shpw-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-Q

____________________


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

For the quarterly period ended September 30, 2022


o			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: 001-39092

____________________

SHAPEWAYS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

____________________


Delaware			87-2876494
(State or other jurisdiction of incorporation)			(I.R.S. Employer Identification No.)

30-02 48th Avenue

Long Island City, NY 11101

(Address of principal executive offices) (Zip Code)

(646) 979-9885

(Registrant’s telephone number, including area code)

____________________

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

SHPW

New York Stock Exchange

Warrants, each whole warrant exercisable for

one share of Common Stock for $11.50 per share

SHPW WS

New York Stock Exchange

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

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 (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	x

		Emerging growth company	x

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No x

As of November 9, 2022 the registrant had 49,295,760 shares of common stock outstanding.

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SHAPEWAYS HOLDINGS, INC.

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PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66

Signature		67

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Report”), including, without limitation, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact included in or incorporated by reference in this Report, regarding the future financial performance of Shapeways Holdings, Inc. (the “Company,” “Shapeways,” “we,” “us” or “our”), as well as the Company’s strategy, future operations, future operating results, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would,” “will,” “seek,” “target,” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on information available as of the date of this Report and on the current expectations, forecasts and assumptions of the management of the Company, involve a number of judgments, risks and uncertainties and are inherently subject to changes in circumstances and their potential effects and speak only as of the date of such statements. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed, contemplated or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under Part II, Item 1A: “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under Part II, Item 1A: “Risk Factors” may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance and the Company’s actual results of operations, financial condition and liquidity, and developments in the industry in the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if the Company’s results or operations, financial condition and liquidity, and developments in the industry in which it operates are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

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PART 1 - FINANCIAL INFORMATION

ITEM 1. Financial Statements

SHAPEWAYS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	September 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	46,941	$	79,677
Restricted cash	136		142
Accounts receivable	1,941		1,372
Inventory	1,242		927

Prepaid expenses and other current assets	5,416		4,360
Total current assets	55,676		86,478
Property and equipment, net	14,649		4,388
Right-of-use assets, net	2,475		842
Goodwill	6,411		1,835
Intangible assets, net	5,470		—
Security deposits	267		175
Total assets	$	84,948	$	93,718
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,761	$	1,909
Accrued expenses and other liabilities	5,681		2,645

Operating lease liabilities, current	777		639
Deferred revenue	1,036		921
Total current liabilities	9,255		6,114
Operating lease liabilities, net of current portion	1,777		326
Warrant liabilities	46		2,274

Total liabilities	11,078		8,714
Commitments and contingencies
Stockholders’ equity
Preferred stock ($0.0001 par value; 10,000,000 shares authorized; none issued or outstanding as of September 30, 2022 and December 31, 2021, respectively)	—		—
Common stock ($0.0001 par value; 120,000,000 shares authorized; 49,294,285 and 48,627,739 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)	5		5
Additional paid-in capital	200,657		198,179
Accumulated deficit	(126,072)		(112,811)
Accumulated other comprehensive loss	(720)		(369)
Total stockholders’ equity	73,870		85,004
Total liabilities and stockholders’ equity	$	84,948	$	93,718

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SHAPEWAYS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue, net	$	8,449	$	7,716	$	24,452	$	25,354
Cost of revenue	4,758		4,055		13,710		13,271
Gross profit	3,691		3,661		10,742		12,083
Operating expenses
Selling, general and administrative	7,605		4,399		20,516		10,613
Research and development	2,572		1,673		6,992		4,099
Total operating expenses	10,177		6,072		27,508		14,712
Loss from operations	(6,486)		(2,411)		(16,766)		(2,629)
Other income (expense)
Long-term debt forgiveness	—		—		—		2,000
Change in fair value of earnout liability	1,784		—		1,784		—
Change in fair value of warrant liabilities	31		5,088		1,558		5,088
Interest expense	(7)		(126)		(7)		(407)
Interest income	21		1		23		1
Other income	110		—		149		1

