, net of allowance for doubtful accounts $1.3 million
|
|
|
1,642
|
|
|
|
5,480
|
|
|
|
—
|
|
|
|
|
|
7,122
|
|
Inventory
|
|
|
10,363
|
|
|
|
8,973
|
|
|
|
—
|
|
|
|
|
|
19,336
|
|
Prepaid expenses and other current assets
|
|
|
1,130
|
|
|
|
1,083
|
|
|
|
—
|
|
|
|
|
|
2,213
|
|
Total current assets
|
|
|
633,046
|
|
|
|
40,523
|
|
|
|
(150,000
|
)
|
|
|
|
|
523,569
|
|
Restricted cash
|
|
|
612
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
612
|
|
Property, plant and equipment, net
|
|
|
13,601
|
|
|
|
1,676
|
|
|
|
—
|
|
|
|
|
|
15,277
|
|
Related party loan receivable
|
|
|
—
|
|
|
|
1,980
|
|
|
|
—
|
|
|
|
|
|
1,980
|
|
Capitalized
software, net
|
|
|
357
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
357
|
|
Right-of-use assets
|
|
|
1,935
|
|
|
|
—
|
|
|
|
911
|
|
|
G
|
|
|
2,846
|
|
Security deposit
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Goodwill
|
|
|
2,252
|
|
|
|
—
|
|
|
|
145,898
|
|
|
A
|
|
|
148,150
|
|
Intangible assets, net
|
|
|
2,453
|
|
|
|
557
|
|
|
|
123,043
|
|
|
C
|
|
|
126,053
|
|
Deferred transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Total Assets
|
|
$
|
654,280
|
|
|
$
|
44,736
|
|
|
$
|
119,852
|
|
|
|
|
$
|
818,868
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
3,360
|
|
|
$
|
1,580
|
|
|
$
|
—
|
|
|
|
|
$
|
4,940
|
|
Customer deposits
|
|
|
1,778
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,778
|
|
Current portion of operating lease
liability
|
|
|
858
|
|
|
|
—
|
|
|
|
505
|
|
|
G
|
|
|
1,363
|
|
Accrued expenses and other current
liabilities
|
|
|
5,563
|
|
|
|
2,943
|
|
|
|
10,287
|
|
|
F
|
|
|
18,793
|
|
Deferred revenue
|
|
|
1,136
|
|
|
|
2,042
|
|
|
|
(379
|
)
|
|
H, I
|
|
|
2,799
|
|
Current
portion of long-term debt, net of deferred financing costs
|
|
|
9,986
|
|
|
|
200
|
|
|
|
(200
|
)
|
|
D
|
|
|
9,986
|
|
Total current liabilities
|
|
|
22,681
|
|
|
|
6,765
|
|
|
|
10,213
|
|
|
|
|
|
39,659
|
|
See the accompanying notes to Unaudited
Pro Forma Condensed Combined Financial Information.
|
|
As of September 30, 2020
|
|
|
|
|
|
|
|
As of September 30, 2020
|
|
|
|
Desktop Metal, Trine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Combined
|
|
|
EnvisionTEC
|
|
|
Transaction
|
|
|
|
|
|
|
|
|
(Historical)
(US GAAP)
|
|
|
(Historical)
(US GAAP
|
|
|
Accounting
Adjustments
|
|
|
(Note 4
References)
|
|
Pro Forma Combined
|
|
Long-term debt, net of deferred financing costs
|
|
|
—
|
|
|
|
1,176
|
|
|
|
—
|
|
|
|
|
|
1,176
|
|
Deferred tax liability
|
|
|
—
|
|
|
|
—
|
|
|
|
5,936
|
|
|
E
|
|
|
5,936
|
|
Lease liability, net of current portion
|
|
|
2,375
|
|
|
|
—
|
|
|
|
406
|
|
|
G
|
|
|
2,781
|
|
Total liabilities
|
|
|
25,056
|
|
|
|
7,941
|
|
|
|
16,555
|
|
|
|
|
|
49,552
|
|
Commitments and contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Convertible Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
—
|
|
|
|
443
|
|
|
|
(443
|
)
|
|
B
|
|
|
—
|
|
Class A Common Stock (includes unvested 328,910 shares of restricted stock)
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
22
|
|
Additional paid-in capital
|
|
|
995,751
|
|
|
|
—
|
|
|
|
150,000
|
|
|
A
|
|
|
1,145,751
|
|
Accumulated deficit
|
|
|
(366,554
|
)
|
|
|
38,588
|
|
|
|
(48,496
|
)
|
|
B, F, H, I
|
|
|
(376,462
|
)
|
Accumulated other comprehensive income
|
|
|
5
|
|
|
|
(2,236
|
)
|
|
|
2,236
|
|
|
B
|
|
|
5
|
|
Total Stockholders’ Equity
|
|
|
629,224
|
|
|
|
36,795
|
|
|
|
103,297
|
|
|
|
|
|
769,316
|
|
Total Liabilities, Convertible Preferred Stock and Stockholders’ Equity
|
|
$
|
654,280
|
|
|
$
|
44,736
|
|
|
$
|
119,852
|
|
|
|
|
$
|
818,868
|
|
See the accompanying notes to Unaudited
Pro Forma Condensed Combined Financial Information.
