Markforged Holding Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies (Tables)

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Summary of Cash Equivalents and Short-term Investments

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


	December 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	119,721	$	—	$	—		$	119,721
Commercial paper		3,077		—		—			3,077
Total cash equivalents		122,798		—		—			122,798
Government bonds		21,719		51		—			21,770
Commercial paper		12,568		1		—			12,569
Corporate bonds		3,927		—		—			3,927
Asset-backed securities		2,921		—		(1	)		2,920
U.S. Treasury bills		2,447		3		—			2,450
Total short-term investments	$	43,582	$	55	$	(1	)	$	43,636
Total cash equivalents and short-term investments		166,380		55		(1	)		166,434

Summary of Allowance For Doubtful Accounts

The following presents the changes in the balance of the Company’s allowance for doubtful accounts:


	Year Ended December 31,
(in thousands)	2022			2021
Balance at beginning of period	$	1,021		$	1,070
Additions		1,435			709
Write – offs		(7	)		(312	)
Recoveries		(890	)		(446	)
Balance at end of period	$	1,559		$	1,021

Summary of Fair Value Hierarchy of The Valuation

The following table presents information about the Company’s assets that are measured at fair value as of December 31, 2022 and 2021, and indicates the fair value hierarchy of the valuation:


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds included in cash and cash equivalents	$	119,721		—		—	$	119,721
Short-term investments included in cash and cash equivalents		—		3,077				3,077
Total cash and cash equivalents	$	119,721	$	3,077	$	—	$	122,798
Government bonds		—		21,770		—		21,770
Commercial paper		—		12,569		—		12,569
Corporate bonds		—		3,927		—		3,927
Asset-backed securities		—		2,920		—		2,920
U.S. Treasury bills		2,450		—		—		2,450
Total assets	$	122,171	$	44,263	$	—	$	166,434
Liabilities:
Contingent earnout liability	$	—	$	—	$	2,415	$	2,415
Private placement warrant liability		—		—		661		661
Teton acquisition contingent earnout liability		—		—		602		602
Total liabilities	$	—	$	—	$	3,678	$	3,678

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds included in cash and cash equivalents	$	286,890	$	—	$	—		286,890
Total assets	$	286,890	$	—	$	—	$	286,890
Liabilities:
Contingent earnout liability		—		—		59,722		59,722
Private placement warrant liability		—		—		2,646		2,646
Total liabilities	$	—	$	—	$	62,368	$	62,368

Summary of Changes in Fair Value of the Derivative Warrant Liabilities

The Company remeasures its SVB Common Stock Warrants (as defined below) and Private Placement Warrants (as defined below) at fair value at each reporting period using Level 3 inputs via the Black-Scholes option-pricing model and Binomial Lattice Model, respectively. The valuation of the earnout shares is based on a Monte Carlo simulation. The significant assumptions used in preparing the above models are disclosed in Note 14 Stock Warrants and Note 13 Earnout. The Teton Software Simulation ("Teton") contingent earnout is related to development and business milestone metrics estimated using a scenario-based approach discussed in Note 3, Contingent Earnout Liability. The Teton development milestone was met and settled in 2022. All Silicon Valley Bank ("SVB") warrants were exercised in June 2021. There were no transfers between levels during the periods presented.


(in thousands)	Contingent Earnout Liability			Private Placement Warrant Liability			SVB Warrant Liability			Teton Acquisition Contingent Earnout Liability			Total Other Liabilities
Fair Value as of December 31, 2020	$	—		$	—		$	545		$	—		$	545
Recognition of liability acquired as part of the Merger		123,129			5,702			—			—			128,831
Change in fair value		(63,407	)		(3,056	)		1,251			—			(65,212	)
Exercise of common stock warrants		—			—			(1,796	)		—			(1,796	)
Fair Value as of December 31, 2021	$	59,722		$	2,646		$	—		$	—		$	62,368

Fair Value as of December 31, 2021	$	59,722		$	2,646		$	—		$	—		$	62,368
Recognition of liability acquired as part of acquisitions	$	—		$	—		$	—		$	1,602		$	1,602
Change in fair value		(57,307	)		(1,985	)		—			500			(58,792	)
Settlement of liability acquired as part of acquisitions		—			—			—			(1,500	)		(1,500	)
Fair Value as of December 31, 2022	$	2,415		$	661		$	—		$	602		$	3,678

Summary of Property and Equipment Depreciated

The cost of property and equipment is depreciated based upon the following asset lives:


Asset Classification	Estimated Useful Life
Machinery and equipment	5 years
Leasehold improvements	Shorter of estimated useful life or remaining lease term
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	3 years

Summary of Balance of The Company's Warranty Reserve

Warranty reserves are included within accrued expenses on the consolidated balance sheets. The following table presents changes in the balance of the Company’s warranty reserve:


	Year Ended December 31,
(in thousands)	2022			2021
Balance at beginning of period	$	658		$	564
Additions to warranty reserve		812			529
Claims fulfilled		(850	)		(435	)
Balance at end of period	$	620		$	658

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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