shpw-20230331

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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 March 31, 2023


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.)

12163 Globe St,

Livonia, MI 48150

(Address of principal executive offices) (Zip Code)

(734) 422-6060

(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 May 10, 2023 the registrant had 50,861,075 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 March 31, 2023 (Unaudited) and December 31, 202 2	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the Three Months Ended March 31, 202 3 and 202 2	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three Months Ended March 31 , 202 3 and 202 2	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 3 1 , 202 3 and 202 2	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

Signature		61

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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)


	March 31, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	12,817	$	30,630
Restricted cash	140		139
Short-term investments	19,733		9,816
Accounts receivable	2,250		1,606
Inventory	1,406		1,307

Prepaid expenses and other current assets	6,562		6,255
Total current assets	42,908		49,753
Property and equipment, net	16,492		15,627
Operating lease, right-of-use assets, net	2,159		2,365
Goodwill	6,286		6,286
Intangible assets, net	5,209		5,398
Security deposits	99		99
Total assets	$	73,153	$	79,528
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,505	$	2,354
Accrued expenses and other liabilities	6,296		5,950

Operating lease liabilities, current	708		719
Finance lease liability, current	49		—
Other financing obligations, current	37		—
Deferred revenue	1,061		972
Total current liabilities	9,656		9,995
Operating lease liabilities, net of current portion	1,534		1,715
Deferred tax liabilities, net	45		27
Finance lease liability, noncurrent	227		—
Other financing obligations	459		—

Total liabilities	11,921		11,737
Commitments and contingencies
Stockholders’ equity
Preferred stock ($0.0001 par value; 10,000,000 shares authorized; none issued or outstanding as of March 31, 2023 and December 31, 2022)	—		—
Common stock ($0.0001 par value; 120,000,000 shares authorized; 49,609,167 and 49,445,174 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)	5		5
Additional paid-in capital	202,167		201,362
Accumulated deficit	(140,435)		(133,032)
Accumulated other comprehensive loss	(505)		(544)
Total stockholders’ equity	61,232		67,791
Total liabilities and stockholders’ equity	$	73,153	$	79,528

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 March 31,
		2023		2022
Revenue, net		$	8,199	$	7,570
Cost of revenue		4,917		4,161
Gross profit		3,282		3,409
Operating expenses
Selling, general and administrative		8,481		6,145
Research and development		2,526		2,065
Total operating expenses		11,007		8,210
Loss from operations		(7,725)		(4,801)
Other income (expense)

Interest income		319		1
Interest expense		(21)		—
Other income		114		1
Loss on disposal of assets		(72)		—
Change in fair value of warrant liabilities		—		762
Total other income (expense), net		340		764
Loss before income tax expense		(7,385)		(4,037)
Income tax expense		18		—
Net loss		(7,403)		(4,037)
Net loss per share:
Basic		$	(0.14)	$	(0.08)
Diluted		$	(0.14)	$	(0.08)
Weighted average common shares outstanding:
Basic		53,410,652		53,142,447
Diluted		53,410,652		53,142,447
Other comprehensive income (loss)
Foreign currency translation adjustment		39		(52)
Comprehensive loss		$	(7,364)	$	(4,089)

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

(UNAUDITED)

(in thousands, except share and per share amounts)


	Common Stock
Three Months Ended March 31, 2023		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
Balance at January 1, 2023		49,445,174	$	5	$	201,362	$	(133,032)	$	(544)	$	67,791
Issuance of Legacy Shapeways common stock upon exercise of stock options		164,052	—		—		—		—		—
Cancellation of restricted stock		(59)	—		—		—		—		—
Stock-based compensation expense		—	—		805		—		—		805
Net loss		—	—		—		(7,403)		—		(7,403)

Foreign currency translation		—	—		—		—		39		39
Balance at March 31, 2023		49,609,167	$	5	$	202,167	$	(140,435)	$	(505)	$	61,232


	Common Stock
Three Months Ended March 31, 2022		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
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