Desktop Metal, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
(in thousands, except share and per share data)
|
|
For the Year
Ended
December 31, 2019
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, 2019
|
|
|
|
Desktop Metal,
Trine Pro Forma
Combined
(Historical)
(US GAAP)
|
|
|
EnvisionTEC
(Historical)
(US GAAP
|
|
|
Transaction
Accounting
Adjustments
|
|
|
(Note
References)
|
|
|
Pro Forma
Combined
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
22,758
|
|
|
$
|
34,582
|
|
|
$
|
(330
|
)
|
|
|
4(a)
|
|
|
$
|
57,010
|
|
Services
|
|
|
3,681
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
3,681
|
|
Total revenues
|
|
$
|
26,439
|
|
|
$
|
34,582
|
|
|
$
|
(330
|
)
|
|
|
|
|
|
$
|
60,691
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
45,268
|
|
|
|
20,825
|
|
|
|
4,569
|
|
|
|
4(b)
|
|
|
|
70,662
|
|
Services
|
|
|
5,528
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
5,528
|
|
Total cost of sales
|
|
|
50,796
|
|
|
|
20,825
|
|
|
|
4,569
|
|
|
|
|
|
|
|
76,190
|
|
Gross margin
|
|
|
(24,357
|
)
|
|
|
13,757
|
|
|
|
(4,899
|
)
|
|
|
|
|
|
|
(15,499
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
54,656
|
|
|
|
4,755
|
|
|
|
4,520
|
|
|
|
4(b)
|
|
|
|
63,931
|
|
Sales and marketing
|
|
|
18,749
|
|
|
|
5,005
|
|
|
|
4,296
|
|
|
|
4(b),4(c)
|
|
|
|
28,050
|
|
General and administrative
|
|
|
12,807
|
|
|
|
4,834
|
|
|
|
10,903
|
|
|
|
4(b),4(d)
|
|
|
|
28,544
|
|
Total Operating Expenses
|
|
|
86,212
|
|
|
|
14,594
|
|
|
|
19,719
|
|
|
|
|
|
|
|
120,525
|
|
Profit/(Loss) from Operations
|
|
|
(110,569
|
)
|
|
|
(837
|
)
|
|
|
(24,618
|
)
|
|
|
|
|
|
|
(136,024
|
)
|
Interest expense
|
|
|
(503
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
(503
|
)
|
Interest and other income, net
|
|
|
5,952
|
|
|
|
302
|
|
|
|
—
|
|
|
|
|
|
|
|
6,254
|
|
Profit/(Loss) before income taxes
|
|
$
|
(105,120
|
)
|
|
$
|
(535
|
)
|
|
$
|
(24,618
|
)
|
|
|
|
|
|
$
|
(130,273
|
)
|
Provision for income taxes
|
|
|
—
|
|
|
|
(22
|
)
|
|
|
1,191
|
|
|
|
4(e)
|
|
|
|
1,169
|
|
Net Profit/(Loss)
|
|
$
|
(105,120
|
)
|
|
$
|
(557
|
)
|
|
$
|
(23,427
|
)
|
|
|
|
|
|
$
|
(129,104
|
)
|
Shares used to compute earnings per
share – basic and diluted
|
|
|
23,379
|
|
|
$
|
—
|
|
|
|
8,038
|
|
|
|
5
|
|
|
|
31,417
|
|
Net Loss per share – basic and diluted
|
|
$
|
(4.50
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
(4.11
|
)
|
Other Comprehensive Profit/Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale marketable securities
|
|
|
171
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
171
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
(879
|
)
|
|
|
—
|
|
|
|
|
|
|
|
(879
|
)
|
Total Comprehensive Profit/Loss, net of taxes
|
|
$
|
(104,949
|
)
|
|
$
|
(1,436
|
)
|
|
$
|
(23,427
|
)
|
|
|
|
|
|
$
|
(129,812
|
)
|
See the accompanying notes to Unaudited
Pro Forma Condensed Combined Financial Information.
Desktop Metal, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(in thousands, except share and per share data)
|
|
For the Nine Months Ended
September 30, 2020
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2020
|
|
|
|
Desktop Metal,
Trine Pro
Forma
Combined
(Historical)
(US GAAP)
|
|
|
EnvisionTEC
(Historical)
(US GAAP
|
|
|
Transaction
Accounting
Adjustments
|
|
|
(Note
References)
|
|
|
Pro Forma
Combined
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
6,113
|
|
|
$
|
32,611
|
|
|
$
|
(202
|
)
|
|
|
4(a)
|
|
|
$
|
38,522
|
|
Services
|
|
|
1,988
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
1,988
|
|
Total revenues
|
|
$
|
8,101
|
|
|
$
|
32,611
|
|
|
$
|
(202
|
)
|
|
|
|
|
|
$
|
40,510
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
18,145
|
|
|
|
13,557
|
|
|
|
3,427
|
|
|
|
4(b)
|
|
|
|
35,129
|
|
Services
|
|
|
3,365
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
3,365
|
|
Total cost of sales
|
|
|
21,510
|
|
|
|
13,557
|
|
|
|
3,427
|
|
|
|
|
|
|
|
38,494
|
|
Gross margin
|
|
|
(13,409
|
)
|
|
|
19,054
|
|
|
|
(3,629
|
)
|
|
|
|
|
|
|
2,016
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
31,362
|
|
|
|
3,186
|
|
|
|
3,390
|
|
|
|
4(b)
|
|
|
|
37,938
|
|
Sales and marketing
|
|
|
9,994
|
|
|
|
1,253
|
|
|
|
3,240
|
|
|
|
4(b),4(c)
|
|
|
|
14,487
|
|
General and administrative
|
|
|
14,737
|
|
|
|
4,636
|
|
|
|
461
|
|
|
|
4(b)
|
|
|
|
19,834
|
|
Total Operating Expenses
|
|
|
56,093
|
|
|
|
9,075
|
|
|
|
7,091
|
|
|
|
|
|
|
|
72,259
|
|
Profit/(Loss) from Operations
|
|
|
(69,502
|
)
|
|
|
9,979
|
|
|
|
(10,720
|
)
|
|
|
|
|
|
|
(70,243
|
)
|
Interest expense
|
|
|
(253
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
(253
|
)
|
Interest and other income, net
|
|
|
995
|
|
|
|
511
|
|
|
|
—
|
|
|
|
|
|
|
|
1,506
|
|
Profit/(Loss) before income taxes
|
|
$
|
(68,760
|
)
|
|
$
|
10,490
|
|
|
$
|
(10,720
|
)
|
|
|
|
|
|
$
|
(68,990
|
)
|
Provision for income taxes
|
|
|
—
|
|
|
|
(420
|
)
|
|
|
519
|
|
|
|
4(e)
|
|
|
|
99
|
|
Net Profit/(Loss)
|
|
$
|
(68,760
|
)
|
|
$
|
10,070
|
|
|
$
|
(10,201
|
)
|
|
|
|
|
|
$
|
(68,891
|
)
|
Shares used to compute earnings per
share – basic and diluted
|
|
|
29,457
|
|
|
|
—
|
|
|
|
8,038
|
|
|
|
5
|
|
|
|
37,495
|
|
Net Loss per share – basic and diluted
|
|
$
|
(2.33
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
(1.84
|
)
|
Other Comprehensive Profit/Loss, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale marketable securities