Total other income (expense), net	1,939		4,963		3,507		6,683
(Loss) income before income tax expense (benefit)	(4,547)		2,552		(13,259)		4,054
Income tax expense (benefit)	3		—		2		(71)
Net (loss) income	(4,550)		2,552		(13,261)		4,125
Deemed dividend - Earnout Shares	—		(18,132)		—		(18,132)
Net loss attributable to common stockholders	$	(4,550)	$	(15,580)	$	(13,261)	$	(14,007)
Net (loss) income per share:
Basic	$	(0.09)	$	0.07	$	(0.25)	$	0.11
Diluted	$	(0.09)	$	0.07	$	(0.25)	$	0.11
Net loss per share attributable to common stockholders
Basic	$	(0.09)	$	(0.41)	$	(0.25)	$	(0.38)
Diluted	$	(0.09)	$	(0.41)	$	(0.25)	$	(0.38)
Weighted average common shares outstanding: (1)
Basic	53,185,561		37,932,345		52,985,344		37,351,244
Diluted	53,185,561		37,932,345		52,985,344		37,351,244
Other comprehensive loss
Foreign currency translation adjustment	(125)		(22)		(351)		(39)
Comprehensive loss	$	(4,675)	$	(15,602)	$	(13,612)	$	(14,046)

(1)Retroactively restated the common shares for 2021 due to the reverse recapitalization as described in Notes 1 and 11.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SHAPEWAYS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands, except share and per share amounts)


	Preferred Stock			Common Stock
Three and Nine Months Ended September 30, 2022	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
Balance at January 1, 2022	—	$	—	48,627,739	$	5	$	198,179	$	(112,811)	$	(369)	$	85,004
Issuance of Legacy Shapeways common stock upon exercise of stock options	—	—		217,967	—		99		—		—		99
Stock-based compensation expense	—	—		—	—		312		—		—		312
Net loss	—	—		—	—				(4,037)		—		(4,037)
Transfer of Private Warrants to Public Warrants							382						382
Foreign currency translation	—	—		—	—		—				(52)		(52)
Balance at March 31, 2022	—	—		48,845,706	5		198,972		(116,848)		(421)		81,708
Issuance of Legacy Shapeways common stock upon exercise of stock options				367,732	—		189		—		—		189
Stock-based compensation expense	—	—		—	—		457		—		—		457
Net loss	—	—		—	—		—		(4,674)		—		(4,674)
Transfer of Private Warrants to Public Warrants				—	—		288						288
Foreign currency translation	—	—		—	—		—		—		(174)		(174)
Balance at June 30, 2022	—	—		49,213,438	5		199,906		(121,522)		(595)		77,794
Stock issued for stock-based compensation	—	—		80,847	—		1		—		—		1
Stock-based compensation expense	—	—		—	—		750		—		—		750
Net loss	—	—		—	—		—		(4,550)		—		(4,550)

Foreign currency translation	—	—		—	—		—		—		(125)		(125)
Balance at September 30, 2022	—	$	—	49,294,285	$	5	$	200,657	$	(126,072)	$	(720)	$	73,870

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SHAPEWAYS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands, except share and per share amounts)


	Preferred Stock			Common Stock
Three and Nine Months Ended September 30, 2021	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
Balance at January 1, 2021 (as previously reported)	22,579,695	$	2	16,211,567	$	2	$	112,993	$	(114,567)	$	(277)	$	(1,847)
Retroactive application of reverse recapitalization	(22,579,695)	(2)		15,972,696	1		1		—		—		—
Balance at January 1, 2021 (after effect of reverse recapitalization) (1)	—	—		32,184,263	3		112,994		(114,567)		(277)		(1,847)
Issuance of Legacy Shapeways common stock upon exercise of stock options	—	—		35,895	—		16		—		—		16
Stock-based compensation expense	—	—		—	—		174		—		—		174
Net income	—	—		—	—		—		1,708		—		1,708
Foreign currency translation	—	—		—	—		—		—		(9)		(9)
Balance at March 31, 2021	—	—		32,220,158	3		113,184		(112,859)		(286)		42
Issuance of Legacy Shapeways common stock upon exercise of stock options	—	—		63,506	—		55		—		—		55
Issuance of Legacy Shapeways convertible Series B-1 preferred stock resulting from exercise of warrants	—	—		19,177	—		60		—		—		60
Stock-based compensation expense	—	—		—	—		171		—		—		171
Net loss	—	—		—	—		—		(135)		—		(135)
Foreign currency translation	—	—		—	—		—		—		(8)		(8)
Balance at June 30, 2021	—	—		32,302,841	3		113,470		(112,994)		(294)		185
Issuance of Legacy Shapeways common stock upon exercise of stock options	—	—		1,113,029	—		481		—		—		481
Issuance of Legacy Shapeways common stock upon conversion of convertible notes	—	—		1,406,741	—		5,913		—		—		5,913
Issuance of Legacy Shapeways common stock upon exercise of warrants	—	—		212,234	—		—		—		—		—
Issuance of Legacy Shapeways convertible Series D preferred stock upon exercise of warrants	—	—		89,217	—		—		—		—		—