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)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(7,403)	$	(4,037)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	442		182
Loss on disposal of assets	72		—
Stock-based compensation expense	805		312
Non-cash lease expense	252		131
Deferred income taxes	18		—

Net change in interest receivable on short-term investments	37		—
Change in fair value of warrant liabilities	—		(762)
Change in operating assets and liabilities:
Accounts receivable	(643)		(134)
Inventory	(94)		24
Prepaid expenses and other assets	(473)		(2,567)

Accounts payable	(698)		(193)
Accrued expenses and other liabilities	334		851
Operating lease liabilities	(243)		(154)
Deferred revenue	89		(406)

Net cash used in operating activities	(7,505)		(6,753)
Cash flows from investing activities:
Purchases of property and equipment	(1,032)		(8,258)
Purchase of short-term investments	(9,769)		—

Net cash used in investing activities	(10,801)		(8,258)
Cash flows from financing activities:
Proceeds received from other finance obligations	493		—
Principal payments on finance leases	(8)		—
Payments on other finance obligations	(5)		—
Proceeds from issuance of common stock	—		99




Net cash provided by financing activities	480		99
Net change in cash and cash equivalents and restricted cash	(17,826)		(14,912)
Effect of change in foreign currency exchange rates on cash and cash equivalents and restricted cash	14		(74)
Cash and cash equivalents and restricted cash at beginning of period	30,769		79,819
Cash and cash equivalents and restricted cash at end of period	$	12,957	$	64,833
Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest	$	21	$	—
Purchase of property and equipment included in accounts payable	$	79	$	—

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 12 additive manufacturing technologies and more than 120 materials and finishes, with the ability to easily scale new innovation. Shapeways has delivered over 24 million parts to over 1 million customers in over 180 countries, from inception through March 31, 2023.

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 for the fiscal year ended December 31, 2022, as filed with the SEC on March 30, 2023 (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. 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 and highly liquid securities with original maturities at the date of acquisition of ninety days or less. 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:


	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	12,817	$	64,692
Restricted cash	140		141
	$	12,957	$	64,833

Short-term investments

The Company invests its excess cash in fixed income instruments including U.S. treasury securities with a maturity of six months or less. The Company has the means and intends to hold all investments to maturity, and as such, its investments are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.

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 March 31, 2023 and December 31, 2022.

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

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

and discontinued items and provides allowances to reduce such items identified to their recoverable amounts. As of March 31, 2023 and December 31, 2022, 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 charges were recorded for the three months ended March 31, 2023 and 2022. 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-competition 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 months ended March 31, 2023 and 2022.

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.

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

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 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 4).

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;

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(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.

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 5).

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 operating lease right-of-use assets, net and the corresponding lease liabilities are included in operating lease liabilities, current and operating lease liabilities, net of current on the Company’s condensed consolidated balance sheets. Finance lease right-of-use assets are presented within property and equipment, net and the corresponding finance lease liabilities are included in finance lease liability, current and finance lease liability, noncurrent on the Company's condensed consolidated balance sheets. Operating lease right-of-use assets and finance lease right-of-use assets, (collectively "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.

Common Stock Warrant Liabilities

The Company evaluates its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”). The Private Warrants (as defined in Note 13) previously met the definition of a derivative under ASC

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

815, and 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.

In December 2022, the Company and the holders of the Private Warrants entered into letter agreements, pursuant to which such holders agreed that the Private Warrants will be exercisable for cash or on a cashless basis and redeemable on the same terms and subject to the same conditions as the Public Warrants (as defined in Note 13). The Company has therefore concluded that as of March 31, 2023 and December 31, 2022, all its warrants met the criteria to be classified in stockholders' equity.

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 March 31, 2023 and 2022, research and development costs were $2,526 and $2,065, respectively.

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended March 31, 2023 and 2022, advertising costs were $341 and $558, 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 months ended March 31, 2023 and 2022 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 the three months ended March 31, 2023 and 2022 is zero. The Company’s effective tax rate of (0.25)% and zero percent for the three months ended March 31, 2023 and 2022, respectively, differs from the applicable statutory tax rate primarily due to the fact

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(in thousands, except share and per share amounts)

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.

