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ExOne (XONE)

Filed: 11 Mar 21, 4:19pm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

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

For the fiscal year ended December 31, 2020

OR

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

For the transition period from                 to                

Commission file number 001-35806

 

The ExOne Company

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-1684608

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

127 Industry Boulevard

North Huntingdon, PA 15642

(Address of Principal Executive Offices) (Zip Code)

(724) 863-9663

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock

XONE

The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No  

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

The aggregate market value of common stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $100.9 million.

As of March 9, 2021, 22,073,724 shares of common stock, par value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.  

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

PART I

1

Item 1.

Business

1

Item 1A.

Risk Factors

8

Item 1B.

Unresolved Staff Comments

18

Item 2.

Properties

18

Item 3.

Legal Proceedings

18

Item 4.

Mine Safety Disclosures

18

 

 

PART II

19

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19

Item 6.

Selected Financial Data

20

Item 7.

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

21

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 8.

Financial Statements and Supplementary Data

30

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

55

Item 9A.

Controls and Procedures

55

Item 9B.

Other Information

56

 

 

PART III

57

Item 10.

Directors, Executive Officers and Corporate Governance

57

Item 11.

Executive Compensation

57

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

57

Item 13.

Certain Relationships and Related Transactions, and Director Independence

57

Item 14.

Principal Accountant Fees and Services

57

 

 

PART IV

58

Item 15.

Exhibits and Financial Statement Schedules

58

 

 

 

i


 

 

PART I

Item 1. Business.

 

General

As used in this Annual Report on Form 10-K, unless the context otherwise requires or indicates, the terms “ExOne,” “Company,”  “we,” “our,” “ours,” and “us” refer to The ExOne Company and its wholly-owned subsidiaries.

This Annual Report on Form 10-K may contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Solely for convenience, marks and trade names referred to in this Annual Report on Form 10-K may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these marks and trade names. Third-party marks and trade names used herein are for nominative informational purposes only and their use herein in no way constitutes or is intended to be commercial use of such names and marks. The use of such third-party names and marks in no way constitutes or should be construed to be an approval, endorsement or sponsorship of us, or our products or services, by the owners of such third-party names and marks.

Cautionary Statement Concerning Forward-Looking Statements

This Annual Report on Form 10-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to our future financial or business performance, strategies, or expectations. Forward-looking statements typically are identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” as well as similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could” and “may.”

We caution that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to and do not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to risk factors previously disclosed in our reports and those identified elsewhere in this report, the following factors, among others, could cause results to differ materially from forward-looking statements or historical performance: the severity and duration of world health events, including the recent COVID-19 outbreak and the related economic repercussions and operational challenges; the Company’s ability to consistently generate operating profits; fluctuations in the Company’s revenues and operating results; the Company’s competitive environment and its competitive position; ExOne’s ability to enhance its current three-dimensional (“3D”) printing machines and technology and to develop and introduce new 3D printing machines; the Company’s ability to qualify more industrial materials in which it can print; demand for ExOne’s products; the availability of skilled personnel; the impact of loss of key management; the impact of customer specific terms in machine sale agreements in determining the period in which the Company recognizes revenue; risks related to global operations including effects of foreign currency and COVID-19; dependency on certain critical suppliers; nature or impact of alliances and strategic investments; reliance on critical information technology systems; the effect of litigation, contingencies and warranty claims; liabilities under laws and regulations protecting the environment; the impact of governmental laws and regulations; operating hazards, war, terrorism and cancellation or unavailability of insurance coverage; the impact of disruption of the Company’s manufacturing facilities or ExOne Adoption Centers; the adequacy of ExOne’s protection of its intellectual property; expectations regarding demand for the Company’s industrial products, and other matters with regard to outlook; and other factors beyond our control, including the impact of COVID-19.

These and other important factors, including those discussed under Part I, Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K, may cause our actual results of operations to differ materially from any future results of operations expressed or implied by the forward-looking statements contained in this Annual Report on Form 10-K. Before making a decision to purchase our common stock, you should carefully consider all of the factors identified in this Annual Report on Form 10-K that could cause actual results to differ from these forward-looking statements.

Our History

Our business began as the advanced manufacturing business of the Extrude Hone Corporation, which manufactured its first 3D printing machine in 2003 using licensed technology developed by researchers at the Massachusetts Institute of Technology (“MIT”). In 2005, our business assets were transferred to The Ex One Company, LLC, a Delaware limited liability company, when Extrude Hone Corporation was acquired by a third party. In 2007, we were acquired by S. Kent Rockwell through his wholly-owned company, Rockwell Forest Products, Inc. On January 1, 2013, the Company was formed when The Ex One Company, LLC was merged with and into a Delaware corporation formed in December 2012, which changed its name to The ExOne Company. On February 12, 2013, we completed our initial public offering.

1


 

The Additive Manufacturing Industry and 3D Printing

3D printing is the most common type of an emerging manufacturing technology that is broadly referred to as additive manufacturing (“AM”). In general, AM is a term used to describe a manufacturing process that produces 3D objects directly from digital or computer models through the repeated deposit of very thin layers of material. 3D printing is the process of joining materials from a digital 3D model, usually layer by layer, to make objects using a printhead, nozzle, or other printing technology. The terms “AM” and “3D printing” are often used interchangeably, as the media and marketplace have popularized the term 3D printing rather than AM, which is the industry term. AM represents a transformational shift from traditional forms of manufacturing (e.g., machining or tooling), which are sometimes referred to as subtractive manufacturing. We believe that AM and 3D printing are increasingly poised to displace traditional subtractive manufacturing methodologies in a growing range of industrial applications.

AM methods generally include the following:

 

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Material extrusion;

 

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Material jetting;

 

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Powder bed fusion;

 

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Directed energy deposition;

 

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Vat photopolymerization;

 

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Sheet lamination; and

 

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Binder jetting.  

Each of the methods above includes one or more underlying technologies used to address specific applications. From our inception, our focus has been specifically targeted on binder jetting technologies for industrial applications.

Historically, AM had focused on prototyping and small, limited production in order to find acceptance of its varying technologies by end users in order to convince users of traditional methods of the viability of such new applications. As AM has evolved, the focus has progressed into production readiness and increasing reliability and repeatability standards associated with higher volumetric output and specifications that industrial applications demand for which binder jetting technologies are ideally suited.

ExOne and 3D Printing  

We are a global provider of 3D printing machines and 3D printed and other products, materials and services to industrial customers. Our business primarily consists of manufacturing and selling 3D printing machines and printing products to specification for our customers using our global installed base of 3D printing machines. Our machines serve direct and indirect applications.  Direct printing produces a component; indirect printing makes a tool to produce a component. We offer pre-production collaboration and print products for customers through our network of ExOne Adoption Centers (“EACs”). We also supply the associated materials, including consumables and replacement parts, and other services, including training and technical support, that are necessary for purchasers of our 3D printing machines to print products. We believe that our ability to print in a variety of industrial materials, as well as our industry-leading volumetric output (as measured by build box size and printing speed), uniquely position us to serve the needs of industrial customers. During 2020 and 2019, sales of 3D printing machines represented 53% and 51% of our total revenue, respectively, and sales of 3D printed and other products, materials, and services, represented 47% and 49% of our total revenue, respectively.

Our binder jetting technology was developed over 20 years ago by researchers at MIT. Our 3D printing machines build or print products from computer-aided drafting (“CAD”) models by depositing successive thin layers of particles of materials such as silicate sands or metal or ceramic powders in a “build box.” A moveable printhead passes over each layer and deposits a chemical binding agent in the selected areas where the finished product will be materialized. Each layer can be unique.

Depending on the industrial material used in printing (sands, metals or ceramics), printed products may require post-production processing including but not limited to, drying or curing, heat treating or sintering, machining or finishing, or other processes which are application specific.

Pre-Print. We believe that our customers have the opportunity to take greater advantage of the design freedom that our 3D printing technology provides. Each of our 3D printing machines uses standard front-end software which gives us the ability to collaborate with our customers to develop and refine CAD designs that meet our customers’ specifications and can be read and processed by our 3D printing machines. We continue to invest in additional pre-print capabilities and resources that empower our customers to fully exploit the design freedom of 3D printing. This includes collaborative agreements, including simulation software development agreements with third parties.

Industrial Materials. We supply printing materials to our customers that have been qualified for use with our machines. As we experience increased demand for our products globally, it is essential that the material supply chain and distribution channels be in close proximity to our current and prospective customers. For the highest quality printed products, the sand grains and metal or ceramic particles used in the 3D printing process must be uniform in size and meet very specific tolerances. We continue to focus on material development activities associated with our 3D printing process, including collaborative arrangements with customers targeted at local supply resources.

2


 

Printing Platforms. Each of our 3D printing machine platforms include a computer processor which controls the printhead(s) utilized in applying layers of chemical binding agent to a material (sands, metals or ceramics) spread across the build area. Our 3D printing machines are differentiated by the varying size of our build box profiles and the speed at which we can jet chemical binding agent and effectively distribute materials in the printing process. We manufacture our 3D printing machines in both Germany and the United States. Our machines serve direct (metal or ceramic) and indirect (sand) applications. Direct printing produces a component; indirect printing makes a tool to produce a component. Our focus is on enhancing our existing machine technologies by expanding our material capabilities for both direct and indirect applications, growing the size of our platforms to meet the needs of industrial customer volume demands and optimizing the speed and quality of our printing processes.

Our 3D printing machines are used primarily to manufacture industrial products that are ordered in various volumes, are highly complex and have a high value to the customer. Our technology is not appropriate for the mass production of simple parts, such as certain higher volume injection molded parts or certain higher volume parts made in metal stamping/forging machines. Traditional manufacturing technology is more economical in making those parts. While we expect over time to be able to increase the kinds of parts that we can make more economically than using subtractive manufacturing, we do not expect to use our technology to make simple, low-cost, mass-produced parts for the foreseeable future.

Post-Print Processing. After a product is printed, the bound and unbound powder in the build box requires curing of the chemical binding agent. For indirect printing of sand molds and cores, curing may occur at room temperature and the printed product is complete after the binder is cured. For certain binder types, a drying process (utilizing an industrial microwave or other means) may be necessary. The mold or core is then poured at a foundry, yielding the finished metal product. We believe that our casting technology offers a number of advantages over traditional casting methods, including enhanced design complexity, increased yield, weight reduction and improved thermal range.

For direct printing, the product needs to be cured and then either sintered or sintered and infiltrated. With sintering, the product is placed into a furnace in an inert atmosphere to sinter the bonded particles and form a strong bonded structure. Depending on the porosity of the bonded structure, the product can be further infiltrated with another material to fill voids. After sintering and infiltration, the product can be polished and finished with a variety of standard industrial methods and coatings. We believe that our 3D printing capabilities enable customers to develop the ideal design for products, freeing them of some of the design constraints inherent in traditional manufacturing, in the industrial material of choice and in a more efficient manner than traditional manufacturing methods.

Our Business Strategy

The principal elements of our growth strategy include:

 

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Expand Our Customer and Application Focus. We intend to leverage our substantial experience in binder jetting technology to focus on the highest value industries and applications. We have made a significant investment in our commercial operations to drive our growth in this area.

 

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Extend the Capabilities of Our Core Technology. We intend to expand our core binder jetting technology through our machine platforms while at the same time lowering the total cost of ownership of our systems for our customers. We are also focused on driving modularity among our various machine platforms for both direct and indirect applications.

 

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Execute on 3D Printed and Other Products, Materials and Services Revenue Growth. We intend to execute on our plan to expand our offerings for 3D printed and other products, materials and services while better leveraging our growing global installed base of 3D printers.

Customers and Sales

Our Customers

Our customers are located primarily in the Americas, Europe/Middle East/Africa (“EMEA”) and Asia Pacific (“APAC”) regions. Our customers include a number of Fortune 500 companies that are leaders in their respective markets. During 2020 and 2019, we conducted a significant portion of our business with a limited number of customers, though not necessarily the same customers for each respective period. During 2020 and 2019, our five most significant customers represented 16.4% and 17.4% of our total revenue, respectively. During 2020 and 2019, there were no customers that individually represented 10.0% or greater of our total revenue. Sales of 3D printing machines are low volume, but generate significant revenue based on their per-unit pricing. Generally, sales of 3D printing machines are to different customers in each respective period. The timing of such sales may be dependent on various factors, including a customer’s capital budgeting cycle, its facility preparedness and the terms of the underlying arrangement with a customer (including certain substantive acceptance provisions) which may vary from period to period. The nature of our revenue from 3D printing machines does not leave us dependent upon a single or a limited number of customers. Sales of 3D printed and other products, materials and services generally result in a significantly lower aggregate price per order as compared to 3D printing machine sales. The nature of our revenue from 3D printed and other products, materials and services does not leave us dependent upon a single or a limited number of customers.

3


 

Educating Our Customers

Educating our customers and raising awareness in our target markets about the many uses and benefits of our binder jetting technology is an important part of our sales process. We believe that customers who experience the efficiency gains, decreased lead-time, increased design flexibility, and decreased cost potential of 3D printing, as compared to subtractive manufacturing, are more likely to purchase our 3D printing machines and be repeat customers of our products and services. We educate our customers on the design freedom, speed, and other benefits of 3D printing by providing printing and design services and support through our EACs. We also seek to expose key potential users to our products through our EACs, installed machines at customers’ locations, university programs, and sales and marketing efforts. Additionally, our EACs provide our customers exposure to a greater variety of our latest machine platforms and material sets.

ExOne Adoption Centers

We have established a network of EACs in North Huntingdon, Pennsylvania; Troy, Michigan; Gersthofen, Germany; and Kanagawa, Japan. Each of our EACs are certified to ISO 9001:2015 standards with various scopes. Through our EACs, we provide sales and marketing and delivery of support and printing services to our customers. Our customers see our 3D printing machines in operation and can evaluate their production capabilities before ordering a 3D printing machine or a printed product or service. While our centers are scalable and have a well-defined footprint that can be easily replicated to serve additional regional markets, we are focusing on enhancing our existing centers to enable adoption rather than geographic expansion. As described below, enhancing our position in strategic locations around the world is an important part of our long-term business strategy.

Marketing and Sales

We market our products under the ExOne brand name in three major geographic regions — the Americas, EMEA and APAC. Our sales are made primarily by our global sales force. Our sales force is augmented, in certain territories, by representatives with specific industry or territorial expertise. Even where we are supported by a representative, substantially all of our product and service offerings provided by our EACs are sold directly to customers by us.

We believe that our direct selling relationship helps to create one of the building blocks for our business — the creation of true collaboration between us and industrial customers who are interested in 3D printing. Increasingly, industrial producers are considering shifting from subtractive manufacturing techniques to 3D printing. Our marketing efforts include educating potential customers about 3D printing technology through collaboration, starting with pre-production services and continuing with production and technical support at our EACs.

Competition

Other companies are active in the market for 3D printing products and services. These companies use a variety of AM methods, including:

 

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Material extrusion;

 

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Material jetting;

 

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Powder bed fusion;

 

-

Directed energy deposition;

 

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Vat photopolymerization;

 

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Sheet lamination; and

 

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Binder jetting.  

Some of the companies that have developed and employ one or more AM technologies include: 3D Systems, Desktop Metal, EOS, General Electric, Hewlett-Packard, Markforged, SLM Solutions, Stratasys and Voxeljet among others.

We also compete with established subtractive manufacturers in the industrial products market. These companies often provide large-scale, highly capitalized facilities that are designed or built to fill specific production purposes, usually mass production. However, we believe that we are well positioned to expand our share of the industrial products market from these manufacturers as AM applications increase. As our technologies improve and our unit cost of production decreases, we expect to be able to compete with subtractive manufacturing on a wide range of products, thereby expanding our addressable market.

We believe that our competitive strengths include:

 

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Volumetric Output Rate. We believe that our binder jetting technology provides us the highest rate of volume output per unit of time among competing AM technologies. Because of our early entrance into the industrial market for AM and our investment in our core 3D printing technology, we have been able to improve the printing speed and expand the build box size of our 3D printing machines. As a result, we have made strides in improving the output efficiency of our 3D printing machines, as measured by volume output per unit of time. With continued advances in our core 3D printing technologies, we believe that our cost of production will continue to decline, increasing our ability to compete with subtractive manufacturing processes, particularly for complex products, effectively expanding our addressable market.

4


 

 

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Printing Platform Size. The volumetric size of the build box area upon which we construct a product is important to industrial customers who may want to either make a high number of products per job run or make an industrial product that has large dimensions and is heavy in final form. We believe that our technology and experience give us the potential to develop large footprint platforms to meet the production demands of current and potential industrial customers. In addition, we have created machine platforms in various size ranges in order to scale our technology to the varying demands of our customers.

 

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Industrial Materials. Our indirect 3D printing machines are able to manufacture sand molds and cores from silica sands and other specialty materials, which are the traditional materials for these casting products. Our direct 3D printing machines are capable of printing in a variety of industrial metals and ceramics. We are in varying stages of qualifying additional industrial materials for both indirect and direct applications and advancing materials that are printable in our machines. We also use chemical binding agents during the printing process. We believe that our unique chemical binding agent technology can more readily achieve efficiency gains over time than other AM technologies, such as laser-fusing technologies.

 

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Global Presence. Since our inception, we have structured our business to address major international markets. We have strategically established one or more EACs in each of the Americas, EMEA and APAC regions. Because many of our current or potential customers are global industrial companies, it is important that we have a presence in or near the areas where these companies have manufacturing facilities.

Suppliers

Manufacturing of our 3D printing machines includes certain components supplied via third-party contract manufacturers. Our third-party contract manufacturers provide a variety of services including sourcing off-the-shelf components, manufacturing custom components/assemblies, final product assembly and integration, end of line testing and quality assurance per our specifications. Our industrial materials are derived from several suppliers and, except as set forth below, the loss of an individual supplier would not have a material adverse effect on our business. We currently have a single supplier of certain printhead components for our 3D printing machines. While we believe that this printhead component supplier is replaceable, in the event of the loss of this supplier, we could experience delays and interruptions that might adversely affect the financial performance of our business. Additionally, we obtain certain pre-production services through design and data capture providers, and certain post-production services through vendors with whom we have existing and good relationships. The loss of any one of these providers or vendors would not have a material adverse effect on our business.