|
|
|
(70
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
(70
|
)
|
Foreign currency translation
|
|
|
—
|
|
|
|
1,348
|
|
|
|
—
|
|
|
|
|
|
|
|
1,348
|
|
Total Comprehensive Profit/Loss, net of taxes
|
|
$
|
(68,830
|
)
|
|
$
|
11,418
|
|
|
$
|
(10,201
|
)
|
|
|
|
|
|
$
|
(67,613
|
)
|
See the accompanying notes to Unaudited
Pro Forma Condensed Combined Financial Information.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
(In thousands)
Note 1 — Basis of Pro Forma Presentation
The accompanying unaudited pro forma
condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X. The unaudited
pro forma condensed combined balance sheet was prepared using the historical balance sheets of Desktop Metal, taking into
account the pro forma effect of the Trine transaction, as of September 30, 2020 and EnvisionTEC as of September 30,
2020. EnvisionTEC’ s fiscal year ends on December 31 and Desktop Metal fiscal year also ends on December 31. The
unaudited pro forma condensed combined statements of income were prepared using:
• the historical unaudited statement of income of
Desktop Metal for the nine months ended September 30, 2020, taking into account the pro forma effect of the
Trine transaction;
• the historical audited statement of income of
Desktop Metal for the year ended December 31, 2019, taking into account the pro forma effect of the Trine
transaction;
• the historical audited consolidated combined
statement of income of EnvisionTEC for the year ended December 31, 2019;
• the historical unaudited consolidated combined
statement of income of EnvisionTEC for the nine months ended September 30, 2020.
Both Desktop Metal and EnvisionTEC’
s historical audited and unaudited financial statements were prepared in accordance with U.S. GAAP and are presented in thousands
of U.S. dollars. The historical EnvisionTEC financial statements included within the unaudited pro forma condensed combined
balance sheet and statements of income include certain reclassifications that were made to conform EnvisionTEC’s financial
statement presentation to that of Desktop Metal.
The acquisition of EnvisionTEC by Desktop
Metal will be accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805,
with Desktop Metal representing the accounting acquirer under this guidance. In the unaudited pro forma condensed combined
balance sheet, Desktop Metal’s costs to acquire EnvisionTEC have been allocated to the assets acquired and liabilities assumed,
based upon management’s preliminary estimate of what their respective fair values would be as of the date of the merger.
The pro forma adjustments are preliminary and are based upon available information and certain assumptions which management
believes are reasonable under the circumstances and which are described in the accompanying notes herein. Actual results may differ
materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under
ASC 805, generally all assets acquired, and liabilities assumed are recorded at their acquisition date fair value. For purposes
of the pro forma information presented herein, the fair value of EnvisionTEC’ s identifiable tangible and intangible
assets acquired, and liabilities assumed are based on a preliminary estimate of fair value. Any excess of the purchase price over
the fair value of identified tangible and intangible assets acquired and liabilities assumed will be recognized as goodwill. Certain
current market based assumptions were used which will be updated upon completion of the combination. Management believes the estimated
fair values utilized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions.
Preliminary fair value estimates may change as additional information becomes available and valuation procedures are completed
and such changes could be material, as certain valuations have yet to commence or progress to a stage where there is sufficient
information for definitive measurement. Following the consummation of the merger, valuations will be completed and management will
conduct a final review. As a result of the finalization of the valuation procedures and review, there may be differences identified
that, when finalized, could have a material impact on the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined
statements of income also include certain purchase accounting adjustments, including items expected to have a continuing impact
on the results of the combined company, such as increased amortization expense on acquired intangible assets. The unaudited pro forma
condensed combined statements of income do not include the impacts of any revenue, cost or other operating synergies that may
result from the merger or any related restructuring costs that may be contemplated.
Note 2 — Reclassifications
The unaudited pro forma condensed combined
financial information has been prepared using Desktop Metal’s significant accounting policies as set forth in Desktop Metal’s
audited consolidated financial statements for the fiscal year ended December 31, 2019. During the preparation of the unaudited
pro forma condensed combined financial information, Desktop Metal performed an initial review of the accounting policies of
EnvisionTEC to determine if differences in accounting policies require reclassification or adjustment to conform to Desktop Metal’s
accounting policies and classifications.
