DOMINION ENERGY MIDSTREAM PARTNERS LP This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, trends, events, and our objectives for future operations, are forward-looking statements. The words "may," "will," "expect," "anticipate," "believe," "intend," "project," "could," "would," "estimate," "potential," "continue," "plan," "target," or the negative of these words or similar expressions are intended to identify forward-looking statements. The forward-looking statements included herein are based on current expectations of management. Actual results may differ from those expressed in forward-looking statements due to additional factors, including those set forth in Item 1A. "Risk Factors" elsewhere in this Quarterly Report on Form 10-Q. Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.
You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Business OverviewDesktop Metal is pioneering a new generation of additive manufacturing technologies focused on the production of end-use parts. We offer a comprehensive portfolio of integrated additive manufacturing solutions comprising hardware, software, materials and services with support for metals, composites, polymers, ceramics, sands, and biocompatible materials. Our solutions span use cases across the product life cycle, from product development to mass production and aftermarket operations, and they address an array of industries, including automotive, aerospace, healthcare and dental, consumer products, heavy industry, general machinery and machine components and research and development. Our growth strategy begins with a commitment to research and development. Since our founding in 2015, we have invested significant resources in research and development, including$10.9 million thus far in 2021, towards building an extensive portfolio of proprietary and differentiated technologies with a focus on making additive manufacturing an easy-to-use, economic and scalable solution. These technologies represent the cornerstones of our future product introductions and are critical to enhancing our existing offerings, and we have over 300 registered patents or pending patent applications. Our additive manufacturing platforms, which leverage these technologies for the production of end-use parts, enable businesses to address their specific goals through a range of solutions that span multiple price points, throughput levels and operating environments. These platforms enable customers to adopt additive manufacturing across new applications where conventional manufacturing has customarily held cost and volume advantages by offering breakthrough print speeds, competitive part costs, accessible workflows and software, turnkey solutions, and support for over 225 qualified materials, the sale of which represent a recurring revenue stream from customers of our additive manufacturing systems in addition to system consumables and other services, such as installation, training and technical support. Across printers, parts and materials, we intend to continue investing resources to develop advances and new technologies that allow us to serve a broader customer base and reach new verticals, thereby expanding our addressable market and driving adoption of additive manufacturing for the volume production of end-use parts. We leverage our core competencies in technology innovation and product development by marketing and selling our additive manufacturing solutions through a leading global distribution network, managed and augmented by our own internal sales and marketing teams. This distribution network covers over 60 countries around the world and is composed of sales professionals with decades of experience in digital manufacturing technologies. Similarly, in addition to manufacturing a subset of our additive manufacturing systems in-house, our internal manufacturing and supply chain teams work collaboratively with both our internal engineering department and third-party contract manufacturers to scale up initial prototypes for commercialization and volume 31
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commercial shipments. Together, our distribution network and manufacturing approach allow us to produce, sell and service our products at-scale in global markets and creates substantial operating leverage as we execute our strategy.
Operating Results
For the three months endedMarch 31, 2021 , we recognized revenues of$11.3 million and used cash in operating activities of$41.1 million , and we ended the period with$572.2 million of cash, cash equivalents, and short-term investments. We incurred a net loss of$59.1 million for the three months endedMarch 31, 2021 . InDecember 2020 , we completed the Business Combination, receiving$534.6 million net cash proceeds, and during the first three months of 2021, the public warrants were exercised, generating$170.7 million of net cash proceeds, both of which we expect to support our operations and investments in the near term. As ofMarch 31, 2021 , we had$416.4 million in cash and cash equivalents,$155.8 million in short-term liquid investments, and current liabilities of$37.5 million .
Recent Developments
EnvisionTEC Acquisition
OnFebruary 16, 2021 , pursuant to the Purchase Agreement and Plan of Merger datedJanuary 14, 2021 , we consummated the EnvisionTEC Acquisition. We paid$143.8 million in cash and issued 5,036,142 Class A common shares with a fair value of$159.8 million as of the close of business on the acquisition date. In connection with the transaction, the Company also agreed to grant restricted stock awards totaling 475,848 shares of the Company's Common Stock to key EnvisionTEC employees. As ofMarch 31, 2021 , the Company has not completed the grant of restricted stock awards.
