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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, 2024

OR

 

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

92-3037714

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

60 Tower Road

Waltham, MA

02451

(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

Warrants to purchase one share of Common Stock, each at an exercise price of $115.00 per share

MKFG

MKFG.WS

New York Stock Exchange

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

As of November 6, 2024, the registrant had 20,620,035 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

Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (Unaudited)

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited)

2

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023 (Unaudited)

3

 

Statement of Changes in Stockholders' Equity for the three and nine months ended September 30, 2024 and 2023 (Unaudited)

4

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited)

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

39

PART II.

OTHER INFORMATION

41

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

Item 3.

Defaults Upon Senior Securities

80

Item 4.

Mine Safety Disclosures

80

Item 5.

Other Information

80

Item 6.

Exhibits

81

Signatures

82

 

 


 

 

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 may not complete the pending merger with Nano Dimension Ltd. (“Nano”) within the anticipated timeframe, or at all, which could have a material adverse impact on our business, financial condition or results of operations, as well as negatively impact the per share price of our Common Stock.
In the recent past, we have been subject to business and intellectual property litigation and are subject to ongoing settlement obligations resulting from such litigation. For example, on September 20, 2024, we entered into a Settlement and Patent License Agreement (“Settlement Agreement”) with Continuous Composites Inc. (“Continuous Composites”) to settle outstanding litigation claims and counterclaims. We paid the first settlement payment of $18 million under the Settlement Agreement on October 10, 2024, and are required to make three additional installment payments thereafter of $1 million, $2 million and $4 million in the fourth quarters of fiscal years 2025, 2026 and 2027, respectively, which payments represent substantial ongoing payment obligations that could have an adverse impact on our business, financial condition or results of operations. Further, these settlement payments are secured by a security interest in, among other assets, our patent intellectual property rights; our inability to make any future settlement payments may result in the forfeiture of our patent intellectual property rights to Continuous Composites.
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 since our inception, which makes evaluating our current business and future prospects difficult and may increase the risk of your investment. Our operating results have and may continue to 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.
Declines in the global economy, geopolitical and social uncertainties, global health crises and difficulties in the markets that we serve may adversely impact our business.
Adverse developments affecting the financial services industry or other third parties, such as a liquidity crisis, increased levels of defaults or non-performance by financial institutions or transactional counterparties or the perception that any of these events could occur, could adversely affect our current and projected business operations and our financial condition and results of operations.
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. 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 which 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 this change 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.
In the recent past, we have been 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.
In the recent past, we have failed to meet the New York Stock Exchange’s (“NYSE”) continued listing requirements with respect to the trading price of our Common Stock; if we are unable to maintain compliance with the continued listing requirements of the New York Stock Exchange (“NYSE”) in the future, our Common Stock could be delisted from the NYSE. Further, the NYSE has notified us that it intends to commence delisting proceedings with respect to our Public Warrants in the near future, which we did not appeal.
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.”

On September 19, 2024, the Company effected a 10-for-1 reverse stock split of the Common Stock. All shares of Common Stock, stock-based instruments and per-share data included in these unaudited condensed consolidated financial statements have been retroactively adjusted as though the stock split had been effected prior to all periods presented.

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 (“Markforged,” the “Company,” “we,” “us”). 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 completion of the Nano Merger (as defined below) with Nano, including the required receipt of the stockholder and regulatory approvals therefor;
our ongoing payment and related obligations under the Settlement Agreement;
the benefits of the Merger, and other acquisitions and our ability to realize such benefits;
our financial performance;
the effect of uncertainties related to economic downturns and global supply chain disruptions, or any future pandemics;
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;
the effect of and our ability to respond to general economic, political and business conditions, including recent increases in interest rates, rising inflation, foreign exchange fluctuations and risk of recession;
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 control 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;
the expected impact of any cost reduction initiative we have undertaken or may in the future undertake and any estimates of our operating expenses and yearly run rate;

 


 

the impact of the reverse stock split on the trading price of our Common Stock, the liquidity of our Common Stock, our ability to attract new investors and raise capital, our ability to maintain compliance with the NYSE’s minimum bid price listing requirement with respect to our Common Stock, and the potential delisting of our Common Stock from the NYSE as a result of any future non-compliance with the NYSE’s minimum bid price listing requirement;
the anticipated delisting of our Public Warrants from the NYSE; and
the outcome of legal or governmental proceedings that have been and may continue to be instituted against us, and the impacts of the outcomes of those legal or governmental proceedings on our business operations, financial condition and results of operations.