The following describes the adjustments and
reclassifications made in the preparation of the unaudited pro forma condensed combined financial statements incorporated
herein for Desktop Metal including the pro forma impact of the Trine transaction:
Balance Sheet as of September 30, 2020
Amount
(In thousands)
|
|
|
Presentation in Trine’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
243
|
|
|
Prepaid income taxes
|
|
Prepaid expenses and other current assets
|
|
3
|
|
|
Accounts payable and accrued expenses
|
|
Accounts payable
|
|
2,673
|
|
|
Accounts payable and accrued expenses
|
|
Accrued expenses and other current
|
Statement of Income for the Year Ended December 31,
2019
Amount
(In thousands)
|
|
|
Presentation in Trine’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
1,857
|
|
|
Operating costs
|
|
General and administration
|
|
5,142
|
|
|
Interest income
|
|
Interest and other income, net
|
|
170
|
|
|
Unrealized gain on marketable securities held in
|
|
Interest and other income, net
|
Statement of Income for the Nine Months Ended September 30,
2020
Amount
(In thousands)
|
|
|
Presentation in Trine’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
4,048
|
|
|
Operating costs
|
|
General and administration
|
|
1,110
|
|
|
Interest income
|
|
Interest and other income, net
|
Historical EnvisionTEC financial information
included within the unaudited pro forma condensed combined financial information have been reclassified to conform the presentation
to that of Desktop Metal as indicated in the table below:
Balance Sheet as of September 30, 2020
Amount
(In thousands)
|
|
|
Presentation in EnvisionTEC’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
200
|
|
|
Related party loan
|
|
Other Current Loans
|
|
|
|
|
|
|
|
Statement of Income for the Year Ended December 31,
2019
Amount
(In thousands)
|
|
|
Presentation in EnvisionTEC’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
5,005
|
|
|
Selling, general and administrative
|
|
Sales and marketing
|
|
4,834
|
|
|
Selling, general and administrative
|
|
General and administrative
|
|
302
|
|
|
Other income
|
|
Interest and other income, net
|
Statement of Income for the Nine Months Ended September 30,
2020
Amount
(In thousands)
|
|
|
Presentation in EnvisionTEC’s
Financial Statements
|
|
Presentation in Unaudited Pro Forma
Condensed Combined Financial
Information
|
$
|
1,253
|
|
|
Selling, general and administrative
|
|
Sales and marketing
|
|
4,636
|
|
|
Selling, general and administrative
|
|
General and administrative
|
|
511
|
|
|
Other income
|
|
Interest and other income, net
|
Note 3 — Conforming Accounting Policies
The unaudited pro forma condensed combined
financial information has been compiled in a manner consistent with the accounting policies adopted by Desktop Metal. Desktop Metal
believes these accounting policies are similar in most material respects to those of EnvisionTEC. During the preparation of these
unaudited pro forma condensed combined financial statements, Desktop Metal became aware of differences between the accounting
policies of Desktop Metal and EnvisionTEC related to ASC 606, Revenue from Contracts with Customers and ASC 842, Leases.
Desktop Metal adopted ASC 606 using the full
retrospective approach effective January 1, 2018 and adopted ASC 842 using the modified retrospective approach effective January 1,
2018. During the preparation of these unaudited pro forma condensed combined financial statements, Desktop Metal reviewed
the impact of the difference in adoption dates and determined that the impact to the unaudited pro forma condensed combined
statement of operations for the year ended December 31, 2019 would not be significant. The unaudited pro forma condensed
combined statement of operations for the nine months ended September 30, 2020 and the unaudited condensed combined balance
sheet as of September 30, 2020 properly reflect the impacts of adopting these standards.
Upon completion of the merger, management
will perform a comprehensive review of Desktop Metal and EnvisionTEC’s accounting policies. As a result of the review, management
may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact
on the financial statements of Desktop Metal.
Note 4 — Adjustments to Unaudited Pro
Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined
financial information has been prepared to illustrate the effect of the Transactions and has been prepared for informational purposes
only. The historical financial information has been adjusted to give effect to pro forma adjustments that reflect the transaction
in accordance with U.S. GAAP.
The unaudited pro forma combined provision
for income taxes does not necessarily reflect the amounts that would have resulted had Desktop Metal filed consolidated income
tax returns during the periods presented.
The unaudited pro forma basic and diluted
earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon
the number of Desktop Metal’s shares outstanding, assuming the merger occurred on January 1, 2019.
Adjustments to Unaudited Pro Forma Condensed Combined
Balance Sheet
The pro forma adjustments in the Unaudited
Pro Forma Condensed Combined Balance Sheet which represent only transaction accounting adjustments are as follows:
Purchase Accounting
|
A.
|
Estimated
Merger Consideration and Allocation:
|
The aggregate consideration for the Business
Combination is approximately $300.0 million, $150.0 million in cash, and $150.0 million in an equivalent number
of shares based on Desktop Metal’s average closing share price of        on       .