Net loss per Share

In accordance with the provisions of ASC 260, Earnings Per Share, net loss per common share is computed by dividing net loss by the weighted-average shares of common stock outstanding during the period. Basic net loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss 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 per share calculation since the effect would be anti-dilutive. A reconciliation of net loss and number of shares used in computing basic and diluted net loss per share is as follows:


	Three Months Ended March 31,
	2023		2022
Basic and Diluted net loss per share computation:
Numerator for basic and diluted net loss per share:
Net loss	$	(7,403)	$	(4,037)
Denominator for basic and diluted net loss per share:
Weighted average common shares - basic and diluted	53,410,652		53,142,447
Basic and diluted net loss per share	$	(0.14)	$	(0.08)

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


	Three Months Ended March 31,
	2023	2022
Common stock warrants	18,410,000	18,410,000
Earnout Shares	3,510,405	3,510,405
Unvested RSUs	6,253,772	3,268,105

Included in net loss per share are 3,899,158 and 4,339,216 shares subject to options due to their nominal exercise prices as of March 31, 2023 and 2022, 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 4, Business Acquisitions.

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.

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(in thousands, except share and per share amounts)

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.

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 has determined that there will be no material impact on its condensed consolidated financial statements due to adoption of this standard.

Note 3. Short-term Investments

As of March 31, 2023, the Company's short-term investments consisted of U.S. Treasury Securities classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. The Company considers all investments with original maturities of 3 months or less to be cash and cash equivalents and investments with original maturities of more than three months but less than one year to be short-term investments. The carrying value, excluding gross unrealized holding gains or losses and fair value as of March 31, 2023 and December 31, 2022 were as follows:


March 31, 2023
	Amortized Cost and Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value March 31, 2023
Classified as Cash and cash equivalents
U.S. Treasury Securities	$	4,962	$	18	$	—	$	4,980

Classified as short-term investments
U.S. Treasury Securities	$	19,733	$	67	$	—	$	19,800


December 31, 2022
	Amortized Cost and Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value December 31, 2022
Classified as Cash and cash equivalents
U.S. Treasury Securities	$	19,864	$	73	$	—	$	19,937

Classified as short-term investments
U.S. Treasury Securities	$	9,816	$	33	$	—	$	9,849

Note 4. 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."

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

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 Linear's revenue performance for the 12 months ending December 31, 2022. The estimated fair value at acquisition was $2,900. During 2022, the Company recognized a non-cash gain of $1,824 as a result of the actual revenue performance of Linear for the 12 months ended December 31, 2022. As of March 31, 2023 the estimated fair value of the earnout consideration was $1,076 and is included in accrued expenses and other liabilities within the unaudited condensed consolidated balance sheet. The earnout was paid 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 $5,903 of net intangible assets and $4,451 of goodwill.

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 5. 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

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(in thousands, except share and per share amounts)

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 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 months ended March 31, 2023 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.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

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


	Three Months Ended March 31,
	2023		2022
Major products and service lines:
Direct sales	$	6,052	$	5,674
Marketplace sales	1,488		1,825
Software	659		71
Total revenue	$	8,199	$	7,570
Timing of revenue recognition:
Products transferred at a point in time	$	1,488	$	1,825
Products and services transferred over time	6,711		5,745
Total revenue	$	8,199	$	7,570

Deferred Revenue

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


	March 31, 2023		December 31, 2022
Balance at beginning of the period	$	972	$	921
Deferred revenue recognized during period	(8,199)		(33,157)
Additions to deferred revenue during period	8,288		33,208
Total deferred revenue	$	1,061	$	972

The Company expects to satisfy its remaining performance obligations within the next twelve months. The $972 of deferred revenue as of January 1, 2023 was recognized during the three months ended March 31, 2023. The opening balance of accounts receivable as of January 1, 2022 was $1,372.