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, 2024 and December 31, 2023

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

 

 

September 30,
2024

 

 

December 31,
2023

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

$

59,279

 

 

$

116,854

 

Restricted cash

 

 

19,371

 

 

 

 

Accounts receivable, net of allowance for expected credit losses ($461 and $360, respectively)

 

 

19,899

 

 

 

24,059

 

Inventory

 

 

21,672

 

 

 

26,773

 

Prepaid expenses

 

 

3,141

 

 

 

2,756

 

Other current assets

 

 

2,218

 

 

 

2,022

 

Total current assets

 

 

125,580

 

 

 

172,464

 

Property and equipment, net

 

 

15,864

 

 

 

17,713

 

Intangible assets, net

 

 

21,328

 

 

 

17,128

 

Right-of-use assets

 

 

31,496

 

 

 

36,884

 

Other assets

 

 

2,976

 

 

 

3,763

 

Total assets

 

$

197,244

 

 

$

247,952

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

 

$

10,319

 

 

$

13,235

 

Accrued expenses

 

 

10,061

 

 

 

9,840

 

Settlement payable (Note 15)

 

 

18,000

 

 

 

 

Deferred revenue

 

 

8,343

 

 

 

8,779

 

Lease liabilities

 

 

5,758

 

 

 

7,368

 

Other current liabilities

 

 

 

 

 

1,526

 

Total current liabilities

 

 

52,481

 

 

 

40,748

 

Long-term settlement payable (Note 15)

 

 

5,181

 

 

 

 

Long-term deferred revenue

 

 

4,686

 

 

 

6,083

 

Contingent earnout liability

 

 

7,653

 

 

 

1,379

 

Long-term lease liabilities

 

 

27,809

 

 

 

35,771

 

Other liabilities

 

 

1,476

 

 

 

2,361

 

Total liabilities

 

 

99,286

 

 

 

86,342

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized at September 30, 2024 and December 31, 2023; 20,495,979 and 19,858,127 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

 

 

19

 

 

 

19

 

Additional paid-in capital

 

 

376,435

 

 

 

366,281

 

Accumulated deficit

 

 

(278,378

)

 

 

(204,664

)

Accumulated other comprehensive income (loss)

 

 

(118

)

 

 

(26

)

Total stockholders’ equity

 

 

97,958

 

 

 

161,610

 

Total liabilities and stockholders’ equity

 

$

197,244

 

 

$

247,952

 

 

See notes to the unaudited condensed consolidated financial statements.

1


MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2024 and 2023

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

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

$

20,484

 

 

$

20,075

 

 

$

62,719

 

 

$

69,614

 

Cost of revenue

 

10,441

 

 

 

10,907

 

 

 

31,665

 

 

 

36,891

 

Gross profit

 

10,043

 

 

 

9,168

 

 

 

31,054

 

 

 

32,723

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

8,144

 

 

 

8,194

 

 

 

24,514

 

 

 

28,436

 

Research and development

 

7,850

 

 

 

9,724

 

 

 

26,845

 

 

 

30,390

 

General and administrative

 

11,162

 

 

 

12,202

 

 

 

33,661

 

 

 

36,450

 

Goodwill impairment

 

 

 

 

29,467

 

 

 

 

 

 

29,467

 

Litigation judgment

 

423

 

 

 

 

 

 

17,723

 

 

 

 

Total operating expenses

 

27,579

 

 

 

59,587

 

 

 

102,743

 

 

 

124,743

 

Loss from operations

 

(17,536

)

 

 

(50,419

)

 

 

(71,689

)

 

 

(92,020

)

Change in fair value of derivative liabilities

 

63

 

 

 

(94

)

 

 

189

 

 

 

220

 

Change in fair value of contingent earnout liability

 

(7,408

)

 

 

(2,502

)

 

 

(6,274

)

 

 

(2,509

)

Other income (expense), net

 

471

 

 

 

(55

)

 

 

252

 

 

 

(277

)

Interest expense

 

(169

)

 

 

(127

)

 

 

(493

)

 

 

(243

)

Interest income

 

1,021

 

 

 

1,602

 

 

 

3,651

 

 

 

4,870

 

Loss before income taxes

 

(23,558

)

 

 

(51,595

)

 

 

(74,364

)

 

 

(89,959

)

Income tax (benefit) expense

 

(188

)

 

 

(233

)

 

 

(650

)

 

 

(590

)

Net loss

$

(23,370

)

 

$

(51,362

)

 

$

(73,714

)

 

$

(89,369

)

Weighted average shares outstanding - basic and diluted

 

20,330,917

 

 

 

19,741,014

 

 

 

20,129,099

 

 

 

19,639,131

 

Net loss per share - basic and diluted

$

(1.15

)

 

$

(2.60

)

 

$

(3.66

)

 

$

(4.55

)

 

See notes to the unaudited condensed consolidated financial statements.