Research and Development

We spent $8.8 million and $9.9 million on research and development during 2020 and 2019, respectively. Our research and development spending has resulted in an expansion of our material printing capabilities (over 20 materials now qualified for printing on our platforms) and new platform development (including the recent market introduction of our X1 25Pro® and S-Max ProTM platforms and planned introduction of our X1 160ProTM platform in 2021).

We expect to continue to invest in our research and development activities in the future. A significant portion of our research and development expenditures have been focused on the following:

 

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Properties of print materials and chemical binder formulation;

 

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Mechanics of droplet flight into beds of powder;

 

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Metallurgy of thermally processing metals that are printed through AM;

 

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Mechanical design elements of our 3D printing machines;

 

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Mechanics of spreading powders in a job box;

 

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Evaluation of product applications utilizing our 3D printing machines;

 

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Transfer of digital data through a series of software links to drive a printhead; and

 

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Synchronizing all of the above to print ever-increasing volumes of material per unit of time.

Intellectual Property

Patents and Licenses. Significant portions of our technology are covered by a variety of patents. Through December 31, 2016, we were the worldwide licensee of certain patents held by MIT for certain AM printing processes (the “MIT Patents”), with exclusive rights to practice the patents in certain fields including the application of the printing processes to metals (with sublicensing rights), and non-exclusive rights to practice the patents in certain fields including the application of the printing processes to certain non-metals (without sublicensing rights) which gave us a significant head start in the AM industry.

We hold patents as a result of our own technological developments. Our patents were issued in the United States and in various foreign jurisdictions, including Germany and Japan. As a result of our commitment to research and development, we also have applied for other patents for equipment, processes, materials and 3D printing applications in the United States and in various foreign countries. The expiration dates of our patents range from 2021 to 2038. We are also a minority owner of patent rights for several patents in the United States and in various foreign jurisdictions as a successor interest to a 2003 agreement made between Generis GmbH and Extrude Hone GmbH.

5


 

We continue from time to time to evaluate our current licenses and patents. On March 1, 2018, our ExOne GmbH subsidiary notified Voxeljet AG that it has materially breached a 2003 Patent and Know-How Transfer Agreement and asserted its rights to set off damages as a result of the breaches against the annual license fee that we pay to Voxeljet AG under the agreement.

We have developed know-how and trade secrets relative to our 3D printing technology and believe that our early entrance into the industrial market provides us with a timing and experience advantage. Through our investment in our technology, we have been able to qualify industrial materials for use in our 3D printing machines and we intend to continue such efforts. In addition, we have taken steps to protect much of our technology as a trade secret. Given the significant steps that we have taken to establish our experience in AM for industrial applications, as well as our ongoing commitment to research and development, we intend to maintain our preeminent position in the AM industry market.

Trademarks. We have registrations in the United States for the following trademarks: EXONE, EXONE (stylized), X1 EXONE DIGITAL PART MATERIALIZATION (plus design), EXCAST, EXMAL, EXTEC, INNOVENT, INNOVENT+, M-FLEX, M-PRINT, S-MAX, S MAX, S-PRINT, X1 25PRO, X1, and X1-LAB. We also have pending applications in the United States for the following trademarks: X1 EXONE COLLABORATE. INNOVATE. ACCELERATE. (plus design), X1 160PRO, COLLABORATE. INNOVATE. ACCELERATE., X1 EXONE (plus design), FUSE, CLEANFUSE, NANOFUSE, #MAKEMETALGREEN, and MAKE METAL GREEN. We also have registrations for the trademark EXONE in China, Canada, Europe (Community Trade Mark), Japan, and South Korea and an application pending for that trademark in Canada. We also have registrations for the EXONE (stylized) trademark in Europe (Community Trade Mark), and South Korea and an application pending for that trademark in Japan. We have registrations for X1 EXONE DIGITAL PART MATERIALIZATION (plus design) in Brazil, Canada, China, Europe (Community Trade Mark), Japan, and South Korea. We have registrations for X1 EXONE COLLABORATE. INNOVATE. ACCELERATE. (plus design) in Europe (Community Trade Mark) and Japan, with applications pending in Canada, China, and South Korea. We have an application pending in Canada, South Korea, and Japan for the trademark INNOVENT+. We have a registration for the trademark X1 in Europe (Community Trade Mark). We have registrations for a stylized form of X1 in Europe (Community Trade Mark). We have registrations for DIGITAL PART MATERIALIZATION in Japan and South Korea. We have registrations for the trademarks EXERIAL, INNOVENT, INNOVENT+, M-FLEX, S-MAX, and S-PRINT in Europe (Community Trade Mark). We also have registration for the trademark S-PRINT in Canada, China, and Japan.

Trade Secrets. The development of our products, processes and materials has involved a considerable amount of experience, manufacturing and processing know-how and research and development techniques that are not easily duplicated. We protect this knowledge as a trade secret through the confidentiality and non-disclosure agreements which all employees, customers and consultants are required to sign at the time they are employed or engaged by us. Additional information related to the risks associated with our intellectual property rights are described within Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.

Recent Developments

On February 8, 2021, we announced the launch of the ExOne Metal DesignlabTM printer and X1F advanced sintering furnace in an exclusive partnership with Rapidia, a Vancouver, Canada-based technology company. This partnership allows us to expand our metal printing offerings to include an office-friendly solution that carries certain technological advantages (including proprietary materials and processing efficiency) and includes a complementary advanced sintering furnace designed by Rapidia that additionally pairs with certain of our binder jetting platforms. We expect to begin delivery of Metal Designlab units to market beginning in the second quarter of 2021.

Seasonality

Purchases of our 3D printing machines are often subject to the capital expenditure cycles of our customers. Generally, 3D printing machine sales are higher in our third and fourth quarters than in our first and second quarters; however, as acceptance of our 3D printing machines as a credible alternative to traditional methods of production grows, we expect to limit the seasonality we experience.

We believe that COVID-19 may have an adverse effect on the future capital expenditure decisions of our customers outside of their normal spending cycles, which may impact the timing and extent of such decisions.

Backlog

At December 31, 2020, our backlog was approximately $39.4 million, of which approximately $33.0 million is expected to be fulfilled during the next 12 months notwithstanding uncertainty related to the impact of COVID-19, including, but not limited to, domestic and international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. At December 31, 2019, our backlog was approximately $31.1 million.

Environmental Matters

Compliance with federal, state and local laws and regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material impact on capital expenditures, earnings or our competitive position. We are not the subject of any legal or administrative proceeding relating to the environmental laws of the United States or any country in which we have an office. We have not received any notices of any violations of any such environmental laws.

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Employees

At December 31, 2020, we employed a total of 295 (263 full-time) employees at our five global locations. None of these employees is a party to a collective bargaining agreement, and we believe our relations with employees are good.

Product, Geographic and Other Information

Refer to Note 5 and Note 19 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for product and geographic information related to our revenues (based on the country where the sale originated) and geographic information related to our long-lived assets (based on the physical location of assets). For information on risks related to our international operations refer to Part I, Item 1A, “Risk Factors”. Other information relating to our revenues, measurement of profit or loss and total assets is provided in the consolidated financial statements and related notes thereto in Part II, Item 8 of this Annual Report on Form 10-K.

Sale-Leaseback of Gersthofen, Germany Facility

On December 10, 2019, ExOne Property GmbH and ExOne GmbH (our “German Subsidiaries”) entered into a purchase agreement (the “Purchase Agreement”) with Solidas Immobilien und Grundbesitz GmbH, a private, unaffiliated German real estate investor (the “Buyer”), for the sale of our European headquarters and operating facility in Gersthofen, Germany (the “Facility”) for a cash price of €17.0 million (approximately $18.5 million, of which approximately $2.2 million was received prior to December 31, 2019). Concurrently with the execution of the Purchase Agreement, ExOne GmbH and the Buyer entered into a rental contract (the “Lease”) for the leaseback of the Facility for an initial aggregate annual rent totaling €1.5 million (approximately $1.7 million), plus applicable taxes, which is fixed during the initial three-year term and is subject to adjustment on an annual basis (in accordance with the consumer price index for Germany) during the two five-year option extension periods. The sale-leaseback transaction closed on February 18, 2020.

Executive Offices

Our principal executive offices are located at 127 Industry Boulevard, North Huntingdon, Pennsylvania 15642 and our telephone number is (724) 863-9663.

Available Information

Our website address is http://www.exone.com. Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K unless expressly noted.

We file reports with the Securities and Exchange Commission (“SEC”), which we make available on our website free of charge at http://www.investor.exone.com. These reports include Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each of which is provided on our website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. We also make, or will make, available through our website other reports filed with or furnished to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including our proxy statements and reports filed by officers and directors under Section 16(a) of that Act. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

You can obtain copies of exhibits to our filings electronically at the SEC’s website at www.sec.gov or by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The exhibits are also available as part of the Annual Report on Form 10-K for the year ended December 31, 2020, which is available on our corporate website at www.exone.com. Stockholders may also obtain copies of exhibits without charge by contacting our General Counsel and Corporate Secretary at (724) 863-9663.

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Item 1A. Risk Factors.

RISK FACTORS

As a smaller reporting company (“SRC”), we are not required to provide a statement of risk factors on our Annual Report on Form 10-K.  However, we believe this information is valuable to our stockholders.  We reserve the right to not provide risk factors in future filings.

You should carefully consider the following risks, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, in evaluating our business, future prospects and an investment in our common stock. If any of the following risks and uncertainties develops into actual events, our business, financial condition, results of operations and cash flows could be materially adversely affected. In that case, the price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business and Industry

We may not be able to consistently generate operating profits.

Since our inception, we have not consistently generated operating profits, and we may be unable to consistently generate operating profits in the future if we are unable to execute on our business plan. We have incurred a net loss in each of our annual periods since inception. Our operating expenses (including research and development and selling, general and administrative expenses, and excluding gain from sale-leaseback of property and equipment) were $29.8 million and $32.5 million for 2020 and 2019, respectively. Our research and development expenses are primarily for continued investment in our binder jetting technologies, including 3D printing machine development and materials development. Our selling, general and administrative expenses are primarily for employee-related costs and professional service fees, including those associated with managing a public company. We believe that our operating expenses may increase in future periods as we pursue our growth strategies. Increases in our research and development expenses and selling, general and administrative expenses will directly affect our future results of operations and may have an adverse effect on our financial condition.

Our revenues and operating results may fluctuate.

Our revenues and operating results have fluctuated in the past from quarter-to-quarter and year-to-year and are likely to continue to vary due to a number of factors, many of which are not within our control. Both our business and the AM industry are changing and evolving rapidly, and our historical operating results may not be useful in predicting our future operating results.

Our machine orders are often subject to the adoption and capital expenditure cycles of our customers. Thus, revenues and operating results for any future period are not predictable with any significant degree of certainty. Comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance.

Fluctuations in our operating results and financial condition may occur due to a number of factors, including, but not limited to, those listed below and those identified throughout this Risk Factors section:

 

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Our ability to compete with competitors (some of which may also serve as current or future customers of our products) that have significantly more resources than we have, have larger and more experienced sales and service teams and have more experience bringing new products to the market;

 

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The mix of machines and products that we sell during any period;

 

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The length of the adoption cycle and sales cycle for our 3D printing machines;

 

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Entry of new competitors into our markets;

 

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Changes in our pricing policies or those of our competitors, including our response to price competition;

 

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Delays between our expenditures to develop and market new or enhanced machines and products or to develop, acquire or license new technologies and processes and the generation of sales related thereto;

 

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Changes in the amount we spend to promote our products and services;

 

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The geographic distribution of our sales;

 

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Changes in the cost of satisfying our warranty obligations and servicing our installed base of products;

 

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Our level of research and development activities and their associated costs and rates of success;

 

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Changes in the size and complexity of our organization;

 

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Interruptions to or other problems with our information technology systems, manufacturing processes or other operations;

 

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Changes in regulatory requirements governing the handling and use of certain chemicals or powders printed or used in our equipment;

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General economic and industry conditions that affect end-user demand and end-user levels of product design and manufacturing; or

 

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Changes in accounting rules and tax laws.

Due to the foregoing factors, you should not rely on quarter-to-quarter or year-to-year comparisons of our operating results as an indicator of future performance.

Customer demands for certain qualities and capabilities in our machines are constantly evolving.  We may not be able to respond to customer demand as quickly as a better capitalized competitor may be able to respond.    

Generally, our business is focused on the sale of 3D printing machines for, and products manufactured using, AM. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in a market subject to innovation and rapidly developing and changing technology. A variety of technologies have the capacity to compete against one another in the AM market, which is, in part, driven by technological advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Our ability to compete in the industrial AM market depends, in large part, on our success in enhancing and developing new 3D printing machines, in enhancing our current 3D printing machines, in enhancing and adding to our technology, and in developing and qualifying materials with which we can print. We believe that to remain competitive we must continuously enhance and expand the functionality and features of our products and technologies. However, we may not be able to:

 

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Develop new products and technologies that address the increasingly sophisticated and varied needs of prospective end-users;

 

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Enhance our existing products and technologies;

 

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Continue to leverage advances in binder jet printing and other industrial printhead technology;

 

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Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis;

 

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Develop products that are cost-effective or that otherwise gain market acceptance;

 

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Distinguish ourselves from our competitors in our industry; and

 

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Adequately protect our intellectual property as we develop new products and technologies.

We face significant competition in many aspects of our business, which could cause our revenues and gross profit to decline. Competition could also cause us to reduce sales prices or to incur additional marketing or production costs, which could result in decreased revenue, increased costs and reduced margins.

We compete for customers with a wide variety of producers of equipment for models, prototypes, other 3D objects and end-use parts as well as producers of print materials and services for this equipment. Some of our existing and potential competitors are researching, designing, developing and marketing other types of competitive equipment, print materials and services. Many of these competitors have financial, marketing, manufacturing, distribution and other resources that are substantially greater than ours.

We also expect that future competition may arise from the development of allied or related techniques for equipment and print materials that are not encompassed by our patents, from the issuance of patents to other companies that may inhibit our ability to develop certain products, from our entry into new geographic markets and industries and from improvements to existing print materials and equipment technologies. In addition, a number of companies that have substantial resources have announced that they intend to begin producing 3D printing machines, which will further enhance the competition we face.

We intend to continue to follow a strategy of product development to enhance our position to the extent practicable. We cannot assure you that we will be able to maintain our current position in the field or continue to compete successfully against current and future sources of competition. If we do not keep pace with technological change and introduce new products, our revenues and demand for our products may decrease.

We may not be able to retain or hire the number of skilled employees that we need to achieve our business plan.

For our business to grow in accordance with our business plan, we will need to recruit, hire, integrate and retain additional employees with the technical competence and engineering skills to operate our machines, improve our technology and processes and expand our technological capability to print using an increasing variety of materials. People with these skills are in short supply and may not be available in sufficient numbers to allow us to meet the goals of our business plan. In addition, new employees often require significant training and, in many cases, take significant time before they achieve full productivity. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. If we cannot obtain the services of a sufficient number of technically skilled employees, we may not be able to achieve our planned rate of growth, which could adversely affect our results of operations.

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Loss of key management or sales or customer service personnel could adversely affect our results of operations.

Our future success depends to a significant extent on the skills, experience and efforts of our management and other key personnel. We must continue to develop and retain a core group of management individuals if we are to realize our goal of continued expansion and growth. While we have not previously experienced significant problems attracting and retaining members of our management team and other key personnel, there can be no assurance that we will be able to continue to retain these individuals and the loss of any or all of these individuals could materially and adversely affect our business.

Some of our arrangements for 3D printing machines contain customer-specific provisions that may impact the period in which we recognize the related revenues under accounting principles generally accepted in the United States of America (“GAAP”).

Some customers that purchase 3D printing machines from us may require specific, customized factors relating to their intended use of the machine or the installation of the machine in the customers’ facilities. These specific, customized factors are often required by the customers to be included in our commercial agreements relating to the purchases. As a result, our responsiveness to our customers’ specific requirements has the potential to impact the period in which we recognize the revenue relating to that 3D printing machine sale.

Similarly, some customers must build or prepare facilities to install our 3D printing machines, and the completion of such projects can be unpredictable, which can impact the period in which we recognize the revenue relating to that 3D printing machine sale.

Defects in new products or in enhancements to our existing products that give rise to product returns or warranty or other claims could result in material expenses, diversion of management time and attention, and damage to our reputation.

Our 3D printing machines may contain undetected defects or errors when first introduced or as enhancements are released that, despite testing, are not discovered until after a machine has been used. This could result in delayed market acceptance of those machines or claims from sales agents, end-users or others, which may result in litigation, increased end-user service and support costs and warranty claims, damage to our reputation and business or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims related to product quality issues that could lead us to incur significant expenses.

Our business is subject to risks associated with having significant operations in Germany and selling machines and other products in other non-United States locations.

We have significant manufacturing and development operations in Germany. In addition, a significant portion of our revenue is derived from transactions outside of the United States (54.8% and 60.8% for 2020 and 2019, respectively).

Our operations outside of the United States are subject to risks associated with the political, regulatory and economic conditions of Germany and other countries in which we sell or service machines, such as:

 

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Challenges in providing solutions across a significant distance, in different languages and among different cultures;

 

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Fluctuations in foreign currency exchange rates;

 

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Potentially longer sales and payment cycles;

 

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Potentially greater difficulties in collecting accounts receivable;

 

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Potentially adverse tax consequences;

 

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Different, complex and changing laws governing intellectual property rights, sometimes affording reduced protection of intellectual property rights in certain countries;

 

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Difficulties in staffing and managing foreign operations;

 

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Laws and business practices favoring local competition;

 

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Costs and difficulties of customizing products for foreign countries;

 

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Compliance with a wide variety of complex foreign laws, treaties and regulations;

 

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Restrictions imposed by local labor practices and laws on our business and operations;

 

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Rapid changes in government, economic and political policies and conditions, or political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events;

 

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Operating in countries with a higher incidence of corruption and fraudulent business practices;

 

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Seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year end globally;

 

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Transportation delays;

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Tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;

 

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Becoming subject to the laws, regulations and court systems of many jurisdictions;

 

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Specific and significant regulations, including the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) which imposes compliance obligations on companies who possess and use data of EU residents, with resultant fines and penalties for failure to comply;  

 

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Uncertainty and resultant political, financial and market instability arising from the United Kingdom’s exit from the EU (“Brexit”); and

 

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Risks of violations of Foreign Corrupt Practices Act or similar anti-bribery laws.