The following table summarizes the components
of the merger consideration reflected in the unaudited pro forma condensed combined financial information (in thousands of
dollars and shares, except for per share amounts and the exchange ratios):
Purchase Price
|
|
September 30, 2020
|
|
Cash consideration
|
|
$
|
150,000
|
|
Issuance of Desktop Metal shares
|
|
|
150,000
|
|
Total purchase price
|
|
$
|
300,000
|
|
The following is a preliminary estimate of
the assets to be acquired and the liabilities to be assumed by Desktop Metal in the transaction, reconciled to the estimate of
the consideration to be transferred:
Calculation of consideration estimated to be transferred
|
|
|
|
|
September 30, 2020
|
|
Net book value of net assets acquired
|
|
|
|
|
|
$
|
36,795
|
|
Adjustments to:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
C
|
|
|
|
123,043
|
|
Deferred tax
|
|
|
E
|
|
|
|
(5,936
|
)
|
Extinguishment of related party loan
|
|
|
D
|
|
|
|
200
|
|
Goodwill
|
|
|
|
|
|
|
145,898
|
|
Total estimated consideration
|
|
|
|
|
|
$
|
300,000
|
|
|
B.
|
Reflects the
elimination of EnvisionTEC’s historical equity to present it as a goodwill for Desktop Metal.
|
|
C.
|
Reflects the
adjustment to record step-up of intangible assets per description below:
|
Description
|
|
Estimated Useful
Life
|
|
|
Estimated
Fair Value
|
|
|
Balance Sheet
Classification
|
Customer relationships
|
|
|
10
|
|
|
$
|
42,500
|
|
|
Intangible assets, net
|
Acquired technology
|
|
|
8
|
|
|
|
73,100
|
|
|
Intangible assets, net
|
Trade name
|
|
|
13
|
|
|
|
8,000
|
|
|
Intangible assets, net
|
Total identifiable intangible assets
|
|
|
|
|
|
|
123,600
|
|
|
|
Historical EnvisionTEC acquired technology
|
|
|
|
|
|
|
557
|
|
|
|
Pro forma adjustment
|
|
|
|
|
|
$
|
123,043
|
|
|
|
|
D.
|
To eliminate
EnvisionTEC related party loan. This debt will not be assumed by Desktop Metal in connection with the acquisition.
|
|
E.
|
Reflects the
adjustments to record an increase to deferred income tax liabilities of $5.9 million resulting from pro forma fair
value adjustments for the assets acquired and liabilities assumed.
|
|
|
Reflects the income tax effect of pro forma adjustments using the estimated effective tax rate of 4.8%. In its historical
periods, Desktop Metal concluded that it is more likely than not that it will not recognize the benefits of federal and state
net deferred tax assets and as a result established a valuation allowance. However, the German operating entity, EnvisionTEC Gmbh,
is taxed as a corporation under the applicable tax regulations of Germany. As a result, these pro form statements include tax
expense relating to Germany. The remaining EnvisionTEC operating and holding companies are treated as S corporations for U.S.
federal income tax purposes and as such, these pro forma financial statements do not reflect a provision for U.S. federal
and state income taxes relating to those entities.
|
|
F.
|
To adjust
for the nonrecurring transaction expenses incurred by Desktop Metal and EnvisionTEC through the close of the merger. Reflects
the increase in net loss of $10.3 million and the corresponding increase to accrued liabilities related to transaction
costs expected to be incurred by Desktop Metal and EnvisionTEC on or prior to the closing of the merger.
|
Accounting policy alignment
|
G.
|
Reflects the
adjustment for the adoption of ASC 842 to record right-of-use assets and corresponding lease liability related to leased facilities
as of September 30, 2020 The lease liability of $0.9 million was calculated based on the remaining lease payments
as of the closing date discounted using Desktop Metal’s discount rate and presented as current and noncurrent based
on the timing of subsequent payments.
|
|
H.
|
Reflects the
deferral of commissions related to the ASC 606 accounting policy alignment.
|
|
I.
|
Reflects the
adjustment for warranties related to the ASC 606 accounting policy alignment. Revenue related to warranties of $0.3 million
has been deferred as of the nine months ended September 30, 2020.
|
Adjustments to Unaudited Pro Forma Condensed Combined
Statements of Income
The pro forma adjustments in the Unaudited
Pro Forma Condensed Combined Statements of Income which represent only transaction accounting adjustments are as follows:
|
(a)
|
Reflects the
ASC 606 accounting policy alignment for commissions and warranties.
|
Revenue related to warranties of $0.3 million for the twelve months
ended December 31, 2019 and $0.2 million for the nine months ended September 30, 2020 have been deferred.
|
(b)
|
Reflects additional
amortization expense for the estimated fair value adjustment of acquired intangible assets of $14.0 million for the twelve months
ended December 31, 2019 and $10.5 million for the nine months ended September 30, 2020. The preliminary
estimates of fair value and estimated useful lives will likely differ from final amounts that Desktop Metal will calculate
after completing a detailed valuation analysis and difference could have a material effect on the accompanying unaudited pro forma
condensed combined financial statements. A 10% increase in the valuation of intangible assets would cause a corresponding
increase in the amortization expense to approximately $15.4 million for the twelve months ended December 31,
2019 and $11.5 million for the nine months ended September 30, 2020. A 10% increase in the estimated useful
lives of intangible assets would cause a corresponding decrease in the amortization expense to approximately $12.7 million
for the twelve months ended December 31, 2019 and $9.5 million for the nine months ended September 30,
2020.
|
|
(c)
|
Reflects Sales
& marketing expenses related to commissions of $0.1 million for the twelve months ended December 31, 2019
and $0.05 million for the nine months ended September 30, 2020 have been deferred.
|
|
(d)
|
To adjust
for the nonrecurring transaction expenses incurred by Desktop Metal and EnvisionTEC through the close of the merger. Reflects
the increase in net loss of $10.3 million related to transaction costs expected to be incurred by Desktop Metal and EnvisionTEC
on or prior to the closing of the merger. Transactions costs incurred relate to advisory, audit and legal costs associated
with the transaction.