2


 

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the three and nine months ended September 30, 2024 and 2023

(In thousands) (Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

$

(23,370

)

 

$

(51,362

)

 

$

(73,714

)

 

$

(89,369

)

Other comprehensive loss, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale marketable securities, net

 

 

 

 

(17

)

 

 

 

 

 

(42

)

Foreign currency translation adjustment

 

894

 

 

 

(993

)

 

 

(92

)

 

 

(2,539

)

Total comprehensive income (loss)

$

(22,476

)

 

$

(52,372

)

 

$

(73,806

)

 

$

(91,950

)

 

See notes to the unaudited condensed consolidated financial statements.

3


 

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2024 and 2023

(In thousands, except share data) (Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total Stockholders’ Equity

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

 

 

December 31, 2022

 

 

19,456,095

 

 

$

19

 

 

$

352,564

 

 

$

(101,097

)

 

$

1,068

 

 

$

252,554

 

Exercise of common stock options

 

 

50,230

 

 

 

 

 

 

180

 

 

 

 

 

 

 

 

 

180

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

58,038

 

 

 

 

 

 

(118

)

 

 

 

 

 

 

 

 

(118

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,144

 

 

 

 

 

 

 

 

 

4,144

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

212

 

 

 

 

 

 

 

 

 

212

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19,019

)

 

 

 

 

 

(19,019

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

108

 

March 31, 2023

 

 

19,564,363

 

 

$

19

 

 

$

356,982

 

 

$

(120,116

)

 

$

1,176

 

 

$

238,061

 

Exercise of common stock options

 

 

96

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

123,640

 

 

 

 

 

 

(28

)

 

 

 

 

 

 

 

 

(28

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,938

 

 

 

 

 

 

 

 

 

1,938

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

(248

)

 

 

 

 

 

 

 

 

(248

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(18,988

)

 

 

 

 

 

(18,988

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,679

)

 

 

(1,679

)

June 30, 2023

 

 

19,688,099

 

 

$

19

 

 

$

358,645

 

 

$

(139,104

)

 

$

(503

)

 

$

219,057

 

Exercise of common stock options

 

 

705

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

71,766

 

 

 

 

 

 

(159

)

 

 

 

 

 

 

 

 

(159

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,143

 

 

 

 

 

 

 

 

 

4,143

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

(31

)

 

 

 

 

 

 

 

 

(31

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(51,362

)

 

 

 

 

 

(51,362

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,010

)

 

 

(1,010

)

September 30, 2023

 

 

19,760,570

 

 

 

19

 

 

 

362,604

 

 

 

(190,466

)

 

 

(1,513

)

 

$

170,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

19,858,127

 

 

$

19

 

 

$

366,281

 

 

$

(204,664

)

 

$

(26

)

 

$

161,610

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

81,824

 

 

 

 

 

 

(181

)

 

 

 

 

 

 

 

 

(181

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,498

 

 

 

 

 

 

 

 

 

3,498

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

(37

)

 

 

 

 

 

 

 

 

(37

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,946

)

 

 

 

 

 

(35,946

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,041

)

 

 

(1,041

)

March 31, 2024

 

 

19,939,951

 

 

$

19

 

 

$

369,561

 

 

$

(240,610

)

 

$

(1,067

)

 

$

127,903

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

206,366

 

 

 

 

 

 

(159

)

 

 

 

 

 

 

 

 

(159

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,247

 

 

 

 

 

 

 

 

 

3,247

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Issuance of Common Stock in connection
   with acquisition earnout achievement

 

 

108,614

 

 

 

 

 

 

750

 

 

 

 

 

 

 

 

 

750

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,398

)

 

 

 

 

 

(14,398

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

55

 

June 30, 2024

 

 

20,254,931

 

 

$

19

 

 

$

373,397

 

 

$

(255,008

)

 

$

(1,012

)

 

$

117,396

 