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 6. Inventory

Components of inventory consisted of the following:


	March 31, 2023		December 31, 2022
Raw materials	$	1,189	$	849
Work-in-process	91		209
Finished goods	126		249
Total	$	1,406	$	1,307

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Note 7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	March 31, 2023		December 31, 2022
Prepaid service expenses	$	3,203	$	3,231
Prepaid expenses	1,693		1,384
VAT receivable	1,116		990
Prepaid insurance	349		401
Security deposits	175		175
Other current assets	26		74
Total	$	6,562	$	6,255

Note 8. Property and Equipment, Net

Property and equipment, net consisted of the following:


	March 31, 2023		December 31, 2022
Machinery and equipment	$	10,850	$	10,450
Computers and IT equipment	1,144		1,138
Leasehold improvements	882		2,429
Furniture and fixtures	82		81
Vehicles	42		42
Assets to be placed in service	12,594		11,749
Property and equipment	25,594		25,889
Less: Accumulated depreciation	(9,102)		(10,262)
Property and equipment, net	$	16,492	$	15,627

For the three months ended March 31, 2023 and 2022, depreciation expense totaled $253 and $182, respectively. Of these amounts, depreciation charged to cost of revenue was $228 and $150 for the three months ended March 31, 2023 and 2022, respectively.

Note 9. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill as of March 31, 2023 and December 31, 2022 are as follows:


	March 31, 2023		December 31, 2022
Balance, beginning of period	$	6,286	$	1,835
Acquired goodwill	—		4,451
Balance, end of period	$	6,286	$	6,286

The Company had no accumulated impairment losses on goodwill during the three months ended March 31, 2023 and 2022.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Intangible assets consisted of the following as of March 31, 2023:


	Gross carrying amount		Accumulated amortization		Intangible assets, net		Weighted average amortization period (in years)
Customer relationships	$	3,086	$	(283)	$	2,803	10
Trade name	987		(91)		896		10
Acquired software platform	910		(83)		827		10
Customer lists	190		(58)		132		3
Noncompete agreement	52		(24)		28		2
Favorable operating lease	699		(160)		539		4
Unfavorable operating lease	(21)		5		(16)		4
Total intangible assets, net	$	5,903	$	(694)	$	5,209

Intangible assets consisted of the following as of December 31, 2022:


	Gross carrying amount		Accumulated amortization		Intangible assets, net		Weighted average amortization period (in years)
Customer relationships	$	3,086	$	(206)	$	2,880	10
Trade name	987		(66)		921		10
Acquired software platform	910		(61)		849		10
Customer lists	190		(42)		148		3
Noncompete agreement	52		(17)		35		2
Favorable operating lease	699		(117)		582		4
Unfavorable operating lease	(21)		4		(17)		4
Total intangible assets, net	$	5,903	$	(505)	$	5,398

The Company recognized $189 of amortization expense during the three months ended March 31, 2023. There was no amortization expense recorded during the three months ended March 31, 2022. The Company estimates the future aggregate amortization expense related to its intangible assets as of March 31, 2023 will be as follows:


	Amortization expense
Remainder of 2023	$	568
2024	740
2025	689
2026	555
2027	498
Thereafter	2,159
Total	$	5,209

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Note 10. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following:


	March 31, 2023		December 31, 2022
Accrued compensation	$	1,534	$	1,504
Earnout consideration	1,076		1,076
Holdback consideration	800		1,100
Accrued selling expenses	670		487

Taxes payable	573		339

Accrued acquisition of property and equipment	79		225

Other	1,564		1,219
Total	$	6,296	$	5,950

Note 11. Commitments and Contingencies

Leases

During the three months ended March 31, 2023, the Company maintained five leases of facilities located in the United States and the Netherlands, as well as one lease of equipment classified as a finance lease. In addition, the Company has two failed sale-leaseback transactions that have been recorded as finance obligations within its condensed consolidated balance sheets. See Note 12 for additional information.