OnMarch 15, 2021 , we announced the launch ofDesktop Health , a new business focused on accelerating the growth of additive manufacturing solutions for dental, orthodontic, otolaryngology and dermatology applications. Enabled byDesktop Metal's proprietary technology infrastructure for end-use parts production, including high-speed photopolymer, metal binder jetting and bioprinting additive manufacturing technologies combined with an extensive library of advanced materials,Desktop Health's mission is to create advanced, patient-specific solutions in the medical field.
Trine Warrants
OnApril 12, 2021 , the Staff of theSEC issued the "Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies ("SPACs")" (the "Staff Statement"). The Staff Statement discussed "certain features of warrants issued inSPAC transactions" that "may be common across many entities." The Staff Statement indicated that when one or more of such features is included in a warrant, the warrant "should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings." The Company has concluded that the Private Placement Warrants are to be classified as a liability measured at fair value on the Company's consolidated balance sheet upon the Business Combination onDecember 9, 2020 , with subsequent changes in fair value reported in our statement of operations each reporting period. As ofMarch 31, 2021 , all Private Placement Warrants were exercised and there was no outstanding warrant liability.
COVID-19
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 a pandemic. It is not possible to accurately predict the full impact of the COVID-19 pandemic on our business, financial condition and results of operations due to the evolving nature of the COVID-19 pandemic and the extent of its impact across industries and geographies and numerous other uncertainties. For example, we face uncertainties about the duration and spread of the outbreak, additional actions that may be taken by governmental entities, and the impact it may have on the ability of us, our customers, our suppliers, our manufacturers and our other business partners to conduct business. Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary. Many organizations and individuals, including our company and employees, are taking additional steps to avoid or reduce infections, including limiting travel and staying home from work. These measures are disrupting normal business operations and have had significant negative impacts on businesses and financial markets worldwide. We continue to monitor our operations and 32
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government recommendations and have made modifications to our normal operations because of the COVID-19 pandemic, including requiring most non-engineering or operations-related team members to work remotely, utilizing heightened cleaning and sanitization procedures, implementing new health and safety protocols and reducing non-essential travel. The COVID-19 pandemic has caused us to experience several adverse impacts, including extended sales cycles to close new orders for our products, delays in shipping and installing orders due to closed facilities and travel limitations and delays in collecting accounts receivable. The rapid development and uncertainty of the impacts of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic on our business. However, the COVID-19 pandemic, and the measures taken to contain it, present material uncertainty and risk with respect to our performance and financial results. In particular, businesses across an array of vertical markets are temporarily reducing capital expenditure budgets globally as they seek to preserve liquidity to ensure the longevity of their own operations, which in turn may lead to reductions in purchases of our additive manufacturing solutions. Further, office closures may prevent organizations from reaching typical utilizations of our additive manufacturing solutions, resulting in reductions in purchases of consumable materials. Additionally, the COVID-19 pandemic may contribute to facility closures at our third-party contract manufacturers and key suppliers, causing delays and disruptions in product manufacturing, which could affect our ability to ship products purchased by our customers in a timely manner. Disruptions in the capital markets as a result of the COVID-19 pandemic may also adversely affect our business if these impacts continue for a prolonged period and we need additional liquidity.
In the long-term, we believe that the COVID-19 pandemic will encourage organizations to reassess their supply chain structure and may accelerate their adoption of solutions such as additive manufacturing, which could allow for greater flexibility and a reduced reliance on overseas manufacturing.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on many factors that present significant opportunities for us, but also pose risks and challenges, including those discussed below and in "Risk Factors" section of this Quarterly Report on Form 10-Q.
Commercial Launch of Products
Several of our products began commercial shipments in late 2020 and early 2021, with more in the late stages of development and scheduled to begin commercial shipments in 2021. Prior to commercialization, we must complete final testing and manufacturing ramp-up of these products at our third-party contract manufacturers. Any delays in successful completion of these steps may impact our ability to generate revenue from these products.