Stock vested under compensation plan
   less shares withheld to cover taxes

 

 

80,390

 

 

 

 

 

 

(104

)

 

 

 

 

 

 

 

 

(104

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,175

 

 

 

 

 

 

 

 

 

3,175

 

Earnout stock-based compensation expense

 

 

 

 

 

 

 

 

(33

)

 

 

 

 

 

 

 

 

(33

)

Issuance of Common Stock in connection
   with the reverse split

 

 

160,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(23,370

)

 

 

 

 

 

(23,370

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

894

 

 

 

894

 

September 30, 2024

 

 

20,495,979

 

 

$

19

 

 

$

376,435

 

 

$

(278,378

)

 

$

(118

)

 

$

97,958

 

 

See notes to the unaudited condensed consolidated financial statements.

4


 

MARKFORGED HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2024 and 2023

(In thousands) (Unaudited)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(73,714

)

 

$

(89,369

)

Adjustments to reconcile net loss to cash used in operating activities

 

 

 

 

 

 

Depreciation, amortization, and non-cash lease interest

 

 

9,339

 

 

 

9,543

 

Allowance for expected credit losses

 

 

351

 

 

 

(566

)

Provision for excess and obsolete inventory

 

 

1,183

 

 

 

331

 

Change in fair value of derivative liabilities

 

 

(189

)

 

 

(220

)

Change in fair value of contingent earnout liability

 

 

6,274

 

 

 

2,509

 

Amortization (accretion) of (discounts) premiums on available-for-sale securities

 

 

 

 

 

(725

)

Stock-based compensation expense

 

 

9,848

 

 

 

10,158

 

 Loss on disposal of fixed assets

 

 

539

 

 

 

 

Gain on operating lease termination

 

 

(973

)

 

 

 

Long-lived asset impairment

 

 

 

 

 

4,015

 

Goodwill impairment

 

 

 

 

 

29,467

 

Other

 

 

2

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

3,795

 

 

 

7,497

 

Inventory

 

 

3,879

 

 

 

(2,764

)

Prepaid expenses

 

 

(397

)

 

 

671

 

Other current assets

 

 

(198

)

 

 

25

 

Other assets

 

 

162

 

 

 

(392

)

Accounts payable and accrued expenses

 

 

15,182

 

 

 

(3,809

)

Other current liabilities

 

 

(190

)

 

 

44

 

Deferred revenue

 

 

(1,821

)

 

 

(72

)

Other long term liabilities

 

 

(953

)

 

 

(612

)

Other non-current lease liabilities

 

 

(8,068

)

 

 

(5,755

)

Net cash provided by (used in) operating activities

 

 

(35,949

)

 

 

(40,024

)

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,911

)

 

 

(2,176

)

Purchases of available-for-sale securities

 

 

 

 

 

(18,950

)

Proceeds from sales and maturities of marketable securities

 

 

 

 

 

35,500

 

Net cash provided by (used in) investing activities

 

 

(1,911

)

 

 

14,374

 

Financing Activities:

 

 

 

 

 

 

Payment of acquisition-related contingent liabilities

 

 

(582

)

 

 

 

Acquisition holdback payment

 

 

 

 

 

(250

)

Proceeds from exercise of common stock options

 

 

 

 

 

187

 

Taxes paid related to net share settlement of equity awards

 

 

(444

)

 

 

(305

)

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

 

 

(1,026

)

 

 

(368

)

Effect of exchange rate changes on cash

 

 

57

 

 

 

(58

)

Net change in cash, cash equivalents, and restricted cash

 

 

(38,829

)

 

 

(26,076

)

Cash, cash equivalents, and restricted cash

 

 

 

 

 

 

Beginning of year

 

 

118,284

 

 

 

125,672

 

End of period

 

$

79,455

 

 

$

99,596

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

Cash and cash equivalents

 

$

59,279

 

 

$

98,166

 

Restricted cash

 

 

19,371

 

 

 

 

Restricted cash in other non-current assets

 

 

805

 

 

 

1,430

 

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

 

$

79,455

 

 

$

99,596

 

Non cash operating activities

 

 

 

 

 

 

Common stock issued in connection with acquisition earnout achievement

 

$

750

 

 

$

 

Non cash investing and financing activities

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued expenses

 

$

52

 

 

$

133

 

Common stock disbursed to settle acquisition holdback

 

 

 

 

 

250

 

Acquisition of cross license (Note 15)

 

 

5,474

 

 

 

 

 

See notes to the unaudited condensed consolidated financial statements.