The table below presents certain information related to the Company’s lease costs:


	Three Months Ended March 31,
	2023		2022
Operating lease expense	$	252	$	142
Finance lease expense	8		—
Interest expense on finance lease liabilities	4		—

Total lease cost	$	264	$	142

The Company recorded sublease income of $102 during the three months ended March 31, 2023, associated with the Company's sublease of its facility in Michigan. The Company had no sublease income during the three months ended March 31, 2022.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Right-of-use assets and lease liabilities for operating leases were recorded in the condensed consolidated balance sheets as follows:


	March 31, 2023		December 31, 2022
Assets:
Operating lease right-of-use assets, net	$	2,159	$	2,365
Finance lease right-of-use assets, net	275		—
Total lease assets	$	2,434	$	2,365
Liabilities:
Current liabilities:
Operating lease liabilities, current	$	708	$	719
Finance lease liability, current	49		—
Non-current liabilities:
Operating lease liabilities, net of current portion	1,534		1,715
Finance lease liability, net of current portion	227		—
Total lease liability	$	2,518	$	2,434

The Company’s lease agreements do not state an implicit borrowing rate, therefore, an internal incremental borrowing rate was determined based on information available at the lease commencement date for the purposes of determining the present value of lease payments. The incremental borrowing rate reflects the cost to borrow on a securitized basis in each market. The weighted-average remaining lease term for operating and finance leases was 2.88 years and 4.83 years, respectively and the weighted-average incremental borrowing rate for operating and finance leases was 7.11% and 8.06% as of March 31, 2023.

Supplemental cash flow information related to the Company’s leases was as follows:


	Three Months Ended March 31,
	2023		2022
Operating cash flows from operating leases	$	243	$	167

Financing cash flows from finance leases	8		—
Lease liabilities arising from obtaining right-of-use assets	284		—

As of March 31, 2023, future minimum lease payments required under operating and finance leases are as follows:


	Operating Leases		Finance Leases
Rest of 2023	$	632	$	52
2024	848		69
2025	781		69
2026	237		69
2027	—		69
Thereafter	—		6
Total minimum lease payments	2,498		334
Less effects of discounting	(256)		(58)
Present value of future minimum lease payments	$	2,242	$	276

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Desktop Metal

On March 26, 2021, the Company entered into a non-binding Memorandum of Understanding (“MOU”) with Desktop Metal, pursuant to which Desktop Metal agreed to invest $20.0 million in the PIPE Investment. Upon consummation of this investment, the Company became obligated to purchase $20.0 million of equipment, materials and services from Desktop Metal. In conjunction with these obligations, the Company and Desktop Metal agreed to develop a strategic partnership. As of March 31, 2023, the Company had paid $16.3 million to Desktop Metal for equipment, materials and services received and placed purchase orders for another $3.7 million of equipment, materials and services to be purchased under the MOU. The timing of payments for these purchase orders may depend on a number of factors, including Desktop Metal's inventory management and logistics systems and the Company's ability to take delivery of any such equipment, materials and services. The Company has no further obligations under the MOU.

Legal Proceedings

The Company is involved in various legal proceedings which arise from time to time in the normal course of business. While the results of such matters generally cannot be predicted with certainty, management does not expect any such matters to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022.

Note 12. Financing Obligations

During February and March 2023, the Company entered into two lease transactions with Rabo Lease BV (“Rabo”), whereby it sold equipment to Rabo and leased back the equipment for an initial term of four years. The Company concluded that the lease arrangements would be classified as a lease financing obligation as it has the option to repurchase the assets at a fixed price at the end of the term. Therefore, the transactions were each deemed a failed sale-leaseback and were accounted for as a financing obligation. The assets continue to be depreciated over their useful lives, and payments are allocated between interest expense and repayment of the financing obligation. The assets under failed sale-leaseback transactions are included within property and equipment, net on the Company's condensed consolidated balance sheets and the proceeds from the transactions are recorded as a financing obligation.

