10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39453

Markforged Holding Corporation

(Exact Name of Registrant as Specified in its Charter)


Delaware	98-1545859
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

480 Pleasant Street Watertown, MA	02472
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (866) 496-1805

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.0001 per share

Redeemable Warrants, each whole warrant exercisable for one share of Common Stock, $0.0001 par value

MKFG

MKFG.WS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of November 15, 2021, the registrant had 185,851,079 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents



		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Unaudited Statement of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit)	3
	Unaudited Condensed Consolidated Statements of Cash Flows	5
	Unaudited Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
Signatures		73

Risk Factors Summary

The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:



We have a history of net losses and may not be able to achieve profitability for any period in the future or sustain cash flow from operating activities. We have a relatively limited operating history and have experienced rapid growth, which makes evaluating our current business and future prospects difficult and may increase the risk of your investment. Our operating results may fluctuate significantly from period-to-period.



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



A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect our business and our financial results and could cause a disruption to the development of our products. The COVID-19 pandemic has caused a material on-going disruption to our business beginning in the second quarter of 2020 and the COVID-19 related supply chain disruptions have adversely impacted our business in the second half of 2021.



We face significant competition in our industry. If we are unable to create new products or meet the demands of our customers, our business could be materially adversely affected.



We depend on our network of value-added resellers and our business could be materially adversely affected if they do not meet our expectations.



We depend heavily on third-party suppliers. If they or their facilities become unavailable or inadequate, our business could be adversely affected. We may experience significant delays in the design, production and launch of our additive manufacturing solutions and enhancements to existing products, and we may be unable to successfully commercialize products on our planned timelines.



We rely on a limited number of third-party logistics providers for distribution of our products, and their failure to effectively distribute our products, including because of delays and disruptions caused by current conditions in global shipping capacity would adversely affect our sales.



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



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



We may be unable to consistently manufacture our products to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level. As manufacturing becomes a larger part of our operations, we will become exposed to accompanying risks and liabilities. We depend on a limited number of third-party contract manufacturers for a substantial portion of our manufacturing needs and we depend on a number of suppliers for other parts and components; in the second half of 2021, we have increasingly experienced, and expect to continue to experience, price increases, supply shortages and delays and any such delay, disruption or quality control problems in their operations, including due to the COVID-19 pandemic, could cause harm to our operations, including loss of market share, reduced margins and damage to our brand.



We have experienced, and expect to continue to experience, rapid growth and organizational change since our inception. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction or attract new employees and customers.



A real or perceived defect, security vulnerability, error or performance failure in our software or technical problems or disruptions caused by our third-party service providers could cause us to lose revenue, damage our reputation and expose us to liability.



Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating results. Our business is subject to risks associated with selling machines and other products in non-United States locations. Global economic, political and social conditions and uncertainties in the market that we serve may adversely impact our business.



A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.



We are, and have been in the recent past, subject to business and intellectual property litigation. We could be subject to personal injury, property damage, product liability, warranty and other claims involving allegedly defective products that we supply. We could face liability if our additive manufacturing solutions are used by our customers to print dangerous objects.



If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.



We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain effective internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

EXPLANATORY NOTE

On July 14, 2021, we consummated the merger (the "Merger") contemplated by the Agreement and Plan of Merger, dated as of February 23, 2021 (the “Merger Agreement”), by and among one, a Cayman Islands exempted company limited by shares (“one”), Caspian Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of one (“Merger Sub”), and MarkForged, Inc., a Delaware corporation (“Legacy Markforged”). As a result of the Merger, Legacy Markforged merged with and into Merger Sub with Legacy Markforged surviving as our wholly-owned subsidiary and, following one’s filing of a notice of deregistration and necessary accompanying documents with the Cayman Islands Registrar of Companies, and a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which one was domesticated, one changed its name to “Markforged Holding Corporation.”

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for our future operations of Markforged Holding Corporation. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “should”, “strive”, “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward-looking statements in this Quarterly Report on Form 10-Q include, for example, statements about:



the benefits of the Merger and our ability to realize such benefits;



our financial performance;



the effect of uncertainties related to the COVID-19 pandemic and global supply chain disruptions;



the expected growth of the additive manufacturing industry;



our anticipated growth and our ability to achieve and maintain profitability in the future;



the impact of the regulatory environment and complexities with compliance related to such environment on us;



our ability to respond to general economic, political and business conditions;



our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth;



the success of our marketing efforts and our ability to expand our customer base;



our ability to develop and deliver new products, features and functionality that are competitive and meet market needs;



our ability to maintain an effective system of internal controls over financial reporting;



our ability to remediate our material weaknesses in our internal control of financial reporting;



our ability to grow and manage growth profitably and retain key employees; and



the outcome of legal or governmental proceedings that may be instituted against us.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2021 and December 31, 2020

(In thousands, except share data and par value amounts) (Unaudited)


	September 30, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	296,735		$	58,715
Accounts receivable, net		24,071			16,601
Inventory		11,270			6,553
Prepaid expenses		5,397			1,496
Other current assets		511			1,373
Total current assets		337,984			84,738
Property and equipment, net		5,335			4,281
Other assets		773			584
Total assets	$	344,092		$	89,603
Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable	$	2,213		$	3,369
Accrued expenses		13,641			8,168
Deferred revenue		5,552			6,196
Other current liabilities		294			300
Total current liabilities		21,700			18,033
Long-term debt		—			5,022
Long-term deferred revenue		3,130			2,905
Deferred rent		1,426			1,073
Contingent earnout liability		80,419			—
Other liabilities		4,284			545
Total liabilities		110,959			27,578
Commitments and contingencies (Note 14)
Convertible preferred stock (Note 9)		—			137,497
Stockholders’ equity (deficit)
Common stock, $0.0001 par value; 1,000,000,000 and 183,300,000 shares authorized at September 30, 2021 and December 31, 2020; 185,697,959 and 39,510,108 shares issued at September 30, 2021 and December 31, 2020, respectively		19			4
Additional paid-in capital		312,084			5,538
Treasury stock, 0 shares at September 30, 2021 and 483,479 shares at December 31, 2020		—			(1,450	)
Accumulated deficit		(78,970	)		(79,564	)
Total stockholders’ equity (deficit)		233,133			(75,472	)
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)	$	344,092		$	89,603