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Repurchase of Legacy Shapeways common stock	—	—		(19,226)	—		(152)		—		—		(152)
Effect of Merger and recapitalization, net of redemptions and issuance costs	—	—		5,691,648	1		10,035		—		—		10,036
Issuance of common stock pursuant to PIPE financing, net of issuance costs	—	—		7,500,000	1		64,936		—		—		64,937
Stock-based compensation expense	—	—		—	—		438		—		—		438
Net income	—	—		—	—		—		2,552		—		2,552
Foreign currency translation	—	—		—	—		—		—		(22)		(22)
Balance at September 30, 2021	—	$	—	48,296,484	$	5	$	195,121	$	(110,442)	$	(316)	$	84,368

(1)Retroactively restated for the reverse recapitalization as described in Notes 1 and 2.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SHAPEWAYS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands, except share and per share amounts)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(13,261)	$	4,125
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	1,032		424

Stock-based compensation expense	1,519		783
Non-cash lease expense	687		696
Non-cash debt forgiveness	—		(2,000)
Change in fair value of earnout liability	(1,784)		—
Change in fair value of warrant liabilities	(1,558)		(5,088)
Change in operating assets and liabilities:
Accounts receivable	710		(924)
Inventory	(152)		173
Prepaid expenses and other assets	(1,335)		83

Accounts payable	(396)		(512)
Accrued expenses and other liabilities	713		853
Lease liabilities	(732)		(762)
Deferred revenue	(458)		(101)

Net cash used in operating activities	(15,015)		(2,250)
Cash flows from investing activities:
Purchases of property and equipment	(9,043)		(125)
Cash paid for acquisitions, net of cash acquired	(8,861)		—
Net cash used in investing activities	(17,904)		(125)
Cash flows from financing activities:

Proceeds from issuance of common stock	289		552
Proceeds received from exercise of preferred stock warrants	—		60
Effect of Merger, net of transaction costs	—		86,792
Repayments of loans payable	—		(3,459)

Net cash provided by financing activities	289		83,945
Net change in cash and cash equivalents and restricted cash	(32,630)		81,570
Effect of change in foreign currency exchange rates on cash and cash equivalents and restricted cash	(112)		(28)
Cash and cash equivalents and restricted cash at beginning of period	79,819		8,709
Cash and cash equivalents and restricted cash at end of period	$	47,077	$	90,251
Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	—	$	88
Accrued acquisition of property and equipment	$	—	$	441
Issuance of Legacy Shapeways common stock upon conversion of convertible notes	$	—	$	5,913
Repurchase of Legacy Shapeways common stock	$	—	$	(152)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Note 1. Organization

On September 29, 2021 (the “Closing” or the “Closing Date”), Galileo Acquisition Corp., a Cayman Islands exempted company (“Galileo” and after the Domestication (as defined below) “Shapeways”), a publicly-traded special purpose acquisition company, consummated the transactions described in the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) dated April 28, 2021, by and among Galileo Founders Holdings, L.P. (the “Sponsor”), Galileo Acquisition Corp., Galileo Acquisition Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Galileo (“Merger Sub”), and Shapeways, Inc., a Delaware corporation (“Legacy Shapeways”), whereby Merger Sub merged with and into Legacy Shapeways, the separate corporate existence of Merger Sub ceasing and Legacy Shapeways being the surviving corporation and a wholly owned subsidiary of Shapeways (the “Merger”).