The weighted average interest rate of 20.5% was used to impute interest on the failed sale-leaseback transactions. Interest expense recognized for the three months ended March 31, 2023 was $16.

As of March 31, 2023, future financing obligation payments are as follows:


	Finance Obligations
Rest of 2023	$	101
2024	135
2025	135
2026	135
2027	13
Total payments	519
Less: imputed interest	(325)
Financing obligation at end of term	302
Total financing obligations	$	496

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Note 13. Stockholders’ Equity

Common Stock

Upon closing of the Business Combination, pursuant to the terms of the Certificate of Incorporation, the Company authorized 120,000,000 shares of Common Stock with a par value $0.0001. The holders of Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval and are entitled to receive dividends, as and if declared by the Board of Directors out of legally available funds.

The Company has issued and outstanding 49,609,167 and 49,445,174 shares of Common Stock as of March 31, 2023 and December 31, 2022, respectively.

Public Warrants

Prior to the Merger, the Company had outstanding 13,800,000 warrants entitling the holder to purchase one share of common stock of the Company at an exercise price of $11.50 per share (the "Public Warrants"). The Public Warrants became exercisable 30 days after the Closing Date, and expire five years after the Closing Date or earlier upon redemption or liquidation.

The Company may redeem the Public Warrants as follows: in whole and not in part; at a price of $0.01 per warrant; at any time while the Public Warrants are exercisable, upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder; if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share, for any 20 trading days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders; and if, and only if, there is a current registration statement in effect with respect to the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. Certain of these conditions have not been met to redeem the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The Company had outstanding 4,110,000 private warrants that were issued upon the consummation of the initial public offering of Galileo (the "Private Warrants"). Additionally, at the Closing, a lender holding a convertible note issued by the Company with an aggregate principal amount of $500 converted the note into 500,000 sponsor warrants exercisable for common stock at a purchase price of $1.00 per warrant (the "Sponsor Warrants"), with terms equivalent to the Private Warrants. The Sponsor Warrants are no longer held by the initial purchaser or any of its permitted transferees, and therefore have terms equivalent to the Public Warrants. In December 2022, the Company and the holders of the Private Warrants entered into letter agreements, pursuant to which such holders agreed that the Private Warrants will be exercisable for cash or on a cashless basis and redeemable on the same terms and subject to the same conditions as the Public Warrants.

There were 18,410,000 warrants outstanding as of March 31, 2023 and December 31, 2022.

Note 14. Stock-Based Compensation

2010 Stock Plan

Prior to the Business Combination, Legacy Shapeways maintained its 2010 Stock Plan (the “2010 Plan”), under which Legacy Shapeways granted statutory and non-statutory stock to employees, outside directors and consultants. The maximum number of shares of common stock that was issuable under the 2010 Plan was 16,942,546 shares.

In connection with the Business Combination, each Legacy Shapeways stock option that was outstanding immediately prior to Closing, whether vested or unvested, was converted into an option to acquire a number of shares of common stock (each such option, an “Exchanged Option”) equal to the product of (i) the number of shares of Legacy Shapeways common stock subject to such Legacy Shapeways option immediately prior to the Business Combination and (ii) 90% of the

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

recapitalization conversion ratio of 0.8293 established in the Merger (the "Conversion Ratio"), at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy Shapeways option immediately prior to the consummation of the Business Combination, divided by (B) 90% of the Conversion Ratio. Except as specifically provided in the Business Combination Agreement, following the Business Combination, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Shapeways option immediately prior to the consummation of the Business Combination. All stock option activity was retroactively restated to reflect the Exchanged Options.