5


 

MARKFORGED HOLDING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization, Nature of the Business, and Risks and Uncertainties

Organization and Nature of Business

Unless otherwise indicated or the context otherwise requires, references to the “Company” and “Markforged” refer to the consolidated operations of Markforged Holding Corporation and its subsidiaries. References to “AONE” refer to the company prior to the consummation of the Merger and references to “Legacy Markforged” refer to MarkForged, Inc. and its consolidated subsidiaries prior to the consummation of the Merger.

Legacy Markforged was founded in 2013 to transform the manufacturing industry with high strength, cost effective parts using additive manufacturing. Markforged produces and sells 3D printers, materials, software, and other related services worldwide to customers who can build parts strong enough for the factory floor with significantly reduced lead time and cost. The printers print in plastic, nylon, metal, and the parts can be reinforced with carbon fiber for industry leading strength at an affordable price point.

On February 23, 2021, one, a Cayman Islands exempted company (“AONE”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Caspian Merger Sub Inc., a wholly owned subsidiary of AONE (“Merger Sub”), and Legacy Markforged, pursuant to which (i) AONE would deregister as a Cayman Islands company and domesticate as a corporation in the State of Delaware and would be renamed “Markforged Holding Corporation” (the “Domestication”) and (ii) Merger Sub would merge with and into Legacy Markforged with Legacy Markforged surviving as a wholly owned subsidiary of Markforged Holding Corporation (the “Merger”). AONE's shareholders approved the transactions contemplated by the Merger Agreement on July 13, 2021, and the Domestication and the Merger were completed on July 14, 2021 (the "Closing").

Cash proceeds of the merger were funded through a combination of AONE’s $132.5 million of cash held in trust (after redemptions of $64.2 million) and an aggregate of $210.0 million in fully committed common stock transactions at $10.00 per share. Immediately prior to the Closing, Legacy Markforged repurchased shares of common stock from certain of its stockholders, for a total value of $45.0 million, referred to as the “Employee Transactions”. Total net proceeds upon Closing, net of the Employee Transactions and transaction costs paid at Closing of $27.1 million, were $288.8 million.

Proposed Merger with Nano Dimension Ltd.

On September 25, 2024, the Company entered into an Agreement and Plan of Merger (the “Nano Merger Agreement”) with Nano Dimension Ltd., an Israeli company (“Nano”), and Nano US II, Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Nano (“Nano Merger Sub”), pursuant to which Nano Merger Sub will merge with and into the Company (the “Nano Merger”), with the Company surviving the Nano Merger as an indirect wholly-owned subsidiary of Nano. Following the closing of the Nano Merger (the “Nano Merger Closing”), the Company’s Common Stock (as defined below), will be delisted from the New York Stock Exchange (the “NYSE”) and will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Subject to the terms and conditions set forth in the Nano Merger Agreement, at the effective time of the Nano Merger (the “Effective Time”), each outstanding share of common stock, par value $0.0001 per share, of the Company (“Common Stock”) (other than (i) shares of the Company’s preferred stock, par value $0.0001 per share (“Preferred Stock”), (ii) shares of Common Stock held by the Company as treasury stock or otherwise held directly by a Company subsidiary, Nano or Nano Merger Sub immediately prior to the Effective Time, and (iii) shares of Common Stock held by Company stockholders that are entitled to, and have properly demanded appraisal for such shares, in accordance with, and have complied in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Dissenting Shares” and together with clauses (i)-(iii), the “Excluded Shares”)), will be converted automatically into the right to receive an amount in cash equal to $5.00 per share, without interest, less any applicable tax withholdings. Immediately prior to the Effective Time, each Excluded Share will be cancelled and cease to exist and no consideration will be paid or payable in respect thereof.

The Nano Merger is subject to approval by Markforged’s stockholders, the receipt of required regulatory approvals and other customary closing conditions.

For further information about the Nano Merger, please refer to the Nano Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q, and the Company’s preliminary Proxy Statement filed on Schedule 14A with the SEC on October 21, 2024.

6


 

Reverse Stock Split

On September 19, 2024, the Company effected a 10-for-1 reverse stock split of the Company's Common Stock. All shares of Common Stock, stock-based instruments and per-share data included in these unaudited condensed consolidated financial statements have been retroactively adjusted as though the stock split had been effected prior to all periods presented. As a result of the reverse stock split, the Company issued 160,658 additional shares of Common Stock to stockholders who would have otherwise received fractional shares of Common Stock post-reverse stock split.