Further, on the Closing Date, Galileo was domesticated and continued as a Delaware corporation (the “Domestication” and, together with the Merger, the “Business Combination”), changing its name to “Shapeways Holdings, Inc.” (the “Company” and/or “Shapeways”). Simultaneously with the execution of the Business Combination, Galileo entered into subscription agreements pursuant to which certain investors agreed to purchase an aggregate of 7,500,000 shares of common stock for a purchase price of $10.00 per share and $75,000,000 in the aggregate (the “PIPE Investment”). At the Closing, the Company consummated the PIPE Investment. Shapeways also operates through its wholly owned subsidiaries, Shapeways BV, which was incorporated in the Netherlands on December 10, 2008 and Linear Mold & Engineering, LLC, also referred to as Linear AMS ("Linear"), which was acquired in May 2022.

Shapeways is a leader in the large and fast-growing digital manufacturing industry combining high quality, flexible on-demand manufacturing powered by purpose-built proprietary software which enables customers to rapidly transform digital designs into physical products, globally. Shapeways makes industrial-grade additive manufacturing accessible by fully digitizing the end-to-end manufacturing process, and by providing a broad range of solutions utilizing 11 additive manufacturing technologies and more than 100 materials and finishes, with the ability to easily scale new innovation. Shapeways has delivered over 23 million parts to over 1 million customers in over 180 countries.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and in accordance with the instruction to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. The condensed consolidated financial statements include the accounts of its wholly owned subsidiaries, Legacy Shapeways, Shapeways BV and Linear. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying condensed consolidated interim financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. These unaudited condensed consolidated interim financial statements should be read along with the audited financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021, as filed with the SEC on April 1, 2022 (the “Annual Report”).

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Functional Currency

The Euro is the functional currency for Shapeways BV’s operations outside the United States. Assets and liabilities of these operations are translated into U.S. Dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at the average exchange rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other comprehensive loss within stockholders’ equity (deficit). Gains and losses from foreign currency transactions are included in net loss for the period.

Cash, Cash Equivalents and Restricted Cash

Cash includes cash on hand and demand deposits. The Company maintains its deposits at high quality financial institutions and monitors the credit ratings of those institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. While cash held by financial institutions may at times exceed federally insured limits, the Company believes that no material credit or market risk exposure exists due to the high quality of the institutions. The Company has not experienced any losses on such accounts. Restricted cash represents cash required to be held as collateral for the Company’s credit cards and security deposit for its facility in the Netherlands. Accordingly, these balances contain restrictions as to their availability and usage and are classified as restricted cash in the condensed consolidated balance sheets.

The reconciliation of cash, cash equivalents and restricted cash reported within the applicable condensed consolidated balance sheets that sum to the total of the same such amount shown in the condensed consolidated statements of cash flows is as follows:


	September 30, 2022		September 30, 2021
Cash and cash equivalents	$	46,941	$	90,108
Restricted cash	136		143
	$	47,077	$	90,251

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and are generally unsecured as they are uncollateralized. The Company provides an allowance for doubtful accounts to reduce receivables to their estimated net realizable value. Judgement is exercised in establishing allowances and estimates are based on the customers’ payment history and liquidity. Any amounts that were previously recognized as revenue and subsequently determined to be uncollectible are charged to bad debt expense included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive loss. Given the nature and historical collectability of the Company’s accounts receivable, an allowance for doubtful accounts was not deemed necessary at September 30, 2022 and December 31, 2021.

Inventory

Inventory consists of raw materials, work in progress and finished goods at the Company’s distribution centers. Raw materials are stated at the lower of cost or net realizable value, determined by the first-in-first-out method. Finished goods and work in progress are valued using a methodology to determine the cost of each 3D printed object using allocations for material, labor, machine time and overhead. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts. As of September 30, 2022 and December 31, 2021, the Company determined an allowance was not deemed necessary.

Property and Equipment, Net

Property and equipment are stated at cost, less accumulated depreciation. Maintenance and repairs are charged to expense when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings. No impairment

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

charges were recorded for the three and nine months ended September 30, 2022 and 2021. Costs for capital assets not yet placed into service are capitalized and depreciated once placed into service. Depreciation is recognized using the straight-line method in amounts considered to be sufficient to allocate the cost of the assets to operations over the estimated useful lives or lease terms, as follows:


Asset Category						Depreciable Life
Machinery and equipment						5 to 10 years
Computers and IT equipment						3 to 10 years
Furniture and fixtures						7 to 10 years
Vehicles						10 years
Leasehold improvements						**


**			Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

Long-Lived Assets, Including Definite-Lived Intangible Assets

Intangible assets, which consist of technology, customer relationships, trademarks, favorable and unfavorable operating leases, and non-compete agreements are stated at cost less accumulated amortization. Amortization is generally recorded on a straight-line basis over estimated useful lives ranging from two to ten years. The Company periodically reviews the estimated useful lives of intangible assets and adjusts when events indicate that a shorter life is appropriate. In accordance with authoritative accounting guidance, capitalization of costs to develop software begins when preliminary development efforts are successful and completed. Costs related to the design or maintenance of internal-use software are expensed as incurred.