In addition, our operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency transaction and translation risks because we generally conduct our business, earn revenue and incur costs in the local currency of the countries in which we operate. For example, the financial condition and results of operations of Germany operations are reported in euros and then translated to United States dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements. We do not manage our foreign currency exposure in a manner that would eliminate the effects of changes in foreign exchange rates, which means that changes in exchange rates between these foreign currencies and the United States dollar will affect the recorded levels of our foreign assets and liabilities, as well as our revenues, cost of sales, and operating margins, and could result in exchange losses in any given reporting period. Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction and/or translation risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

We face risks related to the COVID-19 global pandemic which could significantly disrupt our commercial activities and operations.

The outbreak of a novel strain of coronavirus and subsequent global pandemic (“COVID-19”) has resulted in global government-enforced travel and business closures throughout the world. Our sales, installation and service of 3D printing machines have been disrupted, and the future spread of the disease may cause our commercial efforts to be disrupted again. We may incur expenses or delays resulting from such events outside of our control, which could have a material adverse effect on our financial position, results of operations or cash flows.

We manufacture our 3D printing machines at our facilities in Gersthofen, Germany and North Huntingdon, Pennsylvania. In addition, we have a network of EACs in the United States, Germany and Japan. If the operations of one or more of these facilities are materially disrupted (including as a result of COVID-19), we may be unable to fulfill certain customer orders for the period of the disruption, we may not be able to recognize revenue on certain orders and we might need to modify our standard sales terms to secure commitments of customers during the period of the disruption and perhaps longer. Depending on the cause of the disruption, we could incur significant costs to remedy the disruption. Such a disruption could have an adverse effect on our financial position, results of operations or cash flows.

In addition to the commercial risks, the long-term effects of COVID-19 may also include risks associated with employee health and safety and supply chain disruption, each of which may have a material adverse effect on our financial position, results of operations or cash flows.

We are currently dependent on a single supplier of certain printhead components.

We currently rely on a single source to supply certain printhead components used by our 3D printing machines. While we believe that there are other suppliers of printhead components upon which we could rely, we could experience delays and interruptions if our supply is interrupted that might temporarily impact the financial performance of our business.

We may not be able to consummate and/or effectively integrate strategic transactions.

We may from time to time engage in strategic transactions with third parties if we determine that they will likely provide future financial and operational benefits. Successful completion of any strategic transaction depends on a number of factors that are not entirely within our control, including our ability to negotiate acceptable terms, conclude satisfactory agreements and obtain all necessary regulatory approvals. In addition, our ability to effectively integrate an investment into our existing business and culture may not be successful, which could jeopardize future operational performance for the combined businesses.

We explore from time to time various strategic investments and/or alliances. With respect to strategic investments and/or alliances that we may pursue, there is no guarantee that we will successfully negotiate and complete such transactions on favorable terms or at all. The exploration, negotiation, and consummation of strategic investments and/or alliances may involve significant expenditures by us, which may adversely affect our results of operations at the time such expenses are incurred. If we do complete transactions, they may not ultimately strengthen our competitive position or may not be accretive to us for a period of time which may be significant following the completion of such transaction.

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We may be required to pay cash, incur debt and/or issue equity securities to pay for any such transaction, each of which could adversely affect our financial condition and the value of our common stock, and dilute our current stockholders. Our use of cash to pay for transactions would limit other potential uses of our cash. The issuance or sale of equity or convertible debt securities to finance any such transactions would result in dilution to our stockholders. If we incur debt, it could result in increased fixed obligations and could also impose covenants or other restrictions that could impede our ability to manage our operations.

We have been, and may continue to be, the subject of cyber security attacks, which could result in disruption or failure of our information technology (“IT”) systems and could adversely affect our results of operations.

We rely on our IT systems to manage numerous aspects of our business and provide analytical information to management. We may incur significant costs in order to implement the security measures that we feel are necessary to protect our IT systems from cyber security attacks. However, our IT systems may remain vulnerable to damage despite our implementation of security measures that we deem to be appropriate. Our IT systems allow us to efficiently purchase products from our suppliers, provide procurement and logistic services, ship products to our customers on a timely basis, maintain cost-effective operations and provide service to our customers. Our IT systems are an essential component of our business and growth strategies, and a disruption to or failure of our IT systems, including our computer systems, could significantly limit our ability to manage and operate our business efficiently. Although we take steps to secure our IT systems, including our computer systems, intranet and internet sites, email and other telecommunications and data networks, the security measures we have implemented may not be effective and our systems may be vulnerable to, among other things, damage and interruption from power loss, including as a result of natural disasters, computer system and network failures, loss of telecommunication services, operator negligence, loss of data, security breaches and computer viruses. If our systems for protecting against cyber security risks prove not to be sufficient, we could be adversely affected by loss or damage of intellectual property, proprietary information, or client data, interruption of business operations, or additional costs to prevent, respond to, or mitigate cyber security attacks. Any such disruption or loss of business information could materially and adversely affect our reputation, brand, results of operations and financial condition.

We could be subject to personal injury, property damage, product liability, warranty and other claims involving allegedly defective products that we supply.

The products we supply are sometimes used in potentially hazardous applications, such as the assembled parts of an aircraft or automobile, that could result in death, personal injury, property damage, loss of production, punitive damages and consequential damages. While we have not experienced any such claims to date, actual or claimed defects in the products we supply could result in our being named as a defendant in lawsuits asserting potentially large claims.

We attempt to include legal provisions in our agreements with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products. However, it is possible that these limitations may not be effective as a result of unfavorable judicial decisions or laws enacted in the future. Any such lawsuit, regardless of merit, could result in material expense, diversion of management time and efforts and damage to our reputation, and could cause us to fail to retain or attract customers, which could adversely affect our results of operations.

We could face liability if our 3D printers are used by our customers to print dangerous objects.

Customers may use our 3D printing machines to print products that could be used in a harmful way or could otherwise be dangerous. For example, there have been news reports that 3D printing machines were used to print guns or other weapons. We have little, if any, control over what objects our customers print using our 3D printing machines, and it may be difficult, if not impossible, for us to monitor and prevent customers from printing weapons with our 3D printing machines. While we have never printed firearms in any of our EACs, there can be no assurance that we will not be held liable if someone were injured or killed by a weapon printed by a customer using one of our 3D printing machines.

If any of our manufacturing facilities or EACs are disrupted, sales of our products may be disrupted, which could result in loss of revenues and an increase in unforeseen costs.

We manufacture our machines at our facilities in Gersthofen, Germany and North Huntingdon, Pennsylvania. In addition, we have a network of EACs in the United States, Germany and Japan to provide sales and marketing and delivery of support and printing services to our customers. If the operations of any of these facilities are materially disrupted (including as a result of the coronavirus disease COVID-19), we could be unable to fulfill customer orders for the period of the disruption, we may not be able to recognize revenue on orders and we might need to modify our standard sales terms to secure the commitment of new customers during the period of the disruption and perhaps longer. Depending on the cause of the disruption, we could incur significant costs to remedy the disruption and resume product shipments. Such a disruption could have an adverse effect on our results of operations.

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Our manufacturing facilities, and our suppliers’ and our customers’ facilities are vulnerable to disruption due to natural or other disasters, strikes and other events beyond our control.

A major earthquake, fire, tsunami, hurricane, cyclone or other disaster, such as a major flood, seasonal storms, nuclear event or terrorist attack affecting our facilities or the areas in which they are located, or affecting those of our customers or third party manufacturers or suppliers, could significantly disrupt our or their operations, and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our or their damaged manufacturing facilities.  These delays could be lengthy and costly. If any of our manufacturers’, suppliers’ or customers’ facilities are negatively impacted by such a disaster, production, shipment and installation of our 3D printing machines could be delayed, which can impact the period in which we recognize the revenue related to that 3D printing machine sale. Additionally, customers may delay purchases of our products until operations return to normal.  Even if we are able to respond quickly to a disaster, the continued effects of the disaster could create uncertainty in our business operations.  In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, labor strikes, war or the outbreak of epidemic diseases (including the outbreak of the coronavirus disease COVID-19) could have a negative effect on our operations and sales.

Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We generally enter into non-competition agreements with our employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors or customers for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work, including Germany and Japan, and it may be difficult for us to restrict our competitors from benefiting from the expertise of our former employees or consultants developed while working for us. If we cannot demonstrate that our legally protectable interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

Risks Related to Our Intellectual Property

We may not be able to protect our trade secrets and intellectual property.

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We cannot assure you that any of our existing or future intellectual property rights will be enforceable, will not be challenged, invalidated or circumvented, or will otherwise provide us with meaningful protection or any competitive advantage.

We rely primarily on a combination of trade secrets, patents, trademarks, confidentiality or non-disclosure agreements and other contractual arrangements with our employees, end-users and others to maintain our competitive position to protect our proprietary technologies and processes globally. While some of our technology is licensed under patents belonging to others or is covered by process patents which are owned or applied for by us, we have devoted substantial resources to the development of our technology, trade secrets, know-how and other unregistered proprietary rights and much of our key technology is not protected by patents. In particular, in fast-growing markets such as China and India, our technology is not protected by patents.

Despite our efforts to protect our proprietary rights, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies, inventions, processes or improvements.  While we enter into various agreements intended to protect our proprietary rights, these agreements may be breached and confidential information may be willfully or unintentionally disclosed, and these agreements can be difficult and costly to enforce or may not provide adequate remedies if violated.  In addition, our competitors or other parties may learn of our proprietary rights in some other way. Because we cannot legally prevent one or more other companies from developing similar or identical technology to our unpatented technology, it is likely that, over time, one or more other companies may be able to replicate our technology, thereby reducing our technological advantages. If we do not protect our technology or are unable to develop new technology that can be protected by patents or as trade secrets, we may face increased competition from other companies, which may adversely affect our results of operations.

We do, from time to time, apply for patent protection for some of our intellectual property. Our pending patent applications may not be granted. We cannot assure you that any of our existing or future patents will not be challenged, invalidated, or circumvented or will otherwise provide us with meaningful protection. Furthermore, patents are jurisdictional in nature and therefore only protect us in certain markets, rather than globally.  We may not be able to obtain foreign patents corresponding to our United States or foreign patent applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. If our patents do not adequately protect our technology, our competitors may be able to offer additive manufacturing systems or other products similar to ours. Our competitors may also be able to develop similar technology independently or design around our patents, and we may not be able to detect the unauthorized use of our proprietary technology or take appropriate steps to prevent such use. Any of the foregoing events would lead to increased competition and lower revenues or gross margins, which could adversely affect our operating results.

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If our patents and other intellectual property protections do not adequately protect our technology, our competitors may be able to offer products similar to ours. We may not be able to detect the unauthorized use of our proprietary technology and processes or take appropriate steps to prevent such use. Our competitors may also be able to develop similar technology independently or design around our patents. Any of the foregoing events would lead to increased competition and lower revenue or gross profits, which would adversely affect our results of operations.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.

In connection with the enforcement of our intellectual property rights, opposing third parties from obtaining patent rights or disputes related to the validity or alleged infringement of our or third-party intellectual property rights, including patent rights, we have been and may in the future be subject or party to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation, regardless of merit, can be costly and disruptive to our business operations by diverting attention and energies of management and key technical personnel, and by increasing our costs of doing business. We may not prevail in any such dispute or litigation, and an adverse decision in any legal action involving intellectual property rights, including any such action commenced by us, could limit the scope of our intellectual property rights and the value of the related technology. While we strive to avoid infringing the intellectual property rights of third parties, we cannot provide any assurances that we will be able to avoid any infringement claims.

We may be subject to alleged infringement claims.

Our products and technology, including the technology that we license from others, may infringe the intellectual property rights of third parties. Patent applications in the United States and most other countries are confidential for a period of time until they are published, and the publication of discoveries in scientific or patent literature typically lags actual discoveries by several months or more. As a result, the nature of claims contained in unpublished patent filings around the world is unknown to us, and we cannot be certain that we were the first to conceive inventions covered by our patents or patent applications or that we were the first to file patent applications covering such inventions. Furthermore, it is not possible to know in which countries patent holders may choose to extend their filings under the Patent Cooperation Treaty or other mechanisms. In addition, we may be subject to intellectual property infringement claims from individuals, vendors and other companies, including those that are in the business of asserting patents, but are not commercializing products in the field of 3D printing. Any claims that our products or processes infringe the intellectual property rights of others, regardless of the merit or resolution of such claims, could cause us to incur significant costs in responding to, defending and resolving such claims, and may prohibit or otherwise impair our ability to commercialize new or existing products. Any infringement by us or our licensors of the intellectual property rights of third parties may have a material adverse effect on our business, financial condition and results of operations.

Third-party claims of intellectual property infringement successfully asserted against us may require us to redesign infringing technology or enter into costly settlement or license agreements on terms that are unfavorable to us, prevent us from manufacturing or licensing certain of our products, subject us to injunctions restricting our sale of products and use of infringing technology, cause severe disruptions to our operations or the markets in which we compete, impose costly damage awards or require indemnification of our sales agents and end-users. In addition, as a consequence of such claims, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products or developing non-infringing substitute technology. Any of the foregoing developments could seriously harm our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Certain of our past and present employees were previously employed at other additive manufacturing companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable personnel or intellectual property rights. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Risks Related to the Securities Markets and Ownership of Our Common Stock

We have broad discretion as to the use of the net proceeds from securities offerings and may not use them effectively.

We cannot specify with certainty how we may use the net proceeds from securities offerings. Our management has broad discretion in the application of the net proceeds, and we may use these proceeds in ways with which you may disagree or for purposes other than those contemplated at the time of the offering. The failure by our management to apply these funds effectively could have a material adverse effect on our business, financial condition and results of operations. Pending their use, we may invest the net proceeds from a securities offering in a manner that does not produce income or that loses value.

14


 

Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.

Sales of a significant number of shares of our common stock in the public markets could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock, or the market perception that we are permitted to sell a significant number of our securities, would have on the market price of our common stock.

The market price of our common stock may fluctuate significantly.

The market price of our common stock has been and is expected to continue to be highly volatile and may be significantly affected by numerous factors, including the risk factors described in this report and other factors which are beyond our control and may not be directly related to our operating performance. These factors include:

 

-

Significant volatility in the market price and trading volume of securities of companies in our sector, which is not necessarily related to the operating performance of these companies;

 

-

Low average daily trading volumes commonly associated with a small cap entity;

 

-

A high level of short interest in our common stock relative to our outstanding public float;

 

-

The mix of products that we sell, and related services that we provide, during any period;

 

-

Delays between our expenditures to develop and market new products and the generation of sales from those products;

 

-

Changes in the amount that we spend to develop, acquire or license new products, technologies or businesses;

 

-

Changes in our expenditures to promote our products and services;

 

-

Changes in the cost of satisfying our warranty obligations and servicing our global installed base of systems;

 

-

Success or failure of research and development projects of us or our competitors;

 

-

Announcements of technological innovations, new solutions or enhancements or strategic partnerships or acquisitions by us or one of our competitors;

 

-

The publics response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

-

The general tendency towards volatility in the market prices of shares of companies that rely on technology and innovation;

 

-

Changes in regulatory policies or tax guidelines;

 

-

Changes or perceived changes in earnings or variations in operating results;

 

-

Any shortfall in revenue or earnings from levels expected by investors or securities analysts;

 

-

Threatened or actual litigation;

 

-

Changes in our senior management; and

 

-

General economic trends and other external factors.

One of our principal stockholders is able to exert substantial influence in determining the outcome of matters which require the approval of our stockholders.

Our Chairman, S. Kent Rockwell, beneficially owns a significant portion of our outstanding shares of common stock. As a holder of a significant portion of our shares of common stock, Mr. Rockwell may have effective control over the election of our Board of Directors (“Board”) and the direction of our affairs. As a result, he could exert considerable influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election of directors and any transaction that might cause a change in control, such as a merger or acquisition. Any stockholders in favor of a matter that is opposed by Mr. Rockwell would have to obtain a significant number of votes to overrule the votes controlled by Mr. Rockwell.

If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our shares, the price of our shares could decline.

The trading market for our shares will rely in part on the research and reports that equity research analysts publish about us and our business. We do not have control over these analysts, and we do not have commitments from them to write research reports about us. The price of our shares could decline if one or more equity research analysts downgrades our shares, issues other unfavorable or inaccurate commentary or ceases publishing reports about us or our business.

15


 

The sale of shares by insiders, or even the perception that they may do so, could cause our stock price to decline.

The price of our shares could decline if there are substantial sales of our common stock, particularly by our directors, their affiliates or our executive officers or when there is a large number of shares of our common stock available for sale. The perception in the public market that our stockholders might sell our shares also could depress the market price of our shares. From time to time, we may conduct offerings of our securities and our executive officers, directors and selling stockholders could be subject to lock-up agreements that restrict their ability to transfer their shares following the offering. The market price of our shares may drop significantly when the restrictions on resale by our existing stockholders lapse and these stockholders are able to sell their shares into the market. If this occurs, it could impair our ability to raise additional capital through the sale of securities, should we desire to do so.

We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.

As a public company with shares listed on The Nasdaq Stock Market, we incur significant accounting, legal and other expenses that we would not incur as a private company. Although we now qualify as an SRC pursuant to Rule 12b-2 of the Exchange Act, we still incur significant costs associated with our compliance with the public company reporting requirements of the Exchange Act, requirements imposed by the Sarbanes-Oxley Act (most notably Section 404), and the Dodd-Frank Wall Street Reform and Protection Act, and other rules adopted, and to be adopted, by the SEC and The Nasdaq Stock Market. Compliance with these rules and regulations result in increased legal and financial compliance costs and make certain activities more time-consuming and costly. They also make it more difficult for us to obtain director and officer liability insurance, and we incur substantial costs to maintain sufficient coverage.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies generally, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We have invested resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of managements time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected. We cannot predict or estimate the amount or timing of additional costs we may incur in the future to respond to these constantly evolving requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees or as executive officers.

We have never paid cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Therefore, if our share price does not appreciate, our investors may not gain and could potentially lose on their investment in our shares.

We have never declared or paid cash dividends on our common stock, nor do we anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and service and repay indebtedness, if any. As a result, capital appreciation, if any, of our shares will be investors sole source of gain for the foreseeable future.