See notes to the unaudited condensed consolidated financial statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

For the three and nine months ended September 30, 2021 and 2020

(In thousands, except share data and per share data) (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	24,045		$	15,639		$	64,584		$	47,514
Cost of revenue		10,330			6,319			26,729			21,316
Gross profit		13,715			9,320			37,855			26,198
Operating expenses
Sales and marketing		10,399			4,982			25,711			16,744
Research and development		9,761			4,031			21,487			12,883
General and administrative		15,935			3,889			32,770			11,138
Total operating expenses		36,095			12,902			79,968			40,765
Loss from operations		(22,380	)		(3,582	)		(42,113	)		(14,567	)
Change in fair value of warrant liabilities		1,418			(66	)		170			(79	)
Change in fair value of contingent earnout liability		42,710			-			42,710			-
Other (expense) income, net		(48	)		(25	)		(168	)		11
Interest expense		(6	)		(23	)		(15	)		(51	)
Interest income		6			3			9			146
Profit (loss) before income taxes		21,700			(3,693	)		593			(14,540	)
Income tax (benefit) expense		(3	)	26				(1	)		113
Net profit (loss) and comprehensive income (loss)	$	21,703		$	(3,719	)	$	594		$	(14,653	)
Weighted average shares outstanding - basic		162,942,990			38,545,607			81,373,265			38,149,992
Weighted average shares outstanding - diluted		167,091,320			38,545,607			85,407,166			38,149,992
Net profit (loss) per share - basic	$	0.13		$	(0.10	)	$	0.01		$	(0.38	)
Net profit (loss) per share - diluted		0.13			(0.10	)		0.01			(0.38	)

See notes to the unaudited condensed consolidated financial statements.

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and nine months ended September 30, 2021 and 2020

(In thousands, except share data) (Unaudited)


	Convertible Preferred Stock						Common Stock					Additional Paid-in			Treasury Stock						Note		Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount		Capital			Shares			Amount			Receivable		Deficit			(Deficit)			Total
December 31, 2020		107,592,801		$	137,497			39,510,108		$	4	$	5,538			483,479		$	(1,450	)	$	—	$	(79,564	)	$	(75,472	)	$	62,025
Exercise of common stock options		—			—			714,170			—		356			—			—			—		—			356			356
Stock-based compensation expense		—			—			—			—		1,195			—			—			—		—			1,195			1,195
Exercise of Series D warrants		20,037			100			—			—		—			—			—			—		—			—			100
Net profit (loss) and comprehensive income (loss)		—			—			—			—		—			—			—			—		(10,020	)		(10,020	)		(10,020	)
March 31, 2021		107,612,838		$	137,597			40,224,277		$	4	$	7,089			483,479		$	(1,450	)	$	—	$	(89,584	)	$	(83,941	)	$	53,656
Exercise of common stock options		—			—			102,237			—		62			—			—			—		—		$	62		$	62
Stock-based compensation expense		—			—			—			—		1,779			—			—			—		—			1,779			1,779
Exercise of Series D warrants		71,139			355			—			—		—			—			—			—		—			—			355
Exercise of common stock warrants, net of shares withheld for exercise		—			—			179,572			—		1,793			—			—			—		—			1,793			1,793
Net profit (loss) and comprehensive income (loss)		—			—			—			—		—			—			—			—		(11,089	)		(11,089	)		(11,089	)
June 30, 2021		107,683,977		$	137,952			40,506,086		$	4	$	10,723			483,479		$	(1,450	)	$	—	$	(100,673	)	$	(91,396	)	$	46,556
Exercise of common stock options		—			—			1,016,004			—		1,309			—			—			—		—			1,309			1,309
Stock-based compensation expense		—			—			—			—		2,800			—			—			—		—			2,800			2,800
Exercise of Series D warrants		19,036			95			—			—		—			—			—			—		—			—			95
Conversion of convertible preferred stock into common stock upon reverse recapitalization		(107,703,013	)		(138,047	)		107,703,013			11		138,036			—			—			—		—			138,047			—
Retirement of Treasury Stock upon reverse recapitalization		—			—			(483,479	)		—		(1,450	)		(483,479	)		1,450			—		—			—			—
Repurchase of common stock upon reverse recapitalization		—			—			(4,499,998	)		—		(45,000	)		—			—			—		—			(45,000	)		(45,000	)
Issuance of common stock upon the reverse recapitalization, net of transaction costs		—			—			20,456,333			2		113,176			—			—			—		—			113,178			113,178
Issuance of common stock related to PIPE Investment		—			—			21,000,000			2		209,998			—			—			—		—			210,000			210,000
Recognition of derivative liability related to earnout		—			—			—			—		(123,129	)		—			—			—		—			(123,129	)		(123,129	)
Earnout stock-based compensation expense													5,621														5,621			5,621
Net profit (loss) and comprehensive income (loss)		—			—			—			—		—			—			—			—		21,703			21,703			21,703
September 30, 2021		—		$	—			185,697,959		$	19	$	312,084