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets.

Factors that the Company considers in deciding when to perform an impairment review include significant changes in the Company’s forecasted projections for the asset or asset group for reasons including, but not limited to, significant underperformance of a product in relation to expectations, significant changes, or planned changes in the Company’s use of the assets, significant negative industry or economic trends, and new or competing products that enter the marketplace. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized within the statements of operations and comprehensive loss. No impairment charges were recorded for the three and nine months ended September 30, 2022 and 2021.

Goodwill

Goodwill, which represents the excess of purchase prices over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Goodwill is evaluated for impairment on an annual basis at a level of reporting referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired.

Under ASC 350, Intangibles - Goodwill and Other, the Company has the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the goodwill impairment test is performed. Impairment tests are performed on a quarterly basis. Management uses the future discounted cash flows valuation approach to determine the fair value of reporting units and determines whether the fair value of reporting units exceeded its carrying amounts. If the fair value exceeds the carrying amount, then no impairment is

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recognized. If the carrying amount recorded exceeds the fair value calculated, then an impairment charge is recognized for the difference. The impairment review requires management to make judgments in determining various assumptions with respect to revenues, operating margins, growth rates and discount rates. The judgments made in determining the projected cash flows used to estimate the fair value can materially impact the Company’s financial condition and results of operations.

Fair Value Measurements

The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:

Level 1 - Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 - Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

Business Acquisitions

The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s condensed consolidated financial statements from the acquisition date (see Note 3).

Revenue Recognition

Revenue is derived from two primary sources: (a) products and services and (b) software.

The Company recognizes revenue following the five-step model prescribed under ASC 606, Revenue from Contracts with Customers ("ASC 606"): (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the products or services it transfers to the customer. These contracts have different terms based on the scope, performance obligations, and complexity of the project, which often requires the Company to make judgments and estimates in recognizing revenues.

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Performance obligations are satisfied both at a point of time and over time. All revenue is recognized based on the satisfaction of the performance obligation to date (see Note 4).

Leases

The Company’s lease arrangements relate primarily to office and manufacturing space and equipment. The Company’s leases generally have initial terms ranging from 4 to 10 years and may include renewal options and rent escalation clauses. The Company is typically required to make fixed minimum rent payments relating to its right to use an underlying leased asset. Additionally, the Company’s leases do not contain significantly restrictive covenants or residual value guarantees.

The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities, current and operating lease liabilities on the Company’s condensed consolidated balance sheets. The Company does not currently maintain any finance lease arrangements. ROU assets represent the Company’s right to use an underlying asset and lease liabilities represent the Company’s obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term. The Company does not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities. The Company’s short-term leases are not material and do not have a material impact on its ROU assets or lease liabilities.

ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company uses an incremental borrowing rate based on estimated rate of interest for collateralized borrowing since the Company’s leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when it is reasonably certain that the Company will exercise that option. ROU assets include lease payments made in advance, and excludes any incentives received or initial direct costs incurred. The Company recognizes lease expense on a straight-line basis over the lease term.

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component. As such, minimum lease payments include fixed payments for non-lease components within a lease agreement, but exclude variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period.

Stock-based Compensation

The Company recognizes stock-based compensation expense for all stock options, restricted stock units and other arrangements within the scope of ASC 718, Stock Compensation ("ASC 718"). Stock-based compensation expense is measured at the date of grant, based on the fair value of the award, and is recognized using the straight-line method over the employee’s requisite service period. Compensation for stock-based awards with vesting conditions other than service are recognized based on the probability of the performance condition being met over the vesting period. Forfeitures are recognized as they are incurred.