The right of stockholders to receive liquidation and dividend payments on our common stock is junior to the rights of holders of indebtedness and to any other senior securities we may issue in the future.

Shares of our common stock are equity interests and do not constitute indebtedness. This means that shares of our common stock will rank junior to all of our indebtedness and to other non-equity claims against us and our assets available to satisfy claims against us, including our liquidation. Additionally, holders of our common stock are subject to the prior dividend and liquidation rights of holders of our outstanding preferred stock, if any. While we currently have no preferred stock outstanding, our Board is authorized to issue classes or series of preferred stock in the future without any action on the part of our common stockholders.

16


 

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. We are required under Section 404(a) of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, investor groups like Institutional Shareholder Services could initiate a withhold vote campaign with respect to the re-election of the members of our audit committee, and we could be subject to sanctions or investigations by The Nasdaq Stock Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Provisions in our charter documents or Delaware law may inhibit a takeover or make it more difficult to effect a change in control, which could adversely affect the value of our common stock.

Our Certificate of Incorporation and Bylaws contain, and Delaware corporate law contains, provisions that could delay or prevent a change of control or changes in our management. These provisions will apply even if some of our stockholders consider the offer to be beneficial or favorable. If a change of control or change in management is delayed or prevented, the market price of our common stock could decline.

Raising additional capital by issuing securities may cause dilution to our stockholders.

We may need or desire to raise substantial additional capital in the future. Our future capital requirements will depend on many factors, including, among others:

 

-

Research and development investments;

 

-

Our degree of success in capturing a larger portion of the industrial products production market;

 

-

The costs of establishing or acquiring sales, marketing, and distribution capabilities for our products;

 

-

The costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our issued patents, and defending intellectual property-related claims;

 

-

The extent to which we acquire or invest in businesses, products or technologies and other strategic relationships; and

 

-

The costs of financing unanticipated working capital requirements and responding to competitive pressures.

If we raise additional funds by issuing equity or convertible debt securities, we may reduce the percentage ownership of our then-existing stockholders, and the holders of those newly-issued equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by our then-existing stockholders. Additionally, future sales of a substantial number of shares of our common stock or other equity-related securities in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.  

17


 

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We have the following locations:

 

Location

 

Nature of Facility

 

Owned or Leased

 

Approximate Square Footage

 

United States

 

 

 

 

 

 

 

 

North Huntingdon, Pennsylvania

 

Corporate Headquarters

3D Printing Machine Manufacturing

EAC

3D Printing Machine Sales Center

 

Owned

 

 

67,886

 

Troy, Michigan

 

EAC

 

Owned

 

 

19,646

 

St. Clairsville, Ohio

 

EAC

Materials Research and Development

 

Owned

 

 

12,800

 

Europe

 

 

 

 

 

 

 

 

Gersthofen, Germany

 

European Headquarters

3D Printing Machine Manufacturing

EAC

3D Printing Machine Sales Center

 

Leased(a)

 

 

200,585

 

Asia

 

 

 

 

 

 

 

 

Kanagawa, Japan

 

EAC

3D Printing Machine Sales Center

 

Owned

 

 

19,639

 

 

(a)

On December 10, 2019, ExOne Property GmbH and ExOne GmbH, our German subsidiaries, entered into a purchase agreement (the “Purchase Agreement”) with Solidas Immobilien und Grundbesitz GmbH, a private, unaffiliated German real estate investor (the “Buyer”), for the sale of our European headquarters and operating facility in Gersthofen, Germany (the “Facility”). Concurrently with the execution of the Purchase Agreement, ExOne GmbH and the Buyer entered into a rental contract for the leaseback of the Facility for an initial aggregate annual rent totaling approximately $1,700 (€1,500), plus applicable taxes, which is fixed during the initial three-year term and is subject to adjustment on an annual basis (in accordance with the consumer price index for Germany) during the two five-year option extension periods. The sale-leaseback transaction closed on February 18, 2020.

We are subject to various litigation, claims, and proceedings which have been or may be instituted or asserted from time to time in the ordinary course of business. Management does not believe that the outcome of any pending or threatened matters will have a material adverse effect, individually or in the aggregate, on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

 

 

 

18


 

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock has been listed on The Nasdaq Stock Market since February 7, 2013, under the symbol “XONE.”

Stockholders

As of March 1, 2021, there were 41 stockholders of record. The actual number of holders of our common stock is greater than the number of record holders, and includes stockholders who are beneficial owners and whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

We do not anticipate that we will declare or pay regular dividends on our common stock in the foreseeable future, as we generally intend to invest any future earnings in the development and growth of our business. Future dividends, if any, will be at the discretion of our Board and will depend on many factors, including general economic and business conditions, our strategic plans, our financial results and condition, legal requirements, any contractual obligations or limitations, and other factors that our Board deems relevant.

Securities Authorized for Issuance Under Equity Compensation Plans

Our 2013 Equity Incentive Plan (the “Plan”) was adopted on January 24, 2013, and approved by our stockholders on August 19, 2013. The table below sets forth information with regard to securities authorized for issuance under the Plan as of December 31, 2020:

 

Plan Category

 

Number of Securities

to be Issued Upon

Exercise of

Outstanding Options,

Warrants and Rights

 

 

Weighted-Average

Exercise Price of

Outstanding Options,

Warrants and Rights

 

 

Number of Securities

Remaining Available for

Future Issuance Under

Equity Compensation

Plans

(Excluding Securities

Reflected in the

First Column)(a)

 

Equity Compensation Plans Approved by

   Security Holders

 

 

641,232

 

 

$

9.80

 

 

 

499,189

 

Equity Compensation Plans Not Approved by

   Security Holders

 

N/A

 

 

N/A

 

 

N/A

 

 

(a)

On January 24, 2013, the Board adopted the Plan. In connection with the adoption of the Plan, 500,000 shares of common stock were reserved for issuance pursuant to the Plan, with automatic increases in such reserve available each year annually on January 1 from 2014 through 2023 equal to the lesser of 3.0% of the total outstanding shares of common stock as of December 31 of the immediately preceding year or, a number of shares of common stock determined by the Board, provided that the maximum number of shares authorized under the Plan did not exceed 1,992,241 shares, subject to certain adjustments. The maximum number of shares authorized under the Plan was reached on January 1, 2017. At December 31, 2020, 499,189 shares remained available for future issuances under the Plan.

 

Issuer Purchases of Equity Securities

Under the Plan, the Compensation Committee of the Board may require or permit participants under the Plan to elect net settlement upon the vesting of restricted stock awards under the Plan in order to satisfy the related tax withholding obligations.  Under net settlement, we withhold from the shares that would otherwise be delivered to the participant such number of shares of our common stock having an aggregate fair market value equal to the tax withholding obligation. When we withhold these shares, we are required to remit to the appropriate taxing authorities the aggregate fair market value of the shares withheld, which could be deemed a purchase of the common shares by us on the date of withholding.

A summary of our deemed repurchases of shares of our common stock to satisfy tax withholding obligations related to the vesting of restricted stock, as described above, during 2020 is as follows:

 

Period

 

Total Number of

Shares Purchased(a)

 

 

Average Price Paid

Per Share

 

 

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Programs(a)

 

 

Maximum Number

(or Approximate

Dollar Value) of

Shares That

May Be Purchased

Under the Plans or

Programs(a)

 

October 1, 2020 - October 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

November 1, 2020 - November 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

December 1, 2020 - December 31, 2020

 

 

1,348

 

 

 

9.49

 

 

 

 

 

 

 

 

 

 

 

 

1,348

 

 

$

9.49

 

 

 

 

 

$

 

(a)

All of our repurchases of shares of our common stock during 2020 were in connection with the net settlement of vested restricted stock awards. The Company did not have any publicly announced plans or programs to purchase our common stock during 2020.

 

19


 

 

Item 6. Selected Financial Data.

We are an SRC as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

20


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollars in thousands, except per-share amounts)

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto in Part II, Item 8 of this Annual Report on Form 10-K. Certain statements contained in this discussion may constitute 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 Exchange Act. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those reflected in any forward looking statements, as a result of a variety of risks and uncertainties, including those described under Part I, Item 1, “Business – Cautionary Statement Concerning Forward Looking Statements” and Part I, Item 1A, “Risk Factors”.

Overview

Our Business

We are a global provider of 3D printing machines and 3D printed and other products, materials and services to industrial customers. Our business primarily consists of manufacturing and selling 3D printing machines and printing products to specification for our customers using our global installed base of 3D printing machines. Our machines serve direct (metal) and indirect (sand) applications.  Direct printing produces a component; indirect printing makes a tool to produce a component. We offer pre-production collaboration and print products for customers through our network of EACs. We also supply the associated materials, including consumables and replacement parts, and other services, including training and technical support, that are necessary for purchasers of our 3D printing machines to print products. We believe that our ability to print in a variety of industrial materials, as well as our industry-leading volumetric output (as measured by build box size and printing speed), uniquely position us to serve the needs of industrial customers.

Recent Developments

On February 8, 2021, we announced the launch of the ExOne Metal DesignlabTM printer and X1F advanced sintering furnace in an exclusive partnership with Rapidia, a Vancouver, Canada-based technology company. This partnership allows us to expand our metal printing offerings to include an office-friendly solution that carries certain technological advantages (including proprietary materials and processing efficiency) and includes a complementary advanced sintering furnace designed by Rapidia that additionally pairs with certain of our binder jetting platforms. We expect to begin delivery of Metal Designlab units to market beginning in the second quarter of 2021.

Outlook

The impact of COVID-19 and the related economic, business and market disruptions were wide-ranging and continue to be significant. As a result of COVID-19, we were required to temporarily close our operations at our North Huntingdon, Pennsylvania facility for the period from March 23 through March 30, 2020. In response to COVID-19, we have incurred incremental costs associated with protecting the health and safety of our global workforce, enhanced sanitization of our global operating facilities, and information technology capabilities for employees operating remotely. Beginning in March 2020, restrictions imposed by various governmental authorities on both domestic and international shipping and travel have caused a disruption to the timing of delivery and installation of our 3D printing machines, resulting in negative impacts to our financial position, results of operations and cash flows. The duration and severity of the outbreak and its long-term impact on our business are uncertain at this time. We are unable to predict the impact that COVID-19 will have on our future financial position, results of operations and cash flows.

In response to adverse market conditions associated with COVID-19, beginning in March 2020 and through April 2020, we initiated various cost savings actions including a mix of employee terminations, furloughs and pay rate reductions, as well as reductions in consulting and other expenses, all in an effort to conserve cash and maintain adequate liquidity. As a result of these actions, and other reduced costs such as global travel, we realized approximately $5,000 in cash cost savings during 2020. Given the high level of uncertainty associated with the duration and severity of COVID-19, we expect to continue to assess whether additional cost actions are necessary to further adjust our operating model.

We are the global leader in industrial 3D printers utilizing binder jetting technology. Our continued focus is to achieve profitable growth via three strategic initiatives:

 

-

Expand Both Our Customer and Application Focus. We intend to leverage our substantial experience in binder jetting technology to focus on the highest value industries and applications. We have made a significant investment in our global commercial operations to drive our growth in this area.

 

-

Extend the Capabilities of Our Core Technology. We intend to expand our core binder jetting technology through our machine platforms while at the same time lowering the total cost of ownership of our systems for our customers. We are also focused on driving modularity among our various machine platforms for both direct (metal) and indirect (sand) applications.

 

-

Execute on Recurring Revenue Growth. We intend to execute on our plan to expand our offerings for 3D printed and other products, materials and services while better leveraging our growing global installed base of 3D printers.

21


 

Our operating results continue to be impacted by a prolonged downturn in global manufacturing trends as a result of COVID-19 which has influenced the capital expenditure investments of our customers. Despite these headwinds, we ended the fourth quarter with a backlog balance of approximately $39,400. We expect the combination of our backlog at December 31, 2020 and an acceleration in market adoption of our binder jetting technology, including our newly introduced printer platforms (our X1 25Pro, X1 160Pro and InnoventPro® for metal applications and S-Max Pro for sand applications), to provide the basis for our operating stability and growth in 2021 despite continuing negative macroeconomic trends for global manufacturing, including the impact of COVID-19. Based on an increased levels of customer awareness and demand in additive manufacturing technologies, and our enhanced liquidity position (further discussed below) we expect to invest further in our production, development and commercial infrastructure during 2021 in an effort to drive our future growth.

Sale-Leaseback of European Headquarters and Operating Facility in Gersthofen, Germany

On December 10, 2019, ExOne Property GmbH and ExOne GmbH (our “German Subsidiaries”) entered into a purchase agreement (the “Purchase Agreement”) with Solidas Immobilien und Grundbesitz GmbH, a private, unaffiliated German real estate investor (the “Buyer”), for the sale of our European headquarters and operating facility in Gersthofen, Germany (the “Facility”) for a cash price of approximately $18,500 (€17,000), of which approximately $2,200 was received prior to December 31, 2019. Concurrently with the execution of the Purchase Agreement, ExOne GmbH and the Buyer entered into a rental contract (the “Lease”) for the leaseback of the Facility for an initial aggregate annual rent totaling approximately $1,700 (€1,500), plus applicable taxes, which is fixed during the initial three-year term and is subject to adjustment on an annual basis (in accordance with the consumer price index for Germany) during the two five-year option extension periods. The sale-leaseback transaction closed on February 18, 2020.

As a result of the completion of the sale-leaseback transaction further discussed above, we recorded or expect to record the following effects on our results of operations, financial condition and cash flows:

 

-

As indicated, we expect to incur annual rent expense (which commenced during the three months ending March 31, 2020) of approximately $1,700 (with an expected allocation of approximately $1,300, $200 and $200 to cost of sales, research and development and selling, general and administrative expenses, respectively, based on the relative utilization of the Facility). This is in place of depreciation recorded in prior annual periods associated with the Facility of approximately $600 (allocated approximately $400, $100 and $100 to cost of sales, research and development and selling, general and administrative expenses, respectively, based on the relative utilization of the Facility).

 

-

During the three months ended March 31, 2020, we recorded a gain from sale-leaseback of property and equipment of $1,462.

 

-

During the three months ended March 31, 2020, we recorded an operating right-of-use asset and corresponding operating lease liability of $4,605, which was representative of the present value of future minimum lease payments over the initial three-year term as there were no penalties or other factors associated with the lease that resulted in reasonable assurance of its extension at inception.

Backlog

At December 31, 2020, our backlog was approximately $39,400 of which approximately $33,000 is expected to be fulfilled during the next 12 months notwithstanding uncertainty related to the impact of COVID-19 (further discussed above), including, but not limited to, domestic and international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. At December 31, 2019, our backlog was approximately $31,100.

Seasonality

Purchases of our 3D printing machines are often subject to the capital expenditure cycles of our customers. Generally, 3D printing machine sales are higher in our third and fourth quarters than in our first and second quarters; however, as acceptance of our 3D printing machines as a credible alternative to traditional methods of production grows, we expect to limit the seasonality we experience.

We believe that COVID-19 may have an adverse effect on the future capital expenditure decisions of our customers outside of their normal spending cycles, which may impact the timing and extent of such decisions.

Financial Measures

We use several financial and operating metrics to measure our business. We use these metrics to assess the progress of our business, make decisions on where to allocate capital, time and technology investments, and assess longer-term performance within our marketplace. The key metrics are as follows:

22


 

Revenue. Our revenue consists of sales of our 3D printing machines and 3D printed and other products, materials and services.

3D printing machines. 3D printing machine revenues consist of 3D printing machine sales and leasing arrangements. Sales of 3D printing machines may also include optional equipment, materials, replacement components and services (installation, training and other services, including maintenance services and/or an extended warranty). 3D printing machine sales and leasing arrangements are influenced by a number of factors including, among other things, the adoption rate of our 3D printing technology, end-user product design and manufacturing activity, the capital expenditure budgets of end-users and potential end-users and other macroeconomic factors. Purchases or leases of our 3D printing machines, particularly our higher-end, higher-priced systems, typically involve long sales cycles. Several factors can significantly affect revenue reported for our 3D printing machines for a given period including a customer’s capital budgeting cycle, its facility preparedness and the terms of the underlying arrangement with a customer (including certain substantive acceptance provisions) which may vary from period to period.

3D printed and other products, materials and services. 3D printed and other products, materials and services consist of sales derived from our global EAC network (including 3D printed components or tools and castings), consumable materials, aftermarket (including replacement parts for the network of 3D printing machines installed by our global customer base and services for maintenance) and certain funded research and development arrangements. Our EACs utilize our 3D printing machine technology to print products to the specifications of customers. In addition, our EACs provide support and services such as pre-production collaboration prior to printing products for a customer. Sales of consumable materials and aftermarket (replacement parts and service maintenance contracts) are directly linked to our growing network of 3D printing machines installed by our global customer base. Funded research and development includes both commercial and government arrangements which generally apply our additive manufacturing technologies (specifically binder jetting) to one or more specific materials or applications.

Cost of Sales and Gross Profit. Our cost of sales consists primarily of direct labor (related to our global workforce), materials (for both the manufacture of 3D printing machines and for our EAC and other manufacturing operations) and overhead to produce 3D printing machines and 3D printed and other products, materials and services. Also included in cost of sales are license fees (based upon a percentage of revenue of qualifying products and processes) for the use of intellectual property, product warranty costs and other overhead associated with our production processes.

Our gross profit is influenced by a number of factors, the most important of which is the volume and mix of sales of our 3D printing machines and 3D printed and other products, materials and services.

As 3D printing machine sales are cyclical, we seek to achieve a balance in revenue from 3D printing machines and 3D printed and other products, materials and services in order to maximize gross profit while managing business risk. In addition, we expect to reduce our cost of sales over time by continued research and development and supply chain activities directed towards achieving increased efficiencies in our production processes and lowering the total cost of ownership of our 3D printing machines.

Operating Expenses. Our operating expenses consist of research and development expenses and selling, general and administrative expenses.

Research and development expenses. Our research and development expenses consist primarily of salaries and related personnel expenses aimed at 3D printing machine development and materials qualification activities. Additional costs include the related software and materials, laboratory supplies, and costs for facilities and equipment (including 3D printing machines used in materials qualification activities). Research and development expenses are charged to operations as they are incurred. We capitalize the cost of materials, equipment and facilities that have future alternative uses in research and development projects or otherwise.

Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of employee-related costs (salaries and benefits) of our executive officers, sales and marketing (including sales commissions), finance, accounting, information technology and human resources personnel. Other significant general and administrative costs include the facility costs related to our United States and European headquarters and external costs for legal, audit, consulting and other professional services.

Interest Expense. Interest expense consists of the interest cost associated with our related party revolving credit facility and outstanding long-term debt.

Provision (Benefit) for Income Taxes. We are taxed as a corporation for United States federal, state, local and foreign income tax purposes. Current rates in the jurisdictions in which we operate, the United States, Germany, and Japan, are 21.0%, 28.4%, and 33.6%, respectively.

23


 

Results of Operations

Net Loss

Net loss for 2020 was $14,924, or $0.86 per basic and diluted share, compared with a net loss of $15,095, or $0.93 per basic and diluted share, for 2019. The decrease in our net loss was principally due to lower operating expenses primarily as a result of certain cost savings actions taken, and other cost reductions realized, as a result of COVID-19 and the absence of costs associated with the GIFA international foundry show in Dusseldorf, Germany (a once every four-year event), which we attended in June 2019. We also recognized a gain of $1,462 during 2020 associated with the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany. Partially offsetting the decrease in net loss was a reduction in our gross profit (further described below) and an income tax benefit of $818 recorded in 2019 associated with the reversal of previously recorded liabilities for uncertain tax positions following the completion of a tax examination of our German operations.

The following table summarizes revenue by product group for each of the years ended December 31:

 

 

 

 

2020

 

 

2019

 

3D printing machines

 

$

31,470

 

 

 

53.1

%

 

$

27,232

 

 

 

51.1

%

3D printed and other products, materials and services

 

 

27,783

 

 

 

46.9

%

 

 

26,044

 

 

 

48.9

%

 

 

$

59,253

 

 

 

100.0

%

 

$

53,276

 

 

 

100.0

%

 

Revenue for 2020 was $59,253 compared with revenue of $53,276 for 2019, an increase of $5,977, or 11.2%. The increase in revenue was attributable to both of our product groups.

The increase in revenues from 3D printing machines of $4,238 for 2020, or 15.6%, as compared to 2019, resulted primarily from higher volumes (53 units sold during 2020 versus 44 units sold during 2019).

The increase in revenues from 3D printed and other products, materials and services of $1,739, or 6.7%, as compared to 2019, resulted from an increase of $1,589 in consumable materials and aftermarket revenues based on growth in our global installed base of 3D printing machines and an increase of $1,830 associated with research and development arrangements, primarily due to two government projects which commenced during 2020 and an automotive project which commenced during the fourth quarter of 2019. Offsetting these increases was a reduction in revenues of $1,558 from our global sand EAC network based on lower end market demand as a result of the impact of COVID-19 on the macroeconomic environment.

Revenue for both product groups was impacted by COVID-19, including disruptions to domestic and international shipping and travel in addition to the negative macroeconomic effects.

Cost of Sales and Gross Profit

Cost of sales for 2020 was $44,771 compared with cost of sales of $35,848 for 2019, an increase of $8,923, or 24.9%. Gross profit for  2020 was $14,482 compared with gross profit of $17,428 for 2019. Gross profit percentage was 24.4% for 2020 compared with gross profit percentage of 32.7% for 2019.

The decrease in gross profit during 2020 was primarily due to lower realized pricing on products (including sales of our X1 25Pro platform following its initial market introduction in the fourth quarter of 2019 and the sale of a discontinued sand system during the third quarter of 2020) and unfavorable warranty experience, partially offset by higher revenue volumes and lower fixed overhead costs.  Lower fixed overhead costs during 2020 were driven by a reduction in labor, travel, and other discretionary manufacturing expense based on actions taken and other realized reductions as a result of COVID-19. These decreases were offset by an increase in facility rent expense (versus depreciation) following completion of the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany during the first quarter of 2020.

Research and Development

Research and development expenses for 2020 were $8,845 compared with research and development expenses of $9,884 for 2019, a decrease of $1,039, or 10.5%. The decrease in research and development expenses is primarily due to decreases in material-related costs of $490 and consulting and professional fees of $346 based on reductions in machine and material development spending. In addition, there were decreases associated with COVID-19, including reductions of employee-related costs of $272 and travel-related expenses of $92.

24


 

Selling, General and Administrative

Selling, general and administrative expenses for 2020 were $20,953 compared with selling, general and administrative expenses of $22,592 for 2019, a decrease of $1,639, or 7.3%. The decrease in selling, general and administrative expenses was principally due to reductions in trade show expenses of $911 due to COVID-19 and the absence of costs associated with the GIFA international foundry show in Dusseldorf, Germany (a once every four-year event), lower travel expenses of $521 as a result of COVID-19 global travel restrictions, lower consulting and professional fees of $592, lower equity-based and other incentive compensation of $205 and a reduction in provision for bad debts of $256 due to the absence of a specific customer provision recorded during 2019. Offsetting these decreases were increases in sales commissions of $628, consistent with the increase in revenues during 2020 as compared to 2019, and increases in employee costs of $239 primarily due to investments made to our commercial operations, offset by actions taken (terminations and furloughs) in response to COVID-19.

Interest Expense

Interest expense for 2020 was $239 compared with interest expense of $343 for 2019, a decrease of $104, or 30.3%. The decrease in interest expense was principally due to lower interest associated with our related party revolving credit facility (including lower debt issuance cost amortization) following amendment of the Credit Agreement (which reduced the borrowing capacity of the facility) and the extension of the term of the credit facility in February 2020.

Other Expense — Net

Other expense — net for 2020 was $631 compared with other expense — net of $111 for 2019. The change of $520 was principally due to unfavorable foreign exchange rate changes and the related impact on certain intercompany transactions between subsidiaries for which settlement has occurred or is planned.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes for 2020 and 2019 was $200 and ($407), respectively. The effective tax rate for 2020 and 2019 was 1.4% (provision on a loss) and 2.6% (benefit on a loss), respectively.

For 2020, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to net changes in valuation allowances for the period.

For 2019, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to the reversal of previously recorded liabilities for uncertain tax positions (further discussed below) and net changes in valuation allowances for the period.

We have provided a valuation allowance for certain of our net deferred tax assets as a result of our inability to generate consistent net operating profits in certain jurisdictions in which we operate. As such, certain benefits from deferred taxes in the periods presented have been fully offset by changes in the valuation allowance for the related net deferred tax assets. We continue to assess our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to enact in future periods, the impact of potential operating changes on our business and our forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that we are able to reach the conclusion that net deferred tax assets are realizable based on any combination of the above factors in a single, or multiple, taxing jurisdictions, a reversal of the related portion of our existing valuation allowances may occur.

In January 2019, a tax examination of ExOne GmbH (2010-2013 tax years) and ExOne Property GmbH (2013 tax year) was concluded by the local taxing authorities in Germany without significant adjustment to previously established tax positions. As a result, during 2019, we recorded a reversal of certain previously recorded liabilities for uncertain tax positions of $1,075, of which $257 was offset against net operating loss carryforwards.

In December 2019, a tax examination of ExOne GmbH (2014 tax year) and ExOne Property GmbH (2014 tax year) was concluded by the local taxing authorities in Germany without significant adjustment to previously established tax positions. As a result, during 2019, we recorded a reversal of certain previously recorded liabilities for uncertain tax positions of $111, all of which was offset against net operating loss carryforwards.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition are not significant.

Liquidity and Capital Resources

We have incurred a net loss in each of our annual periods since our inception. We incurred net losses of $14,924 and $15,095 during 2020 and 2019, respectively.  At December 31, 2020, we had $49,668 in unrestricted cash and cash equivalents.

25


 

Common Stock Offerings

Since our inception and through December 31, 2020, we have received cumulative unrestricted net proceeds from the sale of our common stock (through our initial public offering and subsequent public offerings, including at-the-market offerings) of $207,530 to fund our operations.

In June 2020, we entered into an equity distribution agreement (the “Oppenheimer Equity Distribution Agreement”) with Oppenheimer & Company, Inc. (“Oppenheimer”) pursuant to which Oppenheimer agreed to act as sales agent in the sale of up to $25,000 in the aggregate of our common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act. Sales of common stock under the Oppenheimer Equity Distribution Agreement ended in September 2020 when the offering limit ($25,000) was reached. Following completion of this offering, in September 2020, we entered into a separate equity distribution agreement (the “Canaccord Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which Canaccord agreed to act as sales agent in the sale of up to $25,000 in the aggregate of our common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act. The terms of both the Oppenheimer Equity Distribution Agreement and the Canaccord Equity Distribution Agreement required a 3.0% commission on the sale of our common stock as well as reimbursement of certain expenses incurred by the sales agent.

During 2020, we sold 3,445,385 shares of common stock in the above-described at-the-market offerings (2,204,875 shares under the Oppenheimer Equity Distribution Agreement and 1,240,510 shares under the Canaccord Equity Distribution Agreement) at an average selling price of $11.82 per share, resulting in net proceeds to us (after deducting commissions) of $39,509. During 2020, we incurred expenses (other than commissions) associated with at-the-market offerings of $340. At December 31, 2020, $171 of the expenses (other than commissions) associated with the at-the-market offerings remained unpaid (included in accounts payable in the accompanying consolidated balance sheet).

There have been no sales of shares of common stock in at-the-market offerings subsequent to December 31, 2020. In February 2021, we terminated the Canaccord Equity Distribution Agreement.  At the time of the termination of the agreement, the remaining maximum offering capacity was $9,269.

On February 10, 2021, we entered into an underwriting agreement pursuant to which we agreed to issue and sell up to 1,666,667 shares of our common stock at a public offering price of $54.00 per share. In addition, we granted the underwriters a 30-day option to purchase up to an additional 205,907 shares of its common stock at the public offering price, less underwriting discounts and commissions.  Under the agreement, we agreed to pay underwriting discounts and commissions of $2.835 per share, as well as reimburse the underwriters for certain expenses. On February 11, 2021, the underwriters exercised their option to purchase 205,907 shares of our stock in full. As a result of this common stock offering, during February 2021, we sold 1,872,574 shares of our common stock and received aggregate net proceeds of approximately $95,000 after underwriting discounts, commissions, legal and accounting fees, and other offering expenses payable by us.

Related Party Revolving Credit Facility

On March 12, 2018, we and our ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors (collectively, the “Loan Parties”), entered into a Credit Agreement and related ancillary agreements with LBM Holdings, LLC (“LBM”), a company controlled by S. Kent Rockwell, who was the Executive Chairman of the Company (a related party) at such date and is currently Chairman of the Company, relating to a $15,000 revolving credit facility (the “Credit Agreement”) to provide additional funding to us for working capital and general corporate purposes. The Credit Agreement provided a credit facility for a term of three years (through March 12, 2021), bearing interest at a rate of one-month LIBOR plus an applicable margin of 500 basis points (6.8% at December 31, 2019 and 5.1% at December 31, 2020). The Credit Agreement required a commitment fee of 75 basis points, or 0.75%, on the unused portion of the facility, payable monthly in arrears. In addition, an up-front commitment fee of 125 basis points, or 1.25% ($188), was required at closing. Borrowings under the Credit Agreement were collateralized by the accounts receivable, inventories and machinery and equipment of the Loan Parties.

On February 18, 2020, the Loan Parties and LBM entered into a First Amendment to the Credit Agreement (the “Amendment”) which (i) reduced the available capacity under the revolving credit facility to $10,000, (ii) extended the term of the credit facility until March 31, 2024, (iii) increased the commitment fee to 100 basis points, or 1.00%, on the unused portion of the revolving credit facility, and (iv) provided a process for the replacement of the LIBOR index after 2021. In addition, the accounts receivable of ExOne GmbH no longer served as collateral for borrowings under the amended revolving credit facility.

Borrowings under the credit facility were required to be made in minimum increments of $1,000. We could make prepayments against outstanding borrowings under the amended Credit Agreement at any time without penalty. At December 31, 2020 and December 31, 2019, the total estimated value of collateral was in significant excess of the maximum borrowing capacity under the credit facility.

The amended Credit Agreement contained several affirmative covenants including prompt payment of liabilities and taxes; maintenance of insurance, properties, and licenses; and compliance with laws. The amended Credit Agreement also contained several negative covenants including restricting the incurrence of certain additional debt; prohibiting future liens (other than permitted liens); prohibiting investment in third parties; limiting the ability to pay dividends; limiting mergers, acquisitions, and dispositions; and limiting the sale of certain property and equipment of the Loan Parties. The amended Credit Agreement did not contain any

26


 

financial covenants. The amended Credit Agreement also contained events of default, including, but not limited to, cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.

We did not consider the Credit Agreement, as amended, indicative of a fair market value lending, as LBM was determined to be a related party based on common control by S. Kent Rockwell. S. Kent Rockwell is the indirect sole owner of LBM. Prior to execution, each of the Credit Agreement and the Amendment was reviewed and approved by the Audit Committee of the Company’s Board of Directors (the “Board”), in accordance with The ExOne Company Policy and Procedures with Respect to Related Person Transactions, and subsequently by a sub-committee of independent members of the Board. At the time of execution of the Credit Agreement, the available loan proceeds were deposited into an escrow account with an unrelated, third party financial institution acting as escrow agent pursuant to a separate escrow agreement by and among the parties. Loan proceeds held in escrow were available to us upon our submission of a loan request to the escrow agent. Such proceeds were not available to LBM until payment in-full of the obligations under the amended Credit Agreement and termination of the amended Credit Agreement. Payments of principal and other obligations were to be made to the escrow agent, while interest payments were to be made directly to LBM. Provided there existed no potential default or event of default, the amended Credit Agreement and the escrow agreement prohibited any acceleration of repayment of any amount outstanding under the amended Credit Agreement and prohibited termination of the amended Credit Agreement or withdrawal from escrow of any unused portion of the available loan proceeds.

There were no borrowings under the credit facility during 2020. During 2019, the Company had borrowings of $4,000, all of which were subsequently repaid prior to December 31, 2019.

Under the terms of the amended Credit Agreement, we could terminate or reduce the credit commitment at any time during the term without penalty.  On March 5, 2021, we terminated the related party revolving credit facility. There were no penalties associated with our termination of the related party revolving credit facility. Due to the termination, we accelerated the amortization of the remaining debt issuance costs associated with the related party revolving credit facility, resulting in recognition of $105 loss on the extinguishment of debt during the three months ended March 31, 2021.

Paycheck Protection Program

On April 18, 2020, we entered into an unsecured promissory note (the “Note”) with an unrelated United States bank (the “Lender”) reflecting a loan in the principal amount of $2,194 (the “Loan”). The Loan was granted pursuant to the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Pursuant to the terms of the Note, the Loan bears interest at a rate of 1.00% per annum and matures on April 18, 2022 (the “Maturity Date”). Under the terms of the Note, principal and interest payments on the Loan were deferred until November 18, 2020, at which time equal installments of principal and interest would be due and payable monthly through the Maturity Date.  Subsequent to us entering into the Note, in June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which extended the deferral of principal and interest payments on the Loan from November 18, 2020 to May 18, 2021. The Note may be prepaid by us at any time prior to maturity without penalty. If we default on the Note, the Lender may, at its option, accelerate the maturity of our obligations under the Note.

Pursuant to the terms of the PPP, the Loan, or a portion thereof, may be forgiven if Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent and utilities. We used all of the Loan proceeds for qualifying expenses. The terms of the Loan, including eligibility and forgiveness, may be subject to further requirements in the Paycheck Protection Program Flexibility Act of 2020 and in regulations and guidance adopted by the SBA. We have elected to account for the Loan in accordance with the terms of the Note while our forgiveness eligibility remains subject to review.

27


 

Cash Flows

The following table summarizes the significant components of cash flows for each of the years ended December 31, and our cash, cash equivalents, and restricted cash balances at the end of each of the periods indicated:

 

 

 

2020

 

 

2019

 

Net cash used for operating activities

 

$

(13,836

)

 

$

(5,304

)

Net cash provided by investing activities

 

 

14,998

 

 

 

2,520

 

Net cash provided by financing activities

 

 

42,213

 

 

 

59

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

558

 

 

 

(172

)

Net change in cash, cash equivalents, and restricted cash

 

$

43,933

 

 

$

(2,897

)

 

 

 

 

 

 

 

 

 

 

 

December 31,

2020

 

 

December 31,

2019

 

Cash and cash equivalents

 

$

49,668

 

 

$

5,265

 

Restricted cash

 

 

508

 

 

 

978

 

Cash, cash equivalents, and restricted cash

 

$

50,176

 

 

$

6,243

 

 

Operating Activities

Net cash used for operating activities for 2020 was $13,836, compared with net cash used for operating activities of $5,304 for 2019. The increase of $8,532 was due principally to an unfavorable change in our net working capital attributable to a decrease in net cash inflows from customers (principally due to the timing of cash collections on 3D printing machine sales) and an increase in net loss (net of noncash items).

Investing Activities

Net cash provided by investing activities for 2020 was $14,998 compared with net cash provided by investing activities of $2,520 for 2019.

For 2020, net cash provided by investing activities included $16,229 in proceeds from the sale of property and equipment, including the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany. These cash inflows were offset by $1,231 in cash outflows associated with capital expenditures.

For 2019, net cash provided by investing activities included cash inflows of $3,186 in proceeds from the sale of property and equipment, including $967 in proceeds from the sale of our former Houston, Texas facility and a deposit of $2,216 on the sale of our Gersthofen, Germany facility. These cash inflows were offset by $666 in cash outflows associated with capital expenditures.

We expect our 2021 capital expenditures to be limited to spending associated with sustaining our existing operations and strategic asset acquisition and deployment (estimated spending of approximately $3,000 to $4,000).

Financing Activities

Net cash provided by financing activities for 2020 was $42,213 compared with net cash provided by financing activities of $59 for 2019.

For 2020, net cash provided by financing activities included cash inflows of $39,340 in proceeds from at-the-market offerings of common stock, net of issuance costs (further discussed above) and $2,194 in proceeds from borrowings on long-term debt associated with our PPP Loan (further discussed above).

For 2019, net cash provided by financing activities included $289 in cash inflows associated with proceeds from the exercise of employee stock options. These cash inflows were offset by cash outflows of $149 in principal payments on long-term debt and $68 associated with taxes related to the net settlement of equity-based awards.