Adoption of our Additive Manufacturing Solutions
We believe the world is at an inflection point in the adoption of additive manufacturing solutions and that we are well-positioned to take advantage of this opportunity across an array of industries due to our proprietary technologies and global distribution capabilities. We expect that our results of operations, including revenue and gross margins, will fluctuate for the foreseeable future as businesses continue to shift away from conventional manufacturing processes towards additive manufacturing for end-use parts. Our turnkey and volume production solutions are designed to empower businesses to realize the full benefits of additive manufacturing at-scale, including geometric and design flexibility, mass customization and supply chain engineering, among others. The degree to which potential and current customers recognize these benefits and invest in our solutions will affect our financial results.
Pricing, Product Cost and Margins
Our comprehensive portfolio of additive manufacturing solutions spans multiple
price points, materials, throughput levels, operating environments and
technologies to enable customers to find the solution that achieves their
specific goals. We also expect to commercialize additional previously announced
products over the course of 2021. Pricing for these products may vary by region
due to marketspecific supply and demand dynamics and product lifecycles, and
sales of certain products have, or are expected to have, higher gross margins
than others. As a result, our financial performance depends, in part, on the mix
of products we sell during a given period. In addition, we are subject to price
competition, and our ability to compete in key markets will depend on the
success of our investments in new technologies and cost improvements as well as
our ability to efficiently and reliability introduce costeffective additive
manufacturing solutions for our customers.
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We believe that we are a leader in mass production and turnkey additive manufacturing solutions, offering breakthrough technologies that enable high throughput and easeofuse through our broad product portfolio. Our performance is significantly dependent on the investment we make in our research and development efforts and on our ability to be at the forefront of the additive manufacturing industry. It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance existing products and generate customer demand for our solutions. We believe that investment in our additive manufacturing solutions will contribute to longterm revenue growth, but it may adversely affect our nearterm profitability. Results of Operations
Comparison of the three months ended
Revenue
The following table presents the revenue of each of our revenue streams, as well as the percentage of total revenue and change from the prior year.
For the Three Months Ended March 31,
2021 2020 Change in Revenues(Dollars in thousands) Revenue % of Total Revenue
% of Total $ % Products Revenue$ 10,311 91 %$ 2,694 80 %$ 7,617 283 % Services Revenue 1,002 9 % 691 20 % 311 45 % Total Revenue$ 11,313 100 %$ 3,385 100 %$ 7,928 234 % Total revenue for the three months endedMarch 31, 2021 and 2020 was$11.3 million and$3.4 million , respectively, an increase of$7.9 million , or 234%. The increase in total revenue was attributable to an increase in revenue from both products and services. We sold more products during the three months endedMarch 31, 2021 as compared to three months endedMarch 31, 2020 , leading to an approximately 283% increase in product revenue. This was primarily due to product revenue from EnvisionTEC following the close of this acquisition. Additionally, we shipped more units during the first quarter of 2021 compared to the first quarter of 2020. For the three months endedMarch 31, 2020 , we experienced decreased customer demand and longer sales cycles resulting from the COVID-19 pandemic. Additionally, as a result of customer facilities closures associated with the COVID-19 pandemic, we experienced delays in shipments and installation as well as decreased utilization of our installed products, leading to a decrease in sales of consumable materials.
Services revenue increased during the three months ended
The following table presents revenue by geographic region, as well as the percentage of total revenue and change from the prior period.
For the Three Months Ended March 31,
2021 2020 Change in Revenues(Dollars in thousands) Revenue % of Total Revenue % of Total $ % Americas$ 6,559 58 %$ 1,229 36 %$ 5,330 434 % EMEA (Europe , theMiddle East and Africa) 2,741 24 % 1,851 55 % 890 48 % APAC (AsiaPacific) 2,013 18 % 305 9 % 1,708 560 % Total Revenue$ 11,313 100 %$ 3,385 100 %$ 7,928 234 % Total revenue increased due to increased product sales in theAmericas , EMEA and APAC regions driven by acquisition of EnvisionTEC, diversification in our product mix, and increased customer demand during the period endedMarch 31, 2021 . Customer demand was lower during the three months endedMarch 31, 2020 as a result of the COVID-19 pandemic. 34 Table of Contents Cost of Sales Total cost of sales duringMarch 31, 2021 and 2020 was$11.9 million and$6.2 million , respectively, an increase of$5.7 million or 92%. The increase in total cost of sales was driven primarily by an increase in product cost of sales, which resulted from greater product sales. Additionally, costs of sales increased$1.1 million due to amortization from intangible assets acquired in the EnvisionTEC acquisition that is included in cost of sales.