Public and Private Common Stock Warrant Liabilities

As part of Galileo’s initial public offering, Galileo issued to third party investors 13,800,000 units, consisting of one ordinary share of Galileo and one warrant, at a price of $10.00 per unit. Each whole warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of Galileo’s initial public offering, Galileo completed the private sale of 4,110,000 warrants to Galileo’s sponsor and EarlyBirdCapital, Inc. at a purchase price of $1.00 per warrant (the “Private Warrants”). In connection with the Business Combination, Galileo’s sponsor exercised its right to convert the aggregate outstanding principal amount of the convertible promissory note issued by Galileo into an aggregate of 500,000 warrants (the "Sponsor Warrants"), with terms equivalent to the Private Warrants.

The Private Warrants are identical to the Public Warrants, except that the Private Warrants (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or

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any of its permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.

The Company evaluated the Public and Private Warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”), and concluded that the Private Warrants do not meet the criteria to be classified in stockholders’ equity. Since the Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the condensed consolidated balance sheets at fair value, with subsequent changes in their respective fair values recognized in the condensed consolidated statement of operations and comprehensive loss at each reporting date.

Research and Development Costs

Research and development expenses consist primarily of allocated personnel costs, fees paid to consultants and outside service providers, and allocations for rent and overhead. Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. For the three months ended September 30, 2022 and 2021, research and development costs were $2,572 and $1,673, respectively. For the nine months ended September 30, 2022 and 2021, research and development costs were $6,992 and $4,099, respectively.

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended September 30, 2022 and 2021, advertising costs were $571 and $568, respectively. For the nine months ended September 30, 2022 and 2021, advertising costs were $1,425 and $1,008, respectively. Advertising costs are included in selling, general and administrative expense on the condensed consolidated statements of operations and comprehensive loss.

Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Although the Company believes that it has adequately reserved for uncertain tax positions (including interest and penalties), it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company makes adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have a material impact on the Company’s financial condition and operating results. Carryforward attributes that were generated in tax years prior to those that remain open for examination may still be adjusted by relevant tax authorities upon examination if they either have been, or will be, used in a future period.

In applying the estimated annual effective tax rate approach prescribed under ASC 740, Income Taxes, and based on present evidence and conclusions around the realizability of deferred tax assets, the Company determined that any deferred tax benefits related to the forecasted tax rate and pretax activity during the three and nine months ended September 30, 2022 and 2021 are neither more likely than not to be realized in the current year, nor realizable as a deferred tax asset at the end of the year. Therefore, the appropriate amount of income tax benefit to recognize related to deferred tax assets during

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the three and nine months ended September 30, 2022 and 2021 is zero. The Company’s effective tax rate of zero for each of the three months ended September 30, 2022 and 2021 and zero and (1.78)% for the nine months ended September 30, 2022 and 2021, respectively, differs from the applicable statutory tax rate primarily due to the fact that the Company maintains a full valuation allowance against its U.S. deferred tax assets as a result of its historical and current period losses.

(Loss) Income per Share

In accordance with the provisions of ASC 260, Earnings Per Share, net (loss) income per common share is computed by dividing net (loss) income by the weighted-average shares of common stock outstanding during the period. Basic (loss) income per share is computed by dividing net (loss) income attributable to common stockholders by the weighted average number of shares outstanding during the period. Diluted net (loss) income per share gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, and convertible debt and convertible securities, using the if-converted method. During a loss period, the effect of the potential exercise of stock options and convertible debt are not considered in the diluted net (loss) income per share calculation since the effect would be anti-dilutive. A reconciliation of net (loss) income and net loss attributable to common stockholders and number of shares used in computing basic and diluted net (loss) income and net loss attributable to common stockholders per share is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic and Diluted net (loss) income per share computation:
Numerator for basic and diluted net loss per share:
Net (loss) income	$	(4,550)	$	2,552	$	(13,261)	$	4,125
Net loss attributable to common stockholders	$	(4,550)	$	(15,580)	$	(13,261)	$	(14,007)
Denominator for basic and diluted net loss per share:
Weighted average common shares - basic and diluted	53,185,561		37,932,345		52,985,344		37,351,244
Basic and diluted net (loss) income per share	$	(0.09)	$	0.07	$	(0.25)	$	0.11
Basic and diluted net loss per share attributable to common stockholders	$	(0.09)	$	(0.41)	$	(0.25)	$	(0.38)

The following table presents the outstanding shares of common stock equivalents that were excluded from the computation of the diluted net (loss) income per share attributable to common stock for the periods in which a net (loss) income is presented because their effect would have been anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Common stock warrants	18,410,000	18,410,000	18,410,000	18,410,000
Earnout Shares	3,510,405	3,510,405	3,510,405	3,510,405
Unvested RSUs	5,247,056	—	5,247,056	—

Included in net (loss) income per share are 3,951,205 and 4,833,059 shares subject to options due to their nominal exercise prices as of September 30, 2022 and 2021, respectively.