On February 26, 2021, we extinguished our building note payable in-full through cash payment of $1,199. We did not incur any prepayment penalties related to the extinguishment of the building note payable in advance of the maturity date (May 2027). For more information related to the building note payable, refer to Note 14 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Financial Condition

The following summarizes the material changes in our financial condition from December 31, 2019 to December 31, 2020:

Restricted cash decreased by $470 following an amendment to our credit facility agreement with a German bank completed in February 2020 which relieved us of a cash collateral requirement for financial guarantees and letters of credit issued by us for commercial transactions requiring security for amounts up to approximately $1,200.

28


 

Accounts receivable decreased by $1,297 based on the timing of cash payments by customers (principally the timing of cash collections on 3D printing machine sales).

Inventories increased by $792 consistent with our growth in backlog. Inventories have also been impacted (primarily the increase in finished goods inventories) as a result of disruptions in delivery and installation of our 3D printing machines as a result of COVID-19.

Prepaid expenses and other current assets increased by $2,269, mostly due to increases in prepayments to suppliers for 3D printing machine components and subassemblies.

Property and equipment – net decreased by $17,595, mostly due to the impact of the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany (which resulted in a derecognition of $17,282 of related property and equipment) and depreciation expense of $3,775 incurred during the period. These decreases were offset by increases associated with capital expenditure additions of $1,231 and net transfers from inventory to property and equipment of 3D printing machines of $1,874.

Operating lease right-of-use assets increased by $3,611, principally as a result of the sale-leaseback transaction further discussed above.

Accounts payable decreased by $1,317 due to the timing of payments to our suppliers and vendors for our production and operating expenses.

Accrued expenses and other current liabilities decreased by $1,964 mostly due to the sale-leaseback transaction further discussed above based on the release of $2,243 of a deposit liability received from the buyer of the operating facility in Gersthofen, Germany in December 2019.

Operating lease liabilities increased $3,611, principally as a result of the sale-leaseback transaction further discussed above.

Contract liabilities increased $1,613 based on the timing of cash payments by customers (principally the timing of cash collections on 3D printing machine sales consistent with growth in our backlog). Contract liabilities have also been impacted as a result of disruptions in delivery and installation of our 3D printing machines as a result of COVID-19.    

Off Balance Sheet Arrangements

In the normal course of its operations, ExOne GmbH issues short-term financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security through a credit facility with a German bank.

At December 31, 2020, total outstanding financial guarantees and letters of credit issued by us were $1,026 (€836), of which $928 (€756) were issued through the credit facility with a Germany bank. The outstanding financial guarantees and letters of credit include expiration dates ranging from March 2021 through February 2023. At December 31, 2019, total outstanding guarantees and letters of credit issued by us were $560 (€499).

For further discussion related to financial guarantees and letters of credit issued by us, refer to Note 12 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Recently Issued and Adopted Accounting Guidance

Refer to Note 1 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Refer to Note 1 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are an SRC as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

29


 

Item 8. Financial Statements and Supplementary Data.

 

 

30


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors

of The ExOne Company

 

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The ExOne Company and Subsidiaries (collectively, the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements.  The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Revenue from Contracts with Customers – 3D Printing Machines

 

Critical Audit Matter Description

As discussed in Note 5 of the consolidated financial statements, the Company derives a portion of its revenue from the sale of 3D printing machines.  Certain of the Company’s contracts with customers provide for multiple performance obligations.  Sales of 3D printing machines may also include optional equipment, materials, replacement components and services (installation, training and other services, including maintenance services and/or extended warranty).  For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of stand-alone selling price for each distinct product or service in the contract, which is generally based on an observable price. Additionally, the Company’s revenue from products is transferred to customers at a point in time.  The Company’s contracts for 3D printing machines generally include substantive customer acceptance provisions.  Revenue under these contracts is recognized when customer acceptance provisions have been satisfied.  We identified the determination of separate performance obligations as a critical audit matter due to the judgements involved in the accounting.  

 

31


 

 

How the Critical Audit Matter Was Addressed in the Audit

Addressing this matter involved obtaining executed contracts with customers, other customer correspondence and acceptance documents, as applicable, for a sample of 3D printing machine sales transactions.  Based on the evidence obtained, we assessed the appropriateness of management’s determination of the separate performance obligations identified within the contract.  

 

 

 

/s/ Schneider Downs & Co. Inc.

 

Schneider Downs & Co. Inc.

 

We have served as the Company’s auditor since 2016.

 

Pittsburgh, Pennsylvania

March 11, 2021

 

32


 

 

The ExOne Company and Subsidiaries

Statement of Consolidated Operations and Comprehensive Loss

(in thousands, except per-share amounts)

 

For the years ended December 31,

 

2020

 

 

2019

 

Revenue

 

$

59,253

 

 

$

53,276

 

Cost of sales

 

 

44,771

 

 

 

35,848

 

Gross profit

 

 

14,482

 

 

 

17,428

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

8,845

 

 

 

9,884

 

Selling, general and administrative

 

 

20,953

 

 

 

22,592

 

Gain from sale-leaseback of property and equipment

 

 

(1,462

)

 

 

 

 

 

 

28,336

 

 

 

32,476

 

Loss from operations

 

 

(13,854

)

 

 

(15,048

)

Other expense

 

 

 

 

 

 

 

 

Interest expense

 

 

239

 

 

 

343

 

Other expense  ̶  net

 

 

631

 

 

 

111

 

 

 

 

870

 

 

 

454

 

Loss before income taxes

 

 

(14,724

)

 

 

(15,502

)

Provision (benefit) for income taxes

 

 

200

 

 

 

(407

)

Net loss

 

$

(14,924

)

 

$

(15,095

)

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.86

)

 

$

(0.93

)

Diluted

 

$

(0.86

)

 

$

(0.93

)

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(14,924

)

 

$

(15,095

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

1,345

 

 

 

(735

)

Comprehensive loss

 

$

(13,579

)

 

$

(15,830

)

 

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

 

33


 

The ExOne Company and Subsidiaries

Consolidated Balance Sheet

(in thousands, except share amounts)

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,668

 

 

$

5,265

 

Restricted cash

 

 

508

 

 

 

978

 

Accounts receivable  ̶  net

 

 

5,225

 

 

 

6,522

 

Current portion of net investment in sales-type leases  ̶  net

 

 

229

 

 

 

213

 

Inventories  ̶  net

 

 

20,562

 

 

 

19,770

 

Prepaid expenses and other current assets

 

 

4,451

 

 

 

2,182

 

Total current assets

 

 

80,643

 

 

 

34,930

 

Property and equipment  ̶  net

 

 

21,300

 

 

 

38,895

 

Operating lease right-of-use assets

 

 

4,043

 

 

 

432

 

Net investment in sales-type leases  ̶  net of current portion   ̶  net

 

 

509

 

 

 

738

 

Other noncurrent assets

 

 

794

 

 

 

371

 

Total assets

 

$

107,289

 

 

$

75,366

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

1,622

 

 

$

153

 

Current portion of operating lease liabilities

 

 

1,958

 

 

 

158

 

Accounts payable

 

 

4,501

 

 

 

5,818

 

Accrued expenses and other current liabilities

 

 

4,978

 

 

 

6,942

 

Current portion of contract liabilities

 

 

13,586

 

 

 

11,846

 

Total current liabilities

 

 

26,645

 

 

 

24,917

 

Long-term debt  ̶  net of current portion

 

 

1,783

 

 

 

1,211

 

Operating lease liabilities  ̶  net of current portion

 

 

2,085

 

 

 

274

 

Contract liabilities  ̶  net of current portion

 

 

159

 

 

 

286

 

Other noncurrent liabilities

 

 

314

 

 

 

96

 

Total liabilities

 

 

30,986

 

 

 

26,784

 

Contingencies and commitments

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 200,000,000 shares authorized,

   20,009,157 (2020) and 16,346,960 (2019) shares issued and outstanding

 

 

200

 

 

 

163

 

Additional paid-in capital

 

 

218,113

 

 

 

176,850

 

Accumulated deficit

 

 

(131,872

)

 

 

(116,948

)

Accumulated other comprehensive loss

 

 

(10,138

)

 

 

(11,483

)

Total stockholders' equity

 

 

76,303

 

 

 

48,582

 

Total liabilities and stockholders' equity

 

$

107,289

 

 

$

75,366

 

 

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

34


 

The ExOne Company and Subsidiaries

Statement of Consolidated Cash Flows

(in thousands)

 

For the years ended December 31,

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(14,924

)

 

$

(15,095

)

Adjustments to reconcile net loss to net cash used for operations:

 

 

 

 

 

 

 

 

Depreciation

 

 

3,775

 

 

 

4,581

 

Equity-based compensation

 

 

1,225

 

 

 

1,416

 

Amortization of debt issuance costs

 

 

49

 

 

 

93

 

Provision for bad debts  ̶  net

 

 

23

 

 

 

279

 

Provision for slow-moving, obsolete and lower of cost or

   net realizable value inventories  ̶  net

 

 

423

 

 

 

292

 

Foreign exchange losses on intercompany transactions  ̶  net

 

 

566

 

 

 

63

 

Gain from sale-leaseback of property and equipment

 

 

(1,462

)

 

 

 

Loss (gain) from disposal of property and equipment  ̶  net

 

 

7

 

 

 

(147

)

Deferred income taxes

 

 

195

 

 

 

(199

)

Changes in assets and liabilities, excluding effects of foreign currency

   translation adjustments:

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

1,464

 

 

 

2

 

Decrease in net investment in sales-type leases

 

 

213

 

 

 

269

 

Increase in inventories

 

 

(2,236

)

 

 

(5,713

)

Increase in prepaid expenses and other assets

 

 

(2,247

)

 

 

(632

)

(Decrease) increase in accounts payable

 

 

(1,679

)

 

 

1,514

 

Decrease in accrued expenses and other liabilities

 

 

(2

)

 

 

(1,308

)

Increase in contract liabilities

 

 

774

 

 

 

9,281

 

Net cash used for operating activities

 

 

(13,836

)

 

 

(5,304

)

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,231

)

 

 

(666

)

Proceeds from sale of property and equipment

 

 

16,229

 

 

 

3,186

 

Net cash provided by investing activities

 

 

14,998

 

 

 

2,520

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from borrowings on long-term debt

 

 

2,194

 

 

 

 

Payments on long-term debt

 

 

(158

)

 

 

(149

)

Proceeds from related party revolving credit facility

 

 

 

 

 

4,000

 

Payments on related party revolving credit facility

 

 

 

 

 

(4,000

)

Proceeds from at-the-market offerings of common stock, net of issuance costs

 

 

39,340

 

 

 

 

Taxes related to the net share settlement of equity-based awards

 

 

(28

)

 

 

(68

)

Proceeds from exercise of employee stock options

 

 

934

 

 

 

289

 

Other

 

 

(69

)

 

 

(13

)

Net cash provided by financing activities

 

 

42,213

 

 

 

59

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

558

 

 

 

(172

)

Net change in cash, cash equivalents, and restricted cash

 

 

43,933

 

 

 

(2,897

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

6,243

 

 

 

9,140

 

Cash, cash equivalents, and restricted cash at end of period

 

$

50,176

 

 

$

6,243

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

167

 

 

$

222

 

Cash paid for income taxes

 

$

516

 

 

$

199

 

Supplemental disclosure of noncash investing and financing activities

 

 

 

 

 

 

 

 

Transfer of internally developed 3D printing machines from inventories to

   property and equipment for internal use or leasing activities

 

$

3,524

 

 

$

2,572

 

Transfer of internally developed 3D printing machines from property

   and equipment to inventories for sale

 

$

1,650

 

 

$

1,206

 

Property and equipment included in accounts payable

 

$

65

 

 

$

71

 

At-the-market offering issuance costs included in accounts payable

 

$

171

 

 

$

 

 

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

35


 

The ExOne Company and Subsidiaries

Statement of Changes in Consolidated Stockholders’ Equity

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other

 

 

Total

 

 

 

Common stock

 

 

Additional

 

 

Accumulated

 

 

comprehensive

 

 

stockholders'

 

 

 

Shares

 

 

$

 

 

paid-in capital

 

 

deficit

 

 

loss

 

 

equity

 

Balance at December 31, 2018

 

 

16,234

 

 

$

162

 

 

$

175,214

 

 

$

(101,853

)

 

$

(10,748

)

 

$

62,775

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(15,095

)

 

 

 

 

 

(15,095

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(735

)

 

 

(735

)

Equity-based compensation

 

 

 

 

 

 

 

 

1,416

 

 

 

 

 

 

 

 

 

1,416

 

Exercise of employee stock options

 

 

40

 

 

 

1

 

 

 

288

 

 

 

 

 

 

 

 

 

289

 

Common stock issued from equity incentive plan

 

 

73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax withholding related to the net share settlement

   of equity-based awards

 

 

 

 

 

 

 

 

(68

)

 

 

 

 

 

 

 

 

(68

)

Balance at December 31, 2019

 

 

16,347

 

 

$

163

 

 

$

176,850

 

 

$

(116,948

)

 

$

(11,483

)

 

$

48,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

16,347

 

 

$

163

 

 

$

176,850

 

 

$

(116,948

)

 

$

(11,483

)

 

$

48,582

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,924

)

 

 

 

 

 

(14,924

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,345

 

 

 

1,345

 

Equity-based compensation

 

 

 

 

 

1

 

 

 

1,224

 

 

 

 

 

 

 

 

 

1,225

 

Exercise of employee stock options

 

 

128

 

 

 

1

 

 

 

933

 

 

 

 

 

 

 

 

 

934

 

Common stock issued from equity incentive plan

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax withholding related to the net share settlement

   of equity-based awards

 

 

(3

)

 

 

 

 

 

(28

)

 

 

 

 

 

 

 

 

(28

)

At-the-market offerings of common stock,

   net of issuance costs

 

 

3,445

 

 

 

35

 

 

 

39,134

 

 

 

 

 

 

 

 

 

39,169

 

Balance at December 31, 2020

 

 

20,009

 

 

$

200

 

 

$

218,113

 

 

$

(131,872

)

 

$

(10,138

)

 

$

76,303

 

 

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

 

 

 

36


 

 

The ExOne Company and Subsidiaries

Notes to the Consolidated Financial Statements

(dollars in thousands, except per-share, share and unit amounts)

Note 1. Summary of Significant Accounting Policies

Organization

The ExOne Company (“ExOne”) is a corporation organized under the laws of the state of Delaware. ExOne was formed on January 1, 2013, when The Ex One Company, LLC, a Delaware limited liability company, merged with and into a Delaware corporation, which survived and changed its name to The ExOne Company (the “Reorganization”). As a result of the Reorganization, The Ex One Company, LLC became ExOne, the common and preferred interest holders of The Ex One Company, LLC became holders of common stock and preferred stock, respectively, of ExOne, and the subsidiaries of The Ex One Company, LLC became the subsidiaries of ExOne. The consolidated financial statements include the accounts of ExOne, its wholly-owned subsidiaries, ExOne Americas LLC (United States); ExOne GmbH (Germany); ExOne Property GmbH (Germany); and ExOne KK (Japan). Collectively, the consolidated group is referred to as the “Company”.

The Company filed a shelf registration statement on Form S-3 (No. 333-223690) with the Securities and Exchange Commission (“SEC”) on March 15, 2018. The purpose of the Form S-3 was to register various equity and debt securities. Subsidiaries of the Company are co-registrants with the Company (“Subsidiary Guarantors”), and the registration statement registered guarantees of debt securities by one or more of the Subsidiary Guarantors. The Subsidiary Guarantors are 100% owned by the Company and any guarantees by the Subsidiary Guarantors will be full and unconditional.

Basis of Presentation

The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All material intercompany transactions and balances have been eliminated in consolidation.

Certain amounts relating to operating lease right-of-use assets ($432), current portion of operating lease liabilities ($158) and operating lease liabilities – net of current portion ($274) in the accompanying consolidated balance sheet at December 31, 2019, have been reclassified from other noncurrent assets, accrued expenses and other current liabilities and other noncurrent liabilities, respectively, to conform to current period presentation.  

Use of Estimates

The preparation of these consolidated financial statements requires the Company to make certain judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Areas that require significant judgments, estimates and assumptions include accounting for accounts receivable (including the allowance for doubtful accounts); inventories (including the allowance for slow-moving and obsolete inventories); product warranty reserves; contingencies; revenue (including the allocation of a sales contract’s total transaction price to each performance obligation for contracts with multiple performance obligations); and equity-based compensation (including the valuation of certain equity-based compensation awards issued by the Company). The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Foreign Currency

The local currency is the functional currency for significant operations outside of the United States. The determination of the functional currency of an operation is made based upon the appropriate economic and management indicators.

Foreign currency assets and liabilities are translated into their United States dollar equivalents based upon year end exchange rates, and are included in stockholders’ equity as a component of other comprehensive income (loss). Revenues and expenses are translated at average exchange rates. Transaction gains and losses that arise from exchange rate fluctuations are charged to operations as incurred, except for gains and losses associated with certain long-term intercompany transactions between subsidiaries for which settlement is not planned or anticipated in the foreseeable future, which are included in other comprehensive income (loss) in the accompanying statement of consolidated operations and comprehensive loss.

The Company transacts business globally and is subject to risks associated with fluctuating foreign exchange rates. For 2020 and 2019, 54.8% and 60.8% of the consolidated revenue of the Company was derived from transactions outside the United States, respectively. This revenue is generated primarily from wholly-owned subsidiaries operating in their respective countries and surrounding geographic areas. This revenue is primarily denominated in each subsidiary’s local functional currency, including the euro and Japanese yen.

37


 

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents. The Company’s policy is to invest cash in excess of short-term operating and debt-service requirements in such cash equivalents. These instruments are stated at cost, which approximates fair value because of the short maturity of the instruments. The Company maintains cash balances with financial institutions located in the United States, Germany and Japan. The Company places its cash with high quality financial institutions and believes its risk of loss is limited; however, at times, account balances may exceed international and federally insured limits. The Company has not experienced any losses associated with these cash balances.

Restricted cash includes any cash balance held by the Company subject to restriction on withdrawal or use.