Gross Loss and Gross Margin
The following table presents gross loss by revenue stream, as well as change in gross loss dollars from the prior period.
For the Three
Months Ended
March 31, Change in Gross
2021 2020 Profit
(Dollars in thousands) Gross Profit (Loss) $ %
Products $ (176) $ (2,347) $ 2,171 93 %
Services (411) (472) 61 13 %
Total $ (587) $ (2,819) $ 2,232 79 %
Total gross loss during the three months endedMarch 31, 2021 and 2020 was$0.6 million and$2.8 million , respectively. The decrease in gross loss of$2.2 million is driven by the EnvisionTEC acquisition, as well as our more diverse product mix sold during the three months endedMarch 31, 2021 , compared to only one product shipping during the three months endedMarch 31, 2020 . Negative gross profit during these periods was the result of higher system costs than selling price, primarily driven by a combination of small purchase quantities for systems and consumables from our third-party contract manufacturers, resulting in higher costs, and the selection of suppliers influenced by time-to-market considerations instead of cost considerations.
The following table presents gross margin by revenue stream, as well as the change in gross margin from the prior period.
For the Three
Months Ended Change in Gross
March 31, Margin
2021 2020 Percentage
(Dollars in thousands) Gross Margin Points %
Products (2) % (87) % 0.85 98 %
Services (41) % (68) % 0.27 40 %
Total (5) % (83) % 0.78 94 %
Total gross margin for three months endedMarch 31, 2021 and 2020 was (5)% and (83)%, respectively. The increase in total gross margin was primarily due to the increase in gross margin from our product revenue, which resulted from a lower product cost for units shipped in the three months endedMarch 31, 2021 as compared to three months endedMarch 31, 2020 .
Research and Development
Research and development expenses during the three months endedMarch 31, 2021 and 2020 were$10.9 million and$12.3 million , respectively, a decrease of$1.4 million , or 11%. The decrease in research and development expenses was primarily due to a$1.0 million decrease in engineering consulting and prototyping costs related to the maturation of our product development efforts. Additionally, compensation costs decreased$0.5 million as a result of a reduction in headcount due to the COVID-19 pandemic.
Sales and Marketing
Sales and marketing expenses during the three months endedMarch 31, 2021 and 2020 were$5.4 million and$4.5 million , respectively, an increase of$0.9 million , or 20%. The increase in sales and marketing expenses was primarily due to increased expense related to EnvisionTEC, partially offset by a reduction in tradeshow and related travel expenses and marketing headcount during the three months endedMarch 31, 2021 due to the COVID-19 pandemic. 35 Table of Contents General and Administrative
General and administrative expenses during the three months endedMarch 31, 2021 and 2020 were$13.8 million and$2.6 million , respectively, an increase of$11.2 million , or 431%. The increase in general and administrative expenses was primarily due to an increase of$7.5 million of professional fees incurred as a result of merger and acquisition activity and costs related to operating as a public company. Additionally, compensation costs increased by$1.5 million , related to hiring to support public company requirements.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability during the three months endedMarch 31, 2021 , and 2020, were a$56.6 million loss and$0 , respectively. The decrease in fair value is the result of the remeasurement of the Private Placement Warrant liability prior to the cashless exercise of the Private Placement Warrants. The warrant liability increased$56.6 million as a result of the remeasurement, which resulted in the$56.6 million loss. As ofMarch 31, 2021 , all Private Placement Warrants were exercised and there was no outstanding warrant liability.