Segment Information

The Company operates and reports in one segment, which focuses on providing additive manufacturing services to customers. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the chief operating decision maker (“CODM”). The Company’s CODM has been identified as its Chief Executive Officer. The Company is continually evaluating its operating and reporting segments as it integrates the acquisitions discussed in Note 3. Business Acquisitions.

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Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and does not believe any will have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.

In October 2021, the FASB issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This standard is effective for fiscal years and interim periods with those fiscal years beginning after December 15, 2022, and should be applied prospectively to business combinations occurring on or after the effective date of the standard. Early adoption is permitted, including adoption in an interim period. The Company early adopted this guidance on April 22, 2022, and has applied the guidance to business combinations entered into during fiscal 2022.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Accounting for Credit Losses (Topic 326), which requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the standard will have on its condensed consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326)—Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. The amendments in this update eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. ASU 2022-02 is effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the update will have on its condensed consolidated financial statements.

Note 3. Business Acquisitions

During April and May 2022, the Company completed three insignificant strategic acquisitions of MP2020, Inc., also referred to as MFG.com ("MFG"), Linear, and MakerOS, Inc. ("MakerOS"), collectively the "2022 acquisitions."

The following table summarizes the total consideration for the 2022 acquisitions:


	Consideration
Cash consideration	$	8,890
Holdback consideration	1,100
Earnout consideration	2,900
Total consideration	$	12,890

The holdback consideration represents the portion of the purchase price to be paid within 12 months from the respective closing dates, subject to reduction for certain indemnifications and other potential obligations of the acquired businesses. The fair value of the earnout consideration liability for the Linear acquisition was determined using a Monte Carlo simulation based on revenue performance for the 12 months ending December 31, 2022. The estimated fair value at acquisition was $2,900 and is included in accrued expenses and other liabilities within the unaudited condensed consolidated balance sheet. As of September 30, 2022 the estimated fair value of the earnout consideration was $1,116. If

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achieved, the earnout will be payable in cash and equity in April 2023. There is no earnout consideration for the MFG or MakerOS acquisitions.

The Company has accounted for the MFG and Linear acquisitions as a business combination in accordance with ASC Topic 805, Business Combinations ("ASC 805"), and the acquisition of Maker OS as an asset purchase. The net assets acquired in the acquisitions was $12,890 which includes $5,781 of net intangible assets and $4,576 of goodwill. The Company has allocated the purchase price based on preliminary estimates of fair value for the assets acquired and liabilities assumed using information currently available. Adjustments, if any, to the preliminary allocation are not expected to be material.

The Company has determined that the impact of these acquisitions was not material to its condensed consolidated financial statements; therefore, separate presentation of revenue and earnings since the acquisition date and pro forma information are not required nor included herein.

Note 4. Revenue Recognition

Under ASC 606, revenue is recognized throughout the life of the executed agreement. The Company measures revenue based on consideration specified in a contract with a customer. Furthermore, the Company recognizes revenue when a performance obligation is satisfied by transferring control of the product or service to the customer which could occur over time or at a point in time.

A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. Customers typically receive the benefit of the Company’s services as (or when) they are performed. Substantially all customer contracts provide that compensation is received for services performed to date. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Nature of Products and Services

The following is a description of the Company’s products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

Direct sales

The Company provides customers with an additive manufacturing service, allowing for the customer to select the specifications of the model which they wish to have printed. Shapeways prints the 3D model and ships the product directly to the customer.

The Company recognizes the sale of shop owner products through their e-commerce website over time using the output method. Contracts involving the sale of shop owner products through their e-commerce website do not include other performance obligations. As such, allocation of the transaction price was not necessary as the entire contract price is attributed to the sole performance obligation identified.

Marketplace sales

The Company provides a platform for shop owners to sell their products to customers through Shapeways’ marketplace website. Shapeways receives a 3.5% markup fee from the shop owner upon the sale of any products through the marketplace.