Regaining Compliance with the NYSE’s Minimum Bid Price Listing Requirement

On October 30, 2024, the NYSE notified the Company that it had regained compliance with the NYSE’s minimum bid price listing requirement pursuant to Section 802.01C of the NYSE Listed Company Manual with respect to its Common Stock because the average closing price of the Common Stock exceeded $1.00 per share over a consecutive 30 trading-day period. The Company had previously been notified by the NYSE that it had fallen out of compliance with the NYSE’s minimum bid price listing requirement on November 17, 2023.

Delisting of Public Warrants

On September 26, 2024, the NYSE notified the Company that the NYSE had determined to delist the Company’s Public Warrants due to “abnormally low” trading price levels pursuant to Section 802.01D of the NYSE Listed Company Manual. The Company did not appeal NYSE’s determination and expects that its Public Warrants will be delisted from the NYSE in the near future.

Liquidity

The Company has funded its operations to date primarily through the sale of convertible preferred stock, the proceeds from the Merger, including the sale of common stock, and the sale of its products. Management believes that existing cash will be sufficient to fund operating and capital expenditure requirements through at least one year after the date these condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

Currently we generate negative operating cash flows and may continue to do so as we focus on pursuing commercialization and product development. During the nine months ended September 30, 2024 and 2023 we generated net negative cash flows from operations of $35.9 million and $40.0 million, respectively. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the timing and extent of spending to support development efforts, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of The Digital Forge platform. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.

We have enacted, and intend to continue to enact, cost savings measures to preserve capital. In November 2023, we announced a cost restructuring initiative that included an approximate 10% workforce reduction and other operational savings measures expected to deliver operating costs savings of approximately $9 - $12 million in 2024. Further, in August 2024, we announced an approximate $25 million cost reduction initiative that is expected to reduce the Company’s operating expenses to a yearly run rate of approximately $70 million. We expect that most of these cost reduction initiatives will be completed in the second half of fiscal year 2024. We expect to incur $1.8 million of one-time termination costs associated with the cost initiative. During the third quarter of 2024 we incurred $1.7 million of the one-time termination costs, of which $0.3 million is recorded in sales and marketing, $0.9 million in research and development, and $0.5 million in general and administrative expense on the condensed consolidated statement of operations. We are currently evaluating other potential initiatives we may undertake to reduce our operating expenses and manage our cash flows. These initiatives could include rationalizing our product portfolio, workforce adjustments based on changes to the business, improving our supply chain and logistics, and improving our inventory management. These initiatives may not be successful, and they may not generate the cost savings we expect. Certain future events, such as a global recession, a material supply chain disruption or other events outside our control, may occur and could negatively impact our operating results and cash position

7


 

and may require us to use our existing capital resources more quickly than we currently anticipate. These events may cause us to undertake additional cost savings measures or seek additional sources of financing.

Risks and Uncertainties

We continue to monitor, analyze, and respond to evolving developments regarding supply chain disruptions and the economic downturn. The Company is unable to predict the ultimate impact that these factors will have on the business, future results of operations, financial position or cash flows. The potential risks to the Company including certain accounting estimates around its supply chain, accounts receivable, inventory and related reserves, and intangible assets, were assessed and had no material impact as of and for the three and nine months ended September 30, 2024. There may be changes to those estimates in future periods, and actual results could differ from those estimates.

 

Note 2. Summary of Significant Accounting Policies

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s fiscal year end is December 31 and, unless otherwise stated, all years and dates refer to the fiscal year.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q and the provisions of Regulation S-X pertaining to interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The unaudited condensed consolidated financial statements include the Company’s accounts and those of its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the financial information for the interim periods presented reflects all adjustments, which are of a normal and recurring nature, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024.

Reporting Currency

The Company’s reporting currency is the U.S. Dollar, while the functional currencies of its foreign subsidiaries are the currencies of the primary economic environment in which each of them operate.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s significant estimates include allowance for expected credit losses, reserve for excess and obsolete inventory, fair value of contingent earnout liability, fair value of earnout share awards, fair value of the private placement warrant liability, assumptions in revenue recognition, and valuation of intangibles and goodwill. The Company evaluates its estimates based on historical experience, current conditions, and various other assumptions that it believes are reasonable under the circumstances.