|
|
(e)
|
Reflects the
income tax effect of pro forma adjustments using the estimated effective tax rate of 4.8%. In its historical periods,
Desktop Metal concluded that it is more likely than not that it will not recognize the benefits of federal and state net deferred
tax assets and as a result established a valuation allowance. However, the German operating entity, EnvisionTEC Gmbh, is taxed
as a corporation under the applicable tax regulations of Germany. As a result, these pro form statements include tax expense
relating to Germany. The remaining EnvisionTEC operating and holding companies are treated as S corporations for U.S. federal
income tax purposes and as such, these pro forma financial statements do not reflect a provision for U.S. federal and
state income taxes relating to those entities.
|
Note 5 — Loss per Share
Net loss per share calculated using the historical
weighted average shares outstanding, and the issuance of additional shares in connection with the Transactions, assuming the shares
were outstanding since January 1, 2019. As the Transactions are being reflected as if they had occurred at the beginning of
the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes
that the shares issuable relating to the Transactions have been outstanding for the entire periods presented.
The unaudited pro forma condensed combined
financial information has been prepared for the year ended December 31, 2019 and for the nine months ended September 30,
2020:
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
(in thousands, except share and per share data)
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Pro forma net loss
|
|
$
|
(68,891
|
)
|
|
$
|
(129,104
|
)
|
Pro forma weighted average shares outstanding – basic and diluted
|
|
|
37,495
|
|
|
|
31,417
|
|
Pro forma EPS – basic and diluted
|
|
$
|
(1.84
|
)
|
|
$
|
(4.11
|
)
|
A 25% fluctuation in the market price of
Desktop Metal shares would affect the number of Desktop Metal shares outstanding, as illustrated in the table below: Common Shares
Outstanding Reconciliation
Common Shares Outstanding Reconciliation
|
|
September 30, 2020
|
|
|
Flux +25%
|
|
|
Flux -25%
|
|
Common shares outstanding at September 30, 2020
|
|
|
29,457
|
|
|
|
29,457
|
|
|
|
29,457
|
|
Average share price for conversion of Desktop Metal shares for consideration
|
|
$
|
18.66
|
|
|
$
|
23.33
|
|
|
$
|
14.00
|
|
Estimated shares issued for purchase consideration
|
|
|
8,038
|
|
|
|
6,431
|
|
|
|
10,718
|
|
Common Shares Outstanding
|
|
|
37,495
|
|
|
|
35,888
|
|
|
|
40,175
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 26, 2021
Desktop Metal, Inc.
(Exact name of registrant as specified in
its charter)
Delaware
|
|
001-38835
|
|
83-2044042
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(IRS Employer
Identification No.)
|
63 Third Avenue
Burlington, Massachusetts
|
|
01803
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(978) 224-1244
Registrant’s telephone number, including
area code
N/A
(Former name or former address, if changed
since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
¨
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
¨
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
¨
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which
registered
|
Class A common stock, par value
$0.0001 per share
|
|
DM
|
|
New York Stock Exchange
|
Warrants to purchase one share of
Class A common stock
|
|
DM.WS
|
|
New York Stock Exchange
|
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
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. ¨
Item 8.01. Other Events.
On February 26,
2021, Desktop Metal, Inc. (the “Company”) issued a press release announcing the redemption of all of its outstanding
warrants to purchase shares of the Company’s common stock that were issued under the Warrant Agreement, dated March 14,
2019, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent, as part of the units
sold in the Company’s initial public offering. A copy of the press release is filed as Exhibit 99.1 hereto and is incorporated
herein by reference.
A copy of the Notice
of Redemption delivered by the Company is filed as Exhibit 99.2 hereto and is incorporated herein by reference.
Neither this Current
Report on Form 8-K, the press release attached hereto as Exhibit 99.1 nor the Notice of Redemption attached hereto as
Exhibit 99.2 constitutes an offer to sell or the solicitation of an offer to buy any of the Company’s securities, and
shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful.
|
Item 9.01.
|
Financial Statement and Exhibits.
|
(d) Exhibits
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
Desktop Metal, Inc.
|
|
|
Date: February 26,
2021
|
By:
|
/s/ Ric Fulop
|
|
Name:
|
Ric Fulop
|
|
Title:
|
Chief Executive Officer
|
Exhibit 99.1
DESKTOP METAL, INC.
ANNOUNCES REDEMPTION OF PUBLIC WARRANTS
BOSTON--(BUSINESS WIRE)--Desktop
Metal, Inc. (NYSE: DM), (“Desktop Metal” or “the Company”), a leader in mass production and turnkey
additive manufacturing solutions, today announced that the Company will redeem all of its outstanding warrants (the “Public
Warrants”) to purchase shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common
Stock”), that were issued under the Warrant Agreement, dated March 14, 2019 (the “Warrant Agreement”),
by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”),
as part of the units sold in the Company’s initial public offering (the “IPO”) and that remain outstanding at
5:00 p.m. New York City time on March 29, 2021 (the “Redemption Date”) for a redemption price of $0.01 per
Public Warrant (the “Redemption Price”). Warrants to purchase Common Stock that were issued under the Warrant Agreement
in a private placement simultaneously with the IPO and that are still held by the initial holders thereof or their permitted transferees
are not subject to this redemption.
Under the terms of the Warrant Agreement,
Desktop Metal is entitled to redeem all of the outstanding Public Warrants if the last sales price of the Common Stock is at least
$18.00 per share on each of twenty trading days within any thirty-day trading period ending on the third trading day prior to
the date on which a notice of redemption is given. At the direction of the Company, the Warrant Agent has delivered a notice of
redemption to each of the registered holders of the outstanding Public Warrants.