The Company handles the financial transaction, manufacturing, distribution and customer service on behalf of the shop owners. The Company is responsible for billing the customer in this arrangement and transmitting the applicable fees to the shop owner. The Company assessed whether it is responsible for providing the actual product or service as a principal, or for arranging for the product or service to be provided by the third party as an agent. Judgment is applied to determine

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whether the Company is the principal or the agent by evaluating whether it has control of the product or service prior to it being transferred to the customer. The principal versus agent assessment is performed at the performance obligation level. Indicators that the Company has considered include whether it has the primary responsibility for fulfilling the promise to provide the specified product or service to the customer and whether it has inventory risk prior to transferring the product or service to the customer. The Company has the responsibility to fulfill the promise to provide the specific good or service on behalf of the shop owners to the customer. In addition, the Company has inventory risk before the specific good or service is transferred to a customer. As such, the Company is deemed the principal and shall recognize revenue on a gross basis for the price it charges to the shop owner for each product or service.

The Company recognizes the sale of 3D printed products to customers at a point in time, specifically upon shipping the goods to the customer (FOB Origin) given the transfer of significant risks and rewards of ownership at that point in time. Contracts involving the manufacturing and delivery of 3D printed products to customers do not include other performance obligations. As such, allocation of the transaction price is not necessary as the entire contract price is attributed to the sole performance obligation identified.

Software revenue

The Company launched the first phase of its software offering under the brand "OTTO" in the fourth quarter of 2021. The software enables other manufacturers to leverage Shapeways’ existing end-to-end manufacturing software to scale their businesses and shift to digital manufacturing. Shapeways’ software offers improved customer accessibility, increased productivity, and expanded manufacturing capabilities for its customers. The Company expanded its software offering's customer base and feature set with the acquisition of MFG and MakerOS, both completed in April 2022. Software revenue for the three and nine months ended September 30, 2022 reflects the April 2022 acquisition of MFG.

For each of the performance obligations classified as software revenue, the performance obligations are satisfied evenly over the term of the contract. For contracts including performance obligations classified as software revenue, the Company identified that each performance obligation has an explicitly stated standalone selling price. As such, allocation is not necessary as the prices included in the contract are attributed to each separate performance obligation.

The following table presents the Company's revenue disaggregated by revenue discipline:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Major products/service lines:
Direct sales	$	6,457	$	5,985	$	18,901	$	19,068
Marketplace sales	1,403		1,663		4,383		6,062
Software	589		68		1,168		224
Total revenue	$	8,449	$	7,716	$	24,452	$	25,354
Timing of revenue recognition:
Products transferred at a point in time	$	1,403	$	1,663	$	4,383	$	6,062
Products and services transferred over time	7,046		6,053		20,069		19,292
Total revenue	$	8,449	$	7,716	$	24,452	$	25,354

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Deferred Revenue

The Company records deferred revenue when cash payments are received in advance of performance. Deferred revenue activity consisted of the following:


	September 30, 2022		December 31, 2021
Balance at beginning of the period	$	921	$	753
Deferred revenue recognized during period	(24,452)		(33,623)
Additions to deferred revenue during period	24,567		33,791
Total Deferred Revenue	$	1,036	$	921

The Company expects to satisfy its remaining performance obligations within the next twelve months. The $921 of deferred revenue as of January 1, 2022 was recognized during the nine months ended September 30, 2022. The opening balance of accounts receivable as of January 1, 2021 was $185.

Practical Expedients and Exemptions

The Company applies the practical expedient related to incremental costs of obtaining a contract. Although certain of its commission costs qualify for capitalization under ASC 340-40, Contracts with Customers, their amortization period is less than one year. Therefore, utilizing the practical expedient, the Company expenses these costs as incurred.

Note 5. Inventory

Components of inventory consisted of the following:


	September 30, 2022		December 31, 2021
Raw materials	$	993	$	735
Work-in-process	103		28
Finished goods	146		164
Total	$	1,242	$	927

Note 6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	September 30, 2022		December 31, 2021
Prepaid operating expenses	$	3,263	$	396
Prepaid insurance	156		2,338

Prepaid expenses	961		680
VAT receivable	1,030		945
Other current assets	6		1
Total	$	5,416	$	4,360

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Note 7.