Interest Expense
Interest expense during the three months ended
Interest and Other Income, Net
Interest and other income, net during the three months endedMarch 31, 2021 and 2020 and was$0.4 million and$0.6 million , respectively, a decrease of$0.2 million , or 33%. Interest income decreased primarily due to a decrease in cash available for investment. Income Taxes
We recorded an income tax benefit of$27.9 million during the three months endedMarch 31, 2021 compared to no provision for the three months endedMarch 31, 2020 . The increase was due to the partial release of the valuation allowance related to the deferred tax liability acquired in the EnvisionTEC acquisition. We have provided a valuation allowance for all of our deferred tax assets as a result of our historical net losses in the jurisdictions in which we operate, except forGermany . We continue to assess our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in a single, or multiple, taxing jurisdictions, a reversal of the related portion of our existing valuation allowances may occur.
Non-GAAP Financial Information
In addition to our results determined in accordance with GAAP, we believe the
below non-GAAP financial measures are useful in evaluating our operational
performance. We use this non-GAAP financial information to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that
this non-GAAP financial information, when taken collectively, may be helpful to
investors in assessing our operating performance.
The non-GAAP financial information excludes, as applicable, stock-based
compensation expense, amortization of acquired intangible assets included in
cost of sales, acquisition-related and other transactional charges included in
general and administrative expense, and change in fair value of warrant
liability. These items are normally included in the comparable measures
calculated and presented in accordance with GAAP. Our management excludes these
items when evaluating our ongoing performance and/or evaluating earnings
potential, and therefore excludes them when presenting non-GAAP financial
measures. Management uses non-GAAP financial measures to supplement our GAAP
results.
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Stock-based compensation is a non-cash expense relating to stock-based awards
issued to executive officers, employees, and outside directors, consisting of
options and restricted stock units. We exclude this expense because it is a
non-cash expense and we assess our internal operations excluding this expense
and believe it facilitates comparisons to the performance of other companies in
our industry.
Amortization of acquired intangible assets is a non-cash expense that is impacted by the timing and magnitude of our acquisitions. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and to comparisons with the performance of other companies in our industry.
Acquisition-related and other transactional charges included in general and
administrative expenses are direct costs related to potential and completed
acquisitions, including transaction fees, due diligence costs, severance,
professional fees, and integration activities. Other transactional charges
include third-party costs related to structuring unusual transactions. The
occurrence and amount of these costs will vary depending on the timing and size
of acquisitions. We believe excluding acquisition-related costs facilitates the
comparison of our financial results to our historical operating results and to
other companies in our industry.
Change in fair value of warrant liability is a non-cash gain or loss impacted by
the fair value of the Private Placement Warrants. We believe the assessment of
our operations excluding this activity is relevant to our assessment of internal
operations and to comparisons with the performance of other companies in our
industry.
We use the below non-GAAP financial measures, and we believe that they assist
our investors, to make period-to-period comparisons of our operational
performance because they provide a view of our operating results without items
that are not, in our view, indicative of our core operating results. We believe
that these non-GAAP financial measures help illustrate underlying trends in our
business, and we use the measures to establish budgets and operational goals for
managing our business and evaluating our performance. We believe that providing
non-GAAP financial measures also affords investors a view of our operating
results that may be more easily compared to the results of other companies in
our industry that use similar financial measures to supplement their GAAP
results.
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The items excluded from the non-GAAP financial measures often have a material
impact on our financial results and such items often recur. Accordingly, the
non-GAAP financial measures included in this Quarterly Report on Form 10-Q
should be considered in addition to, and not as a substitute for, the comparable
measures prepared in accordance with GAAP. The following tables reconcile each
of these non-GAAP financial measures to its most closely comparable GAAP measure
in our financial statements:
For the Three Months Ended
March 31,
(Dollars in thousands) 2021 2020
GAAP gross margin $ (587) $ (2,819) Stock-based compensation included in cost of sales 117 100 Amortization of acquired intangible assets included in cost of sales 1,091 - Non-GAAP gross margin $ 621$ (2,719) GAAP operating loss$ (30,740) $ (22,278) Stock-based compensation 2,217 1,259 Amortization of acquired intangible assets included in cost of sales 1,091 - Amortization of acquired intangibles assets 1,208 164
Acquisition-related and other transactional charges included in general and administrative expenses
4,984 -
Non-GAAP operating loss $ (21,240) $ (20,855)
GAAP net loss $ (59,108) $ (21,804)
Stock-based compensation 2,217 1,259
Amortization of acquired intangible assets included in
cost of sales 1,091 -
Amortization of acquired intangibles assets 1,208 164
Acquisition-related and other transactional charges included in general and administrative expenses
4,984 -
Change in fair value of warrant liability 56,576
-
Non-GAAP net loss $ 6,968 $ (20,381) We define "EBITDA" as net loss plus net interest income, provision for income taxes, depreciation and amortization expense.