In addition, each holder of an in-the-money Legacy Shapeways option held by individuals remaining in continuous service to the Company through the Closing, was granted a right to receive an award of restricted stock units denominated in shares of common stock granted under the 2021 Plan (each, an “Earnout RSU”) equal to the product of (A) the number of shares of Legacy Shapeways common stock that were subject to the option immediately prior to Closing, multiplied by (B) ten percent (10%) of the Conversion Ratio. The Earnout RSUs are subject to substantially the same service-based vesting conditions and acceleration provisions as applied to the Legacy Shapeways option provided that, in addition to such service-based vesting conditions, Earnout RSUs will be subject to vesting and forfeiture conditions based upon the dollar volume-weighted price of the Company’s common stock reaching certain targets (the “RSU Performance Milestones”). The Company records stock compensation expense for Earn-Out RSUs based upon an assessment of the grant date fair value using the Monte Carlo valuation model in accordance with FASB ASC 718. The Company did not grant any additional Earn-Out RSUs during the three months ended March 31, 2023.

Upon the Closing of the Business Combination, the outstanding and unexercised Legacy Shapeways options became options to purchase an aggregate of 4,901,207 shares of the Company’s common stock under the 2010 Plan at an average exercise price of $0.62 per share.

2021 Equity Incentive Plan

Upon the closing of the Business Combination, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan permits the granting of incentive stock options, restricted stock awards, other share-based awards or other cash-based awards to employees, consultants, and non-employee directors. On the first day of each calendar year, beginning on January 1, 2022 and continuing until (and including) January 1, 2031, the number of shares available under the 2021 Plan will automatically increase by a number equal to the lesser of (a) five percent (5%) of the total number of shares of the Company’s common stock issued and outstanding on December 31 of the calendar year immediately preceding the date of such increase and (b) a number of shares of our common stock determined by the Company’s Board of Directors. As of March 31, 2023, 12,525,045 shares of common stock are authorized for issuance pursuant to awards under the 2021 Plan. Any shares of common stock related to awards that are forfeited, cancelled, terminated, expire or shares withheld by the Company to satisfy tax withholding obligations or to pay any exercise price are deemed available for issuance under the 2021 Plan. As of March 31, 2023, 7,344,600 shares remain available for issuance under the 2021 Plan.

2022 New Employee Equity Incentive Plan

In September 2022, the Company adopted the 2022 New Employee Equity Incentive Plan (the "2022 Plan"). The 2022 Plan permits the granting of restricted stock awards, stock options and other share-based rewards to individuals who were not previously employees of the Company, as an inducement material to the individual's entry into employment with the Company within the meaning of Listing Rule 303A.08 of the New York Stock Exchange ("NYSE"). The 2022 Plan was adopted by the Board of Directors without stockholder approval pursuant to NYSE Listing Rule 303A.08. As of March 31, 2023, 5,000,000 shares of common stock are authorized for issuance pursuant to awards under the 2022 Plan. Any shares of common stock related to awards that are forfeited, cancelled, terminated, expire or shares withheld by the Company to satisfy tax withholding obligations or to pay any exercise price are deemed available for issuance under the 2022 Plan. As of March 31, 2023, 3,221,329 shares remain available for issuance under the 2022 Plan.

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SHAPEWAYS HOLDINGS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Option Awards

The Company accounts for share-based payments pursuant to ASC 718 and, accordingly, the Company records stock compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options using the Black-Scholes option pricing model. Due to its limited trading history, the Company lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends. The Company generally recognizes stock compensation expense on the grant date and over the period of vesting or period that services will be provided. There were no stock options granted during three months ended March 31, 2023 and 2022.

The following table summarizes the Company’s stock option activity during the period presented:


	Shares Underlying Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2023	3,979,533	$	0.65	5.67
Granted	—	$	—
Forfeited	(18,252)	$	0.49
Exercised	(250)	$	0.47
Outstanding at March 31, 2023	3,961,031	$	0.63	4.37	$	—








Exercisable at March 31, 2023	3,899,158	$	0.65	4.34	$	—

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price and the exercise price of the stock options. As of March 31, 2023, approximately $20 of unrecognized compensation expense related to non-vested awards is expected to be recognized over the weighted average period of 0.77 years.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity during the period presented:

Restricted Stock Units

Weighted Average Grant Fair Value per Share

Aggregate Intrinsic Value

Outstanding as of January 1, 2023