The Public Warrants may be exercised
by the holders thereof until 5:00 p.m. New York City time on the Redemption Date to purchase fully paid and non-assessable
shares of Common Stock underlying such warrants, at the exercise price of $11.50 per share. Any Public Warrants that remain unexercised
at 5:00 p.m. New York City time on the Redemption Date will be void and no longer exercisable, and the holders of those Public
Warrants will be entitled to receive only the redemption price of $0.01 per warrant.
Ric Fulop, Desktop Metal’s
CEO and co-founder, said, “We are pleased to streamline our capital structure following the close of our business combination
and enhance our cash position by eliminating the Public Warrants. More than 75 percent of our public warrants have been exercised
to date, bolstering our cash balance and providing us with significant financial flexibility to invest in both organic growth
initiatives and pursue inorganic business opportunities in line with our strategy to own printers, parts, and materials that address
Additive Manufacturing 2.0 applications across an array of verticals.”
None of the Company, its board of
directors or employees has made or is making any representation or recommendation to any holder of the Public Warrants as to whether
to exercise or refrain from exercising any Public Warrants.
The shares of Common Stock underlying
the Public Warrants have been registered by the Company under the Securities Act of 1933, as amended, and are covered by a registration
statement filed on Form S-1 with, and declared effective by, the Securities and Exchange Commission (Registration No. 333-251653).
The SEC maintains an Internet website that contains a copy of this prospectus. The address of that site is www.sec.gov.
Alternatively, a copy of the prospectus from the Desktop Metal investor relations website may be obtained at https://ir.desktopmetal.com.
Questions concerning redemption
and exercise of the Public Warrants can be directed to Continental Stock Transfer & Trust Company, 1 State Street, 30th
Floor, New York, New York 10004, Attention: Compliance Department, telephone number (212) 509-4000.
No Offer or Solicitation
This press release shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any offer of any of the Company’s securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under
the securities laws of any such jurisdiction.
About Desktop Metal, Inc.
Desktop Metal, Inc., based
in Burlington, Massachusetts, is accelerating the transformation of manufacturing with end-to-end 3D printing solutions. Founded
in 2015 by leaders in advanced manufacturing, metallurgy, and robotics, the company is addressing the unmet challenges of speed,
cost, and quality to make 3D printing an essential tool for engineers and manufacturers around the world. Desktop Metal was selected
as one of the world’s 30 most promising Technology Pioneers by the World Economic Forum; named to MIT Technology Review’s
list of 50 Smartest Companies; and recognized among the most important innovations in engineering in Popular Science’s “Best
of What’s New.” For more information, visit www.desktopmetal.com.
Forward Looking Statements
This press release contains certain
forward-looking statements within the meaning of the federal securities laws. Forward-looking statement generally are identified
by the words “believe,” “project,” “expect,” “anticipate,” “estimate,”
“intend,” “strategy,” “future,” “opportunity,” “plan,” “may,”
“should,” “will,” “would,” “will be,” “will continue,” “will
likely result,” and similar expressions. Forward-looking statements are predictions, projections and other statements about
future events that are based on current expectations and assumptions and, as a result, are subject to risks, uncertainties. Many
factors could cause actual future events to differ materially from the forward-looking statements in this document, including
but not limited to the risks and uncertainties set forth in the Company’s filings with the U.S. Securities and Exchange
Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results
to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date
they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation
and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events,
or otherwise. The Company does not give any assurance that it will achieve its expectations.
Press Contact
Lynda McKinney,
978-224-1282
Lyndamckinney@desktopmetal.com
Exhibit 99.2
February 26, 2021
NOTICE OF REDEMPTION OF CERTAIN WARRANTS
(CUSIP 25058X 113)
Dear Public Warrant Holder,
Desktop Metal, Inc. (the “Company”)
hereby gives notice that it is redeeming, at 5:00 p.m. New York City time on March 29, 2021 (the “Redemption
Date”), all of the Company’s outstanding warrants (the “Public Warrants”) to purchase
shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”),
that were issued under the Warrant Agreement, dated March 14, 2019 (the “Warrant Agreement”), by
and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”),
as part of the units sold in the Company’s initial public offering (the “IPO”) for a redemption
price of $0.01 per Public Warrant (the “Redemption Price”). Each Public Warrant entitles the holder thereof
to purchase one share of Common Stock for a purchase price of $11.50 per share, subject to adjustments. Any Public Warrants (including
Public Warrants that are included in outstanding units) that remain unexercised at 5:00 p.m. New York City time on the Redemption
Date will be void and no longer exercisable and their holders will have no rights with respect to those Public Warrants, except
to receive the Redemption Price or as otherwise described in this notice for holders who hold their Public Warrants in “street
name.” Warrants to purchase Common Stock that were issued under the Warrant Agreement in a private placement simultaneously
with the IPO and still held by the initial holders thereof or their permitted transferees are not subject to this notice of redemption.
The Public Warrants and the Common Stock
are listed on the New York Stock Exchange (the “NYSE”) under the symbols “DM.WS” and “DM,”
respectively. On February 23, 2021, the closing price of the Public Warrants was $11.09 and the closing price of the Common
Stock was $22.58. At 5:00 p.m. New York City time on the Redemption Date, the Public Warrants will cease trading on the NYSE.
TERMS OF REDEMPTION; CESSATION OF RIGHTS
The rights of the Public Warrant holders
to exercise their Public Warrants will terminate immediately prior to 5:00 p.m. New York City time on the Redemption Date.