We define "Adjusted EBITDA" as EBITDA adjusted for change in fair value of warrant liability, stock-based compensation expense, warrant expense and transaction costs associated with acquisitions.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional
tool for investors to use in evaluating ongoing operating results and trends
because it eliminates the effect of financing, capital expenditures, and
non-cash expenses such as stock-based compensation and warrants, and provides
investors with a means to compare our financial measures with those of
comparable companies, which may present similar non-GAAP financial measures to
investors. However, you should be aware when evaluating EBITDA and Adjusted
EBITDA that we may incur future expenses similar to those excluded when
calculating these measures. In addition, our presentation of these measures
should not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Our computation of these measures,
especially Adjusted EBITDA, may not be comparable to other similarly titled
measures computed by other companies because not all companies calculate these
measures in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should not be
considered in isolation or as a substitute for performance measures calculated
in accordance with GAAP. We compensate for these limitations by relying
primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a
supplemental basis. You should review the reconciliation of net loss to EBITDA
and Adjusted EBITDA below and not rely on any single financial measure to
evaluate our business.
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The following table reconciles net loss to EBITDA and Adjusted EBITDA during the
three months ended
For the Three Months Ended
March 31,
(Dollars in thousands) 2021 2020
Net loss attributable to common stockholders
(42) (478)
Income tax benefit (27,920)
-
Depreciation and amortization 3,892
2,321
EBITDA (83,178)
(19,961)
Change in fair value of warrant liability 56,576
- Stock compensation expense 2,217 1,259 Warrant expense - 139
Transaction costs associated with acquisitions 4,984
- Adjusted EBITDA$ (19,401) $ (18,563)
Liquidity and Capital Resources
We have incurred a net loss in each of our annual periods since our inception. We incurred net losses of$59.1 million and$21.8 million during the three months endedMarch 31, 2021 and 2020, respectively. As ofMarch 31, 2021 , we had$572.2 million in cash, cash equivalents, and short-term investments. As noted in the "Recent Developments" section above, we completed the Business Combination inDecember 2020 , receiving$534.6 million net cash proceeds as a result of the transaction. Additionally, during the three months endedMarch 31, 2021 , we received$170.7 million in net cash proceeds from the exercise of public warrants. We expect both to support our operations and investments in the near term. Since inception, we have received cumulative net proceeds from the Business Combination and the sale of our preferred and common stock of$973.4 million to fund our operations. As ofMarch 31, 2021 , our principal sources of liquidity were our cash, cash equivalents, and short-term investments of$572.2 million which are principally invested in money market funds and fixed income instruments. InJune 2018 , we entered into a three-year,$20.0 million term loan, which provided$10.0 million immediately with the remaining principal balance available to be drawn in up to three draws of not less than$2.0 million for 12 months from close of the facility. We entered into this loan to fund capital expenditures associated with our corporate office. Interest is calculated using the Wall Street Journal Prime rate less 50 basis points, payable monthly in arrears. If our cash and investments fall below$30.0 million , cash equal to the total outstanding amount of the debt is required to be placed in a money market account. In connection with this loan, we are also subject to periodic reporting requirements, and the lender has a first priority lien on all assets. Repayment terms include interest only payments for 36 months, with the principal coming due inJune 2021 .
In
In connection with the acquisition of EnvisionTEC, the Company acquired$1.2 million in PPP loans. 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 ofApril 3, 2022 and an interest rate of 1%. Principal and interest are payable monthly commencing on a date determined by the lender following the determination of the amount of the PPP loan to be forgiven or potentially earlier, as determined under applicableSmall Business Administration rules. The outstanding borrowings may be prepaid by the Company at any time prior to maturity with no prepayment penalties. As ofMarch 31, 2021 , the short-term loan balance is$1.0 million , and the long-term balance is$0.2 million . Subsequent toMarch 31, 2021 , we were notified that the entire loan balance has been forgiven.