Inventories

The Company values all of its inventories at the lower of cost, as determined on the first-in, first-out method or net realizable value. Overhead is allocated to work in process and finished goods based upon normal capacity of the Company’s production facilities. Fixed overhead associated with production facilities that are being operated below normal capacity are recognized as a period expense rather than being capitalized as a product cost. An allowance for slow-moving and obsolete inventories is provided based on historical consumption experience, anticipated product demand and product design changes. These provisions reduce the cost basis of the respective inventories and are recorded as a charge to cost of sales.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, generally three to forty years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the expected term of the related lease. Gains or losses from the sale of assets are recognized upon disposal or retirement of the related assets. Repairs and maintenance are charged to expense as incurred.

The Company evaluates long-lived assets held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset group) to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the excess of carrying value of assets (asset group) over their fair value. The determination of what constitutes an asset group, the associated undiscounted net cash flows, the fair value of assets (asset group) and the estimated useful lives of assets require significant judgments and estimates by management. NaN impairment loss related to held and used assets was recorded by the Company during 2020 or 2019.

Income Taxes

The provision (benefit) for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, the provision (benefit) for income taxes represents income taxes paid or payable (or received or receivable) for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid and result from differences between the financial and tax bases of assets and liabilities and are adjusted for changes in tax rates and tax laws when enacted. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company’s foreign subsidiaries are taxed as corporations under the taxing regulations of those respective countries. As a result, the accompanying statement of consolidated operations and comprehensive loss includes a provision (benefit) for income taxes related to these foreign jurisdictions. Any undistributed earnings are intended to be permanently reinvested in the respective subsidiaries, with the exception of ExOne Property GmbH. The deferred taxes on the outside basis difference of the Company’s investment in ExOne Property GmbH were not significant at December 31, 2020.

The Company recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the income tax position will be sustained on examination by the taxing authorities based upon the technical merits of the position. The income tax benefits recognized in the consolidated financial statements from such positions are then measured based upon the largest amount that has a greater than 50% likelihood of being realized upon settlement. Income tax benefits that do not meet the more likely than not criteria are recognized when effectively settled, which generally means that the statute of limitations has expired or that the appropriate taxing authority has completed its examination even though the statute of limitations remains open. Interest and penalties related to uncertain tax positions are recognized as part of the provision (benefit) for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related income tax benefits are recognized.

Taxes on Revenue Producing Transactions

Taxes assessed by governmental authorities on revenue producing transactions, including sales, excise, value added and use taxes, are recorded on a net basis (excluded from revenue) in the accompanying statement of consolidated operations and comprehensive loss.

38


 

Research and Development

The Company is involved in research and development of new methods and technologies relating to its products. Research and development expenses are charged to operations as they are incurred. The Company capitalizes the cost of certain materials, equipment and facilities that have alternative future uses in research and development projects or otherwise.

Advertising

Advertising costs are charged to expense as incurred and were 0t significant for 2020 or 2019.

Defined Contribution Plan

The Company sponsors a defined contribution savings plan under section 401(k) of the Internal Revenue Code. Under the plan, participating employees in the United States may elect to defer a portion of their pre-tax earnings, up to the Internal Revenue Service’s annual contribution limit. During 2020 and 2019, the Company made discretionary matching contributions of 50% of the first 8% of employee contributions, subject to certain Internal Revenue Service limitations. Discretionary matching contributions made by the Company during 2020 and 2019 were $307 and $304, respectively.

Equity-Based Compensation

The Company recognizes compensation expense for equity-based grants using the straight-line attribution method in which the expense is recognized ratably over the requisite service period based on the grant date fair value of the related award. Forfeitures of pre-vesting equity-based grants are recognized as they are incurred and result in an offset to equity-based compensation expense in the period of recognition. Fair value of equity-based awards is estimated on the date of grant using the Black-Scholes option pricing model.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company measures the fair value of financial assets and liabilities according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date; Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, and Level 3 inputs are unobservable inputs in which little or no market data exists, therefore typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to measurements involving significant unobservable inputs (Level 3).

At December 31, 2020 and December 31, 2019, the Company had no financial instruments (assets or liabilities) measured at fair value on a recurring basis.

COVID-19

In March 2020, the World Health Organization declared the novel strain of coronavirus a global pandemic (“COVID-19”) and recommended containment and mitigation measures worldwide. The impact of COVID-19 and the related economic, business and market disruptions were wide-ranging and continue to be significant. As a result of COVID-19, the Company was required to temporarily close its operations at its North Huntingdon, Pennsylvania facility for the period from March 23 through March 30, 2020. In response to COVID-19, the Company has incurred incremental costs associated with protecting the health and safety of the Company’s global workforce, enhanced sanitization of the Company’s global operating facilities, and information technology capabilities for employees operating remotely. Beginning in March 2020, restrictions imposed by various governmental authorities on both domestic and international shipping and travel have caused a disruption to the timing of delivery and installation of the Company’s 3D printing machines, resulting in negative impacts to the Company’s financial position, results of operations and cash flows. The duration and severity of the outbreak and its long-term impact on the Company’s business are uncertain at this time. The Company is unable to predict the impact that COVID-19 will have on its future financial position, results of operations and cash flows.

Recently Issued Accounting Guidance

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). Recently issued ASUs not listed below either were assessed and determined to be not applicable or are currently expected to have no impact on the consolidated financial statements of the Company.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As an SRC pursuant to Rule 12b-2 of the Exchange Act, these changes become effective for the Company on January 1, 2023. Management is currently evaluating the potential impact of these changes on the consolidated financial statements of the Company.

39


 

Note 2. Common Stock Offerings

In June 2020, the Company entered into an equity distribution agreement (the “Oppenheimer Equity Distribution Agreement”) with Oppenheimer & Company, Inc. (“Oppenheimer”) pursuant to which Oppenheimer agreed to act as sales agent in the sale of up to $25,000 in the aggregate of ExOne common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Sales of common stock under the Oppenheimer Equity Distribution Agreement ended in September 2020 when the offering limit ($25,000) was reached. Following completion of this offering, in September 2020, the Company entered into a separate equity distribution agreement (the “Canaccord Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which Canaccord agreed to act as sales agent in the sale of up to $25,000 in the aggregate of ExOne common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act. The terms of both the Oppenheimer Equity Distribution Agreement and the Canaccord Equity Distribution Agreement required a 3.0% commission on the sale of ExOne common stock as well as reimbursement of certain expenses incurred by the sales agent.

During 2020, the Company sold 3,445,385 shares of common stock in the above-described at-the-market offerings (2,204,875 shares under the Oppenheimer Equity Distribution Agreement and 1,240,510 shares under the Canaccord Equity Distribution Agreement) at an average selling price of $11.82 per share, resulting in net proceeds to the Company (after deducting commissions) of $39,509. During 2020, the Company incurred expenses (other than commissions) associated with at-the-market offerings of $340. At December 31, 2020, $171 of the expenses (other than commissions) associated with the at-the-market offerings remained unpaid (included in accounts payable in the accompanying consolidated balance sheet).

There have been no sales of shares of common stock in at-the-market offerings subsequent to December 31, 2020.

In February 2021, the Company terminated the Canaccord Equity Distribution Agreement. Refer to Note 20 for further discussion related to the termination of the Canaccord Equity Distribution Agreement.

Note 3. Accumulated Other Comprehensive Loss

The following table summarizes changes in the components of accumulated other comprehensive income (loss) for the periods indicated:

 

For the years ended December 31,

 

2020

 

 

2019

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(11,483

)

 

$

(10,748

)

     Other comprehensive income (loss)

 

 

1,345

 

 

 

(735

)

Balance at end of period

 

$

(10,138

)

 

$

(11,483

)

Foreign currency translation adjustments consist of the effect of translation of functional currency financial statements (denominated in the euro and Japanese yen) to the reporting currency of the Company (United States dollar) and certain long-term intercompany transactions between subsidiaries for which settlement is not planned or anticipated in the foreseeable future.   

There were 0 tax impacts related to income tax rate changes and 0 amounts were reclassified to earnings for any of the periods presented.

Note 4. Loss Per Share

The Company presents basic and diluted loss per common share amounts. Basic loss per common share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the applicable period. Diluted loss per common share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares and common equivalent shares outstanding during the applicable period.

As the Company incurred a net loss during 2020 and 2019, basic average common shares outstanding and diluted average common shares outstanding were the same because the effect of potential shares of common stock, including stock options (641,232 — 2020 and 854,259 — 2019) and unvested restricted stock issued (188,891 — 2020 and 66,513 — 2019), was anti-dilutive.

The information used to compute basic and diluted net loss per common share was as follows for the periods indicated:

 

For the years ended December 31,

 

2020

 

 

2019

 

Net loss

 

$

(14,924

)

 

$

(15,095

)

Weighted average shares outstanding (basic and diluted)

 

 

17,423,229

 

 

 

16,309,259

 

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.86

)

 

$

(0.93

)

Diluted

 

$

(0.86

)

 

$

(0.93

)

 

40


 

 

Note 5. Revenue

The Company derives revenue from the sale of 3D printing machines and 3D printed and other products, materials and services. Revenue is recognized when the Company satisfies its performance obligation(s) under a contract (either implicit or explicit) by transferring the promised product or service to a customer, which is when (or as) the customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenue) basis. Shipping and handling costs are included in cost of sales.

Certain of the Company’s contracts with customers contain multiple performance obligations. Sales of 3D printing machines may also include optional equipment, materials, replacement components and services (installation, training and other services, including maintenance services and/or an extended warranty). Certain other contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of stand-alone selling price for each distinct product or service in the contract, which is generally based on an observable price.

The Company’s revenue from products is transferred to customers at a point in time. The Company’s contracts for 3D printing machines generally include substantive customer acceptance provisions. Revenue under these contracts is recognized when customer acceptance provisions have been satisfied. For all other product sales, the Company recognizes revenue at the point in time in which the customer obtains control of the product, which is generally when product title passes to the customer upon delivery. In certain cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.

The Company’s revenue from service arrangements includes deferred maintenance contracts and extended warranties that can be purchased at the customer’s option. The Company generally provides a standard one-year warranty on the Company’s 3D printing machines, which is considered an assurance type warranty, and not considered a separate performance obligation (Note 10). Revenue associated with deferred maintenance contracts is generally recognized at a point in time when the related services are performed where sufficient historical evidence indicates that the costs of performing the related services under the contract are not incurred on a straight-line basis, with such revenue recognized in proportion to the costs expected to be incurred. Revenue associated with extended warranties is generally recognized over time on a straight-line basis over the related contract period.

The Company generates certain service revenues through the sale of research and development services.  Revenue under research and development service contracts is generally recognized over time where progress is measured in a manner that reflects the transfer of control of the promised goods or services to the customer. Depending on the facts and circumstances surrounding each research and development service contract, revenue is recognized over time using either an input measure (based on the entity’s direct costs incurred in an effort to satisfy the performance obligations) or an output measure (specifically units or parts delivered, based upon certain customer acceptance and delivery requirements).

A portion of the Company’s service revenue is generated through contracts with the federal government under fixed-fee, cost reimbursable and time and materials arrangements (certain of which may have periods of performance greater than one year). Revenue under these contracts is generally recognized over time using an input measure based upon direct costs incurred.

The following table summarizes the Company’s revenue by product group for the periods indicated:

 

For the years ended December 31,

 

2020

 

 

2019

 

3D printing machines

 

$

31,470

 

 

$

27,232

 

3D printed and other products, materials and services

 

 

27,783

 

 

 

26,044

 

 

 

$

59,253

 

 

$

53,276

 

 

Revenue from 3D printing machines includes leasing revenue whereby the Company is the lessor of 3D printing machines to its customers. Leasing revenue is accounted for under FASB Accounting Standards Codification Topic 842 “Leases” (Note 11).

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets) and deferred revenue and customer prepayments (contract liabilities) in the accompanying consolidated balance sheet. The Company considers a number of factors in its evaluation of the creditworthiness of its customers, including past due amounts, past payment history, and current economic conditions. For 3D printing machines, the Company’s terms of sale vary by transaction. To reduce credit risk in connection with 3D printing machine sales, the Company may, depending upon the circumstances, require customers to furnish letters of credit or bank guarantees or to provide advanced payment (either partial or in full). For 3D printed and other products and materials, the Company’s terms of sale generally require payment within 30 to 60 days after delivery, although the Company also recognizes that longer payment periods are customary in certain countries where it transacts business. Service arrangements are generally billed in accordance with specific contract terms and are typically billed in advance or in proportion to performance of the related services.

41


 

During 2020, the Company recognized revenue of $9,343 related to contract liabilities at January 1, 2020.  The difference between revenue recognized related to contract liabilities at January 1, 2020 and the current portion of contract liabilities at December 31, 2019 is principally due to customer prepayments of $2,241 received prior to January 1, 2020 for two 3D printing machine sales the Company expected to complete during 2020.  These 3D printing machine sales are now expected to be completed during 2021.

Contract assets were not significant during the year ended December 31, 2020.

At December 31, 2020, the Company had approximately $39,400 of remaining performance obligations (including contract liabilities), which is also referred to as backlog, of which approximately $33,000 is expected to be fulfilled during the next 12 months notwithstanding uncertainty related to the impact of COVID-19 (Note 1), including, but not limited to, international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. 

The Company has elected to apply the practical expedient associated with incremental costs of obtaining a contract, and as such, sales commission expense is generally expensed when incurred because the amortization period would be one year or less. These costs are recorded within selling, general and administrative expenses.

Accounts receivable and net investment in sales-type leases (Note 11) are reported at their net realizable value. The Company carries its investment in sales-type leases based on discounting the minimum lease payments by the interest rate implicit in the lease, less an allowance for doubtful accounts. The Company’s estimate of the allowance for doubtful accounts related to accounts receivable and net investment in sales-type leases is based on the Company’s evaluation of customer accounts with past-due outstanding balances or specific accounts for which it has information that the customer may be unable to meet its financial obligations. Based upon review of these accounts, and management’s analysis and judgment, the Company records a specific allowance for that customer’s accounts receivable or net investment in sales-type lease balance to reduce the outstanding balance to the amount expected to be collected. The allowance is re-evaluated and adjusted periodically as additional information is received that impacts the allowance amount reserved. At December 31, 2020 and 2019, the allowance for doubtful accounts was $576 and $508, respectively. During 2020 and 2019, the Company recorded net provision for bad debts of $23 and $279, respectively.

Note 6. Cash, Cash Equivalents, and Restricted Cash

The following provides a reconciliation of cash, cash equivalents, and restricted cash as reported in the accompanying consolidated balance sheet to the same such amounts shown in the accompanying statement of consolidated cash flows at December 31:

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

49,668

 

 

$

5,265

 

Restricted cash

 

 

508

 

 

 

978

 

Cash, cash equivalents, and restricted cash

 

$

50,176

 

 

$

6,243

 

 

Restricted cash at both December 31, 2020 and December 31, 2019 included $508 of cash collateral required by a United States bank to offset certain short-term, unsecured lending commitments associated with the Company’s corporate credit card program.

Restricted cash at December 31, 2019 also included $470 of cash collateral required by a German bank for short-term financial guarantees issued by ExOne GmbH in connection with certain commercial transactions requiring security. Refer to Note 12 for further discussion related to an amendment to this cash collateral requirement effective in February 2020.

Each of the balances discussed above are considered legally restricted by the Company.

 

Note 7. Inventories

Inventories consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

Raw materials and components

 

$

9,436

 

 

$

8,841

 

Work in process

 

 

4,797

 

 

 

4,922

 

Finished goods

 

 

6,329

 

 

 

6,007

 

 

 

$

20,562

 

 

$

19,770

 

 

Raw materials and components consist of consumable materials and component parts and subassemblies associated with 3D printing machine manufacturing and support activities. Work in process consists of 3D printing machines and other products in varying stages of completion. Finished goods consist of 3D printing machines and other products prepared for sale in accordance with customer specifications.

42


 

At December 31, 2020 and 2019, the allowance for slow-moving and obsolete inventories was $2,678 and $3,443, respectively, and has been reflected as a reduction to inventories (principally raw materials and components). The following table summarizes changes in the allowance for slow-moving and obsolete inventories for the periods indicated:

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

3,443

 

 

$

4,143

 

Provision for slow-moving and obsolete inventories  ̶  net

 

 

218

 

 

 

292

 

Reductions for physical disposal (sale or scrap) of previously

   reserved amounts

 

 

(1,181

)

 

 

(914

)

Foreign currency translation adjustments

 

 

198

 

 

 

(78

)

Balance at end of period

 

$

2,678

 

 

$

3,443

 

 

Reductions for sale, consumption or scrap of previously reserved amounts during 2020 consisted principally of certain raw material and component inventories associated with the Company’s former Exerial 3D printing platform, which were disposed of during the period. There was no significant benefit or charge recorded during the period in connection with the related disposals.

During 2020, the Company recorded a charge of $205 to cost of sales in the accompanying statement of consolidated operations and comprehensive loss associated with certain inventories for which cost was determined to exceed net realizable value.

Note 8. Property and Equipment

Property and equipment consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

 

Economic Life

(in years)

Land

 

$

3,494

 

 

$

6,980

 

 

N/A

Buildings and related improvements

 

 

10,246

 

 

 

25,675

 

 

5 - 40

Machinery and equipment

 

 

20,728

 

 

 

19,531

 

 

3 - 20

Other

 

 

6,291

 

 

 

7,086

 

 

3 - 20

 

 

 

40,759

 

 

 

59,272

 

 

 

Less: Accumulated depreciation

 

 

(20,823

)

 

 

(21,478

)

 

 

 

 

 

19,936

 

 

 

37,794

 

 

 

Construction-in-progress

 

 

1,364

 

 

 

1,101

 

 

 

Property and equipment  ̶  net

 

$

21,300

 

 

$

38,895

 

 

 

Machinery and equipment included assets leased by the Company of $142 and $63 at December 31, 2020 and 2019, respectively.

Machinery and equipment included assets leased to customers (principally 3D printing machines and related equipment) under operating lease arrangements of $1,920 and $1,309 at December 31, 2020 and 2019, respectively. The carrying value of these assets was $986 and $426 at December 31, 2020 and 2019, respectively.

Depreciation expense was $3,775 and $4,581 for 2020 and 2019, respectively.

On February 18, 2020, the Company completed a sale-leaseback transaction associated with its European headquarters and operating facility in Gersthofen, Germany (Note 11). As a result of the completion of this transaction, the Company derecognized $17,282 in net property and equipment during 2020.  In connection with the sale of the facility, the Company recorded a gain of $1,462 during 2020.