At 5:00 p.m. New York City time on the Redemption Date and thereafter, holders of unexercised Public Warrants will have no
rights with respect to those warrants, except to receive the Redemption Price or as otherwise described in this notice for holders
who hold their Public Warrants in “street name.” We encourage you to consult with your broker, financial advisor and/or
tax advisor to consider whether or not to exercise your Public Warrants.
The Company is exercising this right to
redeem the Public Warrants pursuant to Section 6 of the Warrant Agreement. Pursuant to Section 6.1 of the Warrant Agreement,
the Company has the right to redeem all of the outstanding Public Warrants if the last sales price of the Common Stock equals or
exceeds $18.00 per share on each of 20 trading days within any 30-day trading period ending on the third trading day prior to the
date on which a notice of redemption is given. The last sales price of the Common Stock has been at least $18.00 per share on each
of 20 trading days within the 30-day trading period ending on February 23, 2021 (which is the third trading day prior to the
date of this redemption notice).
EXERCISE PROCEDURE
Public Warrant holders have until 5:00
p.m. New York City time on the Redemption Date to exercise their Public Warrants to purchase Common Stock. Each whole
Public Warrant entitles the holder thereof to purchase one share of Common Stock at a cash price of $11.50 per Public Warrant exercised
(the “Exercise Price”).
Payment of the Exercise Price may be made
by wire transfer of immediately available funds. Wire instructions will be provided to the Depository Trust Company and will otherwise
be provided upon request.
Those who hold their Public Warrants
in “street name” should immediately contact their broker to determine their broker’s procedure for exercising
their Public Warrants.
Persons who are holders of record of their
Public Warrants may exercise their Public Warrants by sending (1) the warrant certificate representing the Public Warrants
being exercised (a “Warrant Certificate”), (2) a fully and properly completed “Election to
Purchase” (a form of which is attached hereto as Annex A), duly executed and indicating, among of things, the number
of Public Warrants being exercised, and (3) payment in full of the Exercise Price via wire transfer or other method of payment
permitted by the Warrant Agreement to the Warrant Agent at:
Continental Stock Transfer & Trust
Company
1 State Street, 30th Floor
New York, NY 10004
Attention: Compliance Department
Telephone: (212) 509-4000
The method of delivery of the Public Warrants
is at the option and risk of the holder, but if mail is used, registered mail properly insured is suggested.
The Warrant Certificate, the fully and
properly completed Election to Purchase and payment in full of the Exercise Price must be received by Continental Stock Transfer &
Trust Company prior to 5:00 p.m. New York City time on the Redemption Date. Subject to the following paragraph, any failure
to deliver the Warrant Certificate, a fully and properly completed Election to Purchase or the payment in full of the Exercise
Price before such time will result in such holder’s Public Warrants being redeemed and not exercised.
WARRANTS HELD IN STREET NAME
For holders of Public Warrants who hold
their warrants in “street name,” broker-dealers shall have two business days from the Redemption Date, or 5:00 p.m. New
York City time on March 31, 2021, to deliver the Public Warrants to the Warrant Agent provided that payment in full of the
Exercise Price and a Notice of Guaranteed Delivery is received by the Warrant Agent prior to 5:00 p.m. New York City time
on the Redemption Date. Any such Public Warrant received without the Election to Purchase or the Notice of Guaranteed Delivery
having been duly executed and fully and properly completed or without the payment in full of the Exercise Price will be deemed
to have been delivered for redemption (at $0.01 per Public Warrant), and not for exercise.
PROSPECTUS
A prospectus covering the Common Stock issuable
upon the exercise of the Public Warrants is included in a registration statement (Registration No. 333-251653) initially filed
with the Securities and Exchange Commission (the “SEC”) on December 23, 2020 and declared effective
by the SEC on February 4, 2021. The SEC maintains an Internet website that contains a copy of this prospectus. The address
of that site is www.sec.gov. Alternatively, you can obtain a copy of the prospectus from our investor relations website
at https://ir.desktopmetal.com.
REDEMPTION PROCEDURE
Payment of the Redemption Price will be
made by the Company upon presentation and surrender of a Public Warrant for payment after 5:00 p.m. New York City time on
the Redemption Date. Those who hold their shares in “street name” should contact their broker to determine their broker’s
procedure for redeeming their Public Warrants.
*********************************
Any questions you may have about redemption
and exercising your Public Warrants may be directed to the Warrant Agent at its address and telephone number set forth above.
|
Sincerely,
|
|
|
|
Desktop Metal, Inc.
|
|
|
|
/s/ Meg Broderick
|
|
Meg Broderick
|
|
General Counsel and Secretary
|
Annex A
DESKTOP METAL, INC.
ELECTION TO PURCHASE
The undersigned hereby
irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _____________ shares of Class A
Common Stock, par value $0.0001 per share (“Common Stock”), of Desktop Metal Inc. (the “Company”)
and herewith tenders payment for such shares of Common Stock to the order of the Company in the amount of $____________ in accordance
with the terms hereof. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of
__________________________, whose address is ________________________________________ and that such shares of Common Stock
be delivered to __________________________ whose address is ________________________________________. If said number
of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of __________________________,
whose address is ________________________________________and that such Warrant Certificate be delivered to ________________________,
whose address is ________________________________________.
The warrants to purchase
shares of Common Stock have been called for redemption by the Company pursuant to Section 6 of the Warrant
Agreement, dated as of March 14, 2019 (the “Warrant Agreement”), by and among the Company and Continental
Stock Transfer & Trust Company, as warrant agent. Pursuant to the terms of the Warrant Agreement, each whole Warrant is
exercisable for one fully paid and non-assessable share of Common Stock.
[Signature Page Follows]
Date: ,
2021
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(Signature)
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(Address)
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(Tax Identification Number)
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE)).