We believe that our existing capital resources will be sufficient to support our
operating plan and cash commitments for at least the next 12 months. As of
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liquid investments. This liquid asset balance significantly exceeds our current
liabilities of
We expect net losses to continue in connection with our ongoing activities, particularly as we continue to invest in commercialization and new product development. Additionally, we may engage in future acquisitions which may require additional capital.
Cash Flows
Since inception, we have primarily used proceeds from the Business Combination, issuances of preferred stock and debt instruments to fund our operations. The following table sets forth a summary of cash flows for the three months endedMarch 31, 2021 and 2020: For the Three Months Ended March 31, (Dollars in thousands) 2021 2020 Net cash used in operating activities$ (41,129) $ (22,434) Net cash used in investing activities (182,053) 30,680 Net cash provided by financing activities 157,195 132
Net change in cash, cash equivalents, and restricted cash
Operating Activities Net cash used in operating activities was$41.1 million for the three months endedMarch 31, 2021 , primarily consisting of$59.1 million of net losses, adjusted for non-cash items, which primarily included loss on change in fair value of warrant liability of$56.6 million , depreciation and amortization expense of$3.9 million and stock-based compensation expense of$2.2 million , as well as a$17.2 million increase in cash consumed by working capital. The increase in cash consumed by working capital was primarily driven by an increase in certain assets including inventory and prepaid expenses and other current assets, alongside a decrease in certain liabilities including accounts payable, accrued expenses and other current liabilities, and customer deposits. This increase in cash consumed by working capital was partially offset by an increase in certain liabilities customer deposits. Net cash used in operating activities was$22.4 million for the three months endedMarch 31, 2020 , primarily consisting of$21.8 million of net losses, adjusted for certain non-cash items, which primarily included depreciation and amortization expense of$2.3 million and stock-based compensation expense of$1.3 million , as well as a$4.1 million increase in cash consumed by working capital. The increase in cash consumed by working capital was primarily driven by an increase in certain assets including inventory alongside a decrease in certain liabilities including accounts payable, accrued expenses and other current liabilities, and deferred revenue. This increase in cash consumed by working capital was partially offset by a decrease in certain assets including accounts receivable and prepaid expenses and other current assets and an increase in certain liabilities including customer deposits. The majority of our inventory consists of finished goods. Inventory balances may fluctuate during cycles of new product launch, commercialization and planned growth of production and sales of products.
Investing Activities
Net cash used in investing activities was$182.1 million for the three months endedMarch 31, 2021 , primarily consisting of$137.6 million net cash paid to acquire EnvisionTEC, and purchases of marketable securities of$92.4 million , offset by proceeds from sales and maturities of marketable securities of$48.2 million . We purchased$0.3 million of property and equipment. Net cash used in investing activities was$30.7 million for the three months endedMarch 31, 2020 , primarily consisting of purchases of marketable securities of$17.6 million , offset by proceeds from sales and maturities of marketable securities of$49.3 million , as well as purchases of property and equipment
for$1.0 million . 40 Table of Contents Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was$0.1 million for the three months endedDecember 31, 2020 , consisting of proceeds from the exercise of employee stock options.
Critical Accounting Policies and Significant Estimates
Other than as described below, there were no material changes in the first three months of 2021 to the information provided under the heading "Critical Accounting Policies and Estimates" included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Business Combinations
We account for business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at their respective estimated fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. While we use our best estimates and judgments, our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated useful life of each asset, can materially impact the consolidated statements of operations of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. In determining the estimated fair value for intangible assets, we typically utilize the income approach, which discounts the projected future net cash flow using a discount rate deemed appropriate by management that reflects the risks associated with such projected future cash flow. Significant estimates and assumptions include revenue growth rates, royalty rates, discount rates, and tax amortization benefit. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and do not utilize any "structured debt," "special purpose" or similar unconsolidated entities for liquidity or financing purposes.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is included in "Note 2. Summary of Significant Accounting Policies" to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
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