Note 9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

Accrued license fees

 

$

1,563

 

 

$

1,020

 

Product warranty reserves

 

 

1,335

 

 

 

866

 

Accrued payroll and related costs

 

 

1,089

 

 

 

1,382

 

Accrued professional fees

 

 

252

 

 

 

272

 

Income taxes payable

 

 

1

 

 

 

503

 

Deposit liability on sale of property and equipment

 

 

 

 

 

2,243

 

Other

 

 

738

 

 

 

656

 

 

 

$

4,978

 

 

$

6,942

 

 

43


 

 

Note 10. Product Warranty Reserves

 

Substantially all of the Company’s 3D printing machines are covered by a standard one-year warranty. Generally, at the time of sale, a liability is recorded (with an offset to cost of sales) based upon the expected cost of replacement parts and labor to be incurred over the life of the standard warranty. Expected cost is estimated using historical experience for similar products. The Company periodically assesses the adequacy of the product warranty reserves based on changes in these factors and records any necessary adjustments if actual experience indicates that adjustments are necessary. Future claims experience could be materially different from prior results because of the introduction of new, more complex products, a change in the Company’s warranty policy in response to industry trends, competition or other external forces, or manufacturing changes that could impact product quality. In the event that the Company determines that its current or future product repair and replacement costs exceed estimates, an adjustment to these reserves would be charged to cost of sales in the period such a determination is made.

The following table summarizes changes in product warranty reserves, which amounts were reflected in accrued expenses and other current liabilities in the accompanying consolidated balance sheet for the periods indicated:

 

For the year ended December 31,

 

2020

 

 

2019

 

Balance at beginning of period

 

$

866

 

 

$

1,670

 

Provisions for new issuances

 

 

1,318

 

 

 

1,125

 

Payments

 

 

(1,920

)

 

 

(1,514

)

Reserve adjustments

 

 

1,033

 

 

 

(399

)

Foreign currency translation adjustments

 

 

38

 

 

 

(16

)

Balance at end of period

 

$

1,335

 

 

$

866

 

 

Note 11. Leases

Lessee

The Company leases facilities, machinery and other equipment and vehicles under operating lease arrangements (with initial terms greater than 12 months), expiring in various years through 2026. In addition, the Company leases certain equipment and vehicles under finance lease arrangements, which are not significant.

For all operating lease arrangements (with the exception of short-term lease arrangements), the Company presents at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

The Company has elected, as a practical expedient, not to separate non-lease components from lease components, and instead accounts for each separate component as a single lease component for all lease arrangements, as lessee. In addition, the Company has elected, as a practical expedient, not to apply lease recognition requirements to short-term lease arrangements, generally those with a lease term of less than 12 months, for all classes of underlying assets. In determination of the lease term, the Company considers the likelihood of lease renewal options and lease termination provisions. As a result, lease payments under these short-term lease arrangements are recognized in the accompanying statement of consolidated operations and comprehensive loss on a straight-line basis over the lease term.  

The Company uses its incremental borrowing rate in determining the present value of lease payments, as the implicit rate of the lease arrangements is generally not readily determinable.

Future minimum lease payments of operating lease arrangements (with initial terms greater than 12 months) at December 31, 2020, were as follows:

 

2021

 

$

2,119

 

2022

 

 

2,082

 

2023

 

 

48

 

2024

 

 

13

 

2025

 

 

2

 

Thereafter

 

 

1

 

Total minimum lease payments

 

 

4,265

 

Less: Present value discount

 

 

(222

)

Total operating lease liabilities

 

$

4,043

 

 

For 2020 and 2019, lease cost under operating lease arrangements was $2,115 (including $126 relating to short-term lease arrangements) and $389 (including $189 related to short-term lease arrangements), respectively.

44


 

Supplemental information related to operating lease arrangements (with initial terms greater than 12 months) was as follows as of and for the year then ended December 31:

 

 

 

2020

 

 

2019

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

4,909

 

 

$

209

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

2,009

 

 

$

198

 

Weighted average remaining lease term (in years)

 

 

2.1

 

 

 

3.1

 

Weighted average discount rate

 

 

5.1

%

 

 

5.5

%

 

On December 10, 2019, ExOne Property GmbH and ExOne GmbH, the German subsidiaries of the Company (the “German Subsidiaries”), entered into a purchase agreement (the “Purchase Agreement”) with Solidas Immobilien und Grundbesitz GmbH, a private, unaffiliated German real estate investor (the “Buyer”), for the sale of the Company’s European headquarters and operating facility in Gersthofen, Germany (the “Facility”) for a purchase price of approximately $18,500 (€17,000), of which approximately $2,200 (€2,000) was received prior to December 31, 2019. Concurrent with the execution of the Purchase Agreement, ExOne GmbH and the Buyer entered into a rental contract (the “Lease”) for the leaseback of the Facility for an initial aggregate annual rent totaling approximately $1,700 (€1,500), plus applicable taxes, which is fixed during the initial three-year term and is subject to adjustment on an annual basis (in accordance with the consumer price index for Germany) during the 2 five-year option extension periods. The sale-leaseback transaction closed on February 18, 2020. In connection with the completion of the sale-leaseback transaction, the Company recorded an operating lease right-of-use asset and corresponding operating lease liability of $4,605, which was representative of the present value of future minimum lease payments over the initial three-year term, as there were no penalties or other factors associated with the lease that resulted in reasonable assurance of its extension at inception.

 

Lessor

The Company leases machinery and equipment to customers (principally 3D printing machines and related equipment) under lease arrangements classified as either operating leases or sales-type leases. The Company’s operating lease arrangements have initial terms generally ranging from one to five years, certain of which may contain extension or termination clauses, or both. Such operating lease arrangements also generally include a purchase option to acquire the related machinery and equipment at the end of the lease term for either a fixed amount as determined at inception, or a subsequently negotiated fair market value. At December 31, 2020, the Company estimated that the total fair market value significantly exceeded the related net book value of the machinery and equipment held under the Company’s operating lease arrangements. The Company’s sales-type lease arrangements generally include transfer of ownership at the end of the lease term, and as such, the Company’s net investment in sale-type lease arrangements presented in the Company’s accompanying consolidated balance sheet generally does not include an amount of unguaranteed residual value.

For certain of its arrangements, the Company separates and allocates (Note 5) certain non-lease components (principally maintenance services) from lease components. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from lease income) basis. In determination of the lease term, the Company considers the likelihood of lease renewal options and lease termination provisions.

The Company recognized the following components under operating and sales-type lease arrangements in the accompanying statement of consolidated operations and comprehensive loss for the periods indicated:

 

For the years ended December 31,

 

2020

 

 

2019

 

 

 

Operating

 

 

Sales-type

 

 

Operating

 

 

Sales-type

 

Revenue

 

$

785

 

 

$

 

 

$

1,523

 

 

$

 

Interest income(a)

 

$

 

 

$

62

 

 

$

 

 

$

94

 

 

(a)

Interest income related to sales-type leases is recorded as a component of revenue in the accompanying statement of consolidated operations and comprehensive loss for each of the periods presented.

45


 

 

The Company’s net investment in sales-type leases consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

Future minimum lease payments receivable

 

$

1,368

 

 

$

1,595

 

Less: Allowance for doubtful accounts

 

 

(463

)

 

 

(501

)

Net future minimum lease payments receivable

 

 

905

 

 

 

1,094

 

Less: Unearned interest income

 

 

(167

)

 

 

(143

)

Net investment in sales-type leases

 

$

738

 

 

$

951

 

 

During 2019, the Company recorded a provision for bad debt of $416 based on a deterioration in credit quality of a lessee. There were 0 such provisions recorded during 2020.

Future minimum lease payments of non-cancellable operating and sales-type lease arrangements as of December 31, 2020, were as follows:

 

 

 

Operating

 

 

Sales-type

 

2021

 

$

414

 

 

$

554

 

2022

 

 

 

 

 

390

 

2023

 

 

 

 

 

424

 

2024

 

 

 

 

 

 

2025

 

 

 

 

 

 

Thereafter

 

 

 

 

 

 

Total minimum lease payments

 

$

414

 

 

$

1,368

 

Less: Allowance for doubtful accounts

 

 

 

 

 

 

(463

)

Less: Present value discount

 

 

 

 

 

 

(167

)

Future minimum lease payments receivable

 

 

 

 

 

$

738

 

 

 

Note 12. Contingencies and Commitments

Contingencies

On March 1, 2018, the Company’s ExOne GmbH subsidiary notified Voxeljet AG that it had materially breached a 2003 Patent and Know-How Transfer Agreement and asserted its rights to set-off damages as a result of the breaches against the annual license fee due from the Company under the agreement. At this time, the Company cannot reasonably estimate a contingency, if any, related to this matter.

The Company is subject to various litigation, claims, and proceedings which have been or may be instituted or asserted from time to time in the ordinary course of business. Management does not believe that the outcome of any pending or threatened matters will have a material adverse effect, individually or in the aggregate, on the financial position, results of operations or cash flows of the Company.

Commitments

In the normal course of its operations, ExOne GmbH issues short-term financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security through a credit facility with a German bank.

On February 24, 2020, ExOne GmbH entered into an amendment and replacement of its credit facility with the German bank. The credit facility amendments included the elimination of the overdraft credit and short-term loan features of the prior agreement and replaced them with an increased capacity amount of approximately $4,300 (€3,500) for the issuance of financial guarantees and letters of credit for commercial transactions requiring security. The cash collateral requirement for the issuance of financial guarantees and letters of credit for commercial transactions requiring security was eliminated for amounts up to approximately $1,200 (€1,000) as the amendment provided the German bank with a collateral interest in the accounts receivable of ExOne GmbH. Amounts in excess of approximately $1,200 (€1,000) continue to require cash collateral under the amended credit facility.

At December 31, 2020, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the amended credit facility were $928 (€756), with expiration dates ranging from March 2021 through December 2021. At December 31, 2019, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the former credit facility were $560 (€499).

 

 

46


 

 

Note 13. Related Party Revolving Credit Facility

On March 12, 2018, the Company and its ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors (collectively, the “Loan Parties”), entered into a Credit Agreement and related ancillary agreements with LBM Holdings, LLC (“LBM”), a company controlled by S. Kent Rockwell, who was the Executive Chairman of the Company (a related party) at such date and is currently Chairman of the Company, relating to a $15,000 revolving credit facility (the “Credit Agreement”) to provide additional funding to the Company for working capital and general corporate purposes. The Credit Agreement provided a credit facility for a term of three years (through March 12, 2021), bearing interest at a rate of one-month LIBOR plus an applicable margin of 500 basis points (5.1% at December 31, 2020 and 6.8% at December 31, 2019). The Credit Agreement required a commitment fee of 75 basis points, or 0.75%, on the unused portion of the facility, payable monthly in arrears. In addition, an up-front commitment fee of 125 basis points, or 1.25% ($188), was required at closing. Borrowings under the Credit Agreement were collateralized by the accounts receivable, inventories and machinery and equipment of the Loan Parties.

On February 18, 2020, the Loan Parties and LBM entered into a First Amendment to the Credit Agreement (the “Amendment”) which (i) reduced the available capacity under the revolving credit facility to $10,000, (ii) extended the term of the credit facility until March 31, 2024, (iii) increased the commitment fee to 100 basis points, or 1.00%, on the unused portion of the revolving credit facility, and (iv) provided a process for the replacement of the LIBOR index after 2021. In addition, the accounts receivable of ExOne GmbH no longer served as collateral for borrowings under the amended revolving credit facility.

Borrowings under the credit facility were required to be made in minimum increments of $1,000. The Company could make prepayments against outstanding borrowings under the amended Credit Agreement at any time without penalty. At December 31, 2020 and 2019, the total estimated value of collateral was in significant excess of the maximum borrowing capacity under the credit facility.

The amended Credit Agreement contained several affirmative covenants including prompt payment of liabilities and taxes; maintenance of insurance, properties, and licenses; and compliance with laws. The amended Credit Agreement also contained several negative covenants including restricting the incurrence of certain additional debt; prohibiting future liens (other than permitted liens); prohibiting investment in third parties; limiting the ability to pay dividends; limiting mergers, acquisitions, and dispositions; and limiting the sale of certain property and equipment of the Loan Parties. The amended Credit Agreement did not contain any financial covenants. The amended Credit Agreement also contained events of default, including, but not limited to, cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants. The Company obtained waivers related to its event of default on its building note payable (Note 14) and for the incurrence of additional debt associated with its PPP Loan (Note 14).

The Company did not consider the Credit Agreement, as amended, indicative of a fair market value lending, as LBM was determined to be a related party based on common control by S. Kent Rockwell. S. Kent Rockwell is the indirect sole owner of LBM. Prior to execution, each of the Credit Agreement and the Amendment was reviewed and approved by the Audit Committee of the Company’s Board of Directors (the “Board”), in accordance with The ExOne Company Policy and Procedures with Respect to Related Person Transactions, and subsequently by a sub-committee of independent members of the Board. At the time of execution of the Credit Agreement, the available loan proceeds were deposited into an escrow account with an unrelated, third party financial institution acting as escrow agent pursuant to a separate escrow agreement by and among the parties. Loan proceeds held in escrow were available to the Company upon its submission to the escrow agent of a loan request. Such proceeds were not available to LBM until payment in-full of the obligations under the amended Credit Agreement and termination of the amended Credit Agreement. Payments of principal and other obligations were to be made to the escrow agent, while interest payments were to be made directly to LBM. Provided there existed no potential default or event of default, the amended Credit Agreement and the escrow agreement prohibited any acceleration of repayment of any amount outstanding under the amended Credit Agreement and prohibited termination of the amended Credit Agreement or withdrawal from escrow of any unused portion of the available loan proceeds.

There were 0 borrowings under the credit facility during 2020. During 2019, the Company had borrowings of $4,000, all of which were subsequently repaid prior to December 31, 2019.

The Company incurred $265 in debt issuance costs associated with the inception of the credit facility (including the aforementioned up-front commitment fee paid at closing to LBM) and $49 in debt issuance costs associated with the Amendment.

During 2020, the Company recorded interest expense related to the credit facility of $147.  Included in interest expense for 2020 was $44 associated with amortization of debt issuance costs (resulting in $111 in remaining debt issuance costs at December 31, 2020, of which $35 was included in prepaid expenses and other current assets and $76 was included in other noncurrent assets in the accompanying consolidated balance sheet).  Included in interest expense for 2020 was $103 associated with the commitment fee on the unused portion of the revolving credit facility.

During 2019, the Company recorded interest expense related to the credit facility of $260.

47


 

At December 31, 2020 and 2019, $9 and $28, respectively, associated with the commitment fee on the unused portion of the revolving credit facility were included in accounts payable on the accompanying consolidated balance sheet. Amounts payable to LBM at December 31, 2020 and 2019 were settled by the Company in January 2021 and January 2020, respectively.

Under the terms of the amended Credit Agreement, the Company could terminate or reduce the credit commitment at any time during the term without penalty. In March 2021, the Company terminated the credit facility with LBM. Refer to Note 20 for further discussion related to the termination of the credit facility.

 

Note 14. Long-Term Debt

Long-term debt consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

 

 

Principal

 

 

Unamortized

Debt Issuance

Costs

 

 

Net

 

 

Principal

 

 

Unamortized

Debt Issuance

Costs

 

 

Net

 

Paycheck Protection Program loan

 

$

2,194

 

 

$

 

 

$

2,194

 

 

$

 

 

$

 

 

$

 

Building note payable

 

 

1,226

 

 

 

(15

)

 

 

1,211

 

 

 

1,384

 

 

 

(20

)

 

 

1,364

 

Less: Amount due within one year

 

 

(1,626

)

 

 

4

 

 

 

(1,622

)

 

 

(157

)

 

 

4

 

 

 

(153

)

 

 

$

1,794

 

 

$

(11

)

 

$

1,783

 

 

$

1,227

 

 

$

(16

)

 

$

1,211

 

 

On April 18, 2020, the Company entered into an unsecured promissory note (the “Note”) with a United States bank (the “Lender”) reflecting a loan in the principal amount of $2,194 (the “Loan”). The Loan was granted pursuant to the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Pursuant to the terms of the Note, the Loan bears interest at a rate of 1.00% per annum and matures on April 18, 2022 (the “Maturity Date”). Under the terms of the Note, principal and interest payments on the Loan were deferred until November 18, 2020, at which time equal installments of principal and interest would be due and payable monthly through the Maturity Date.  Subsequent to the Company entering into the Note, in June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which extended the deferral of principal and interest payments on the Loan from November 18, 2020 to May 18, 2021.  The Note may be prepaid by the Company at any time prior to maturity without penalty. If the Company defaults on the Note, the Lender may, at its option, accelerate the maturity of the Company’s obligations under the Note.

Pursuant to the terms of the PPP, the Loan, or a portion thereof, may be forgiven if Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent and utilities. The Company used all of the Loan proceeds for qualifying expenses. The terms of the Loan, including eligibility and forgiveness, may be subject to further requirements in the Paycheck Protection Program Flexibility Act of 2020 and in regulations and guidance adopted by the SBA. The Company has elected to account for the Loan in accordance with the terms of the Note while its forgiveness eligibility remains subject to review.

On May 21, 2012, the Company entered into a building note payable with a United States bank. Terms of the building note payable include monthly payments of $18, including interest at 4.00% through May 2017, and subsequently, monthly payments of $19 including interest at the monthly average yield on United States Treasury Securities plus 3.25% for the remainder of the term through May 2027. The building note payable is collateralized by the Company’s facility located in North Huntingdon, Pennsylvania which had a carrying value of $4,795 at December 31, 2020.

At December 31, 2020, the Company identified that it was not in compliance with the annual cash flow-to-debt service ratio covenant associated with the building note payable. The Company requested and was granted a waiver related to compliance with this annual covenant at December 31, 2020 and through December 31, 2021. Related to the 2020 non-compliance, there were no cross-default provisions or related impacts on other lending or financing agreements (Note 13).

Future maturities of long-term debt at December 31, 2020, were as follows:

 

2021

 

$

1,626

 

2022

 

 

912

 

2023

 

 

188

 

2023

 

 

195

 

2025

 

 

201

 

Thereafter

 

 

298

 

 

 

$

3,420

 

 

48


 

 

At December 31, 2020 and 2019, the fair value of long-term debt was $3,382 and $1,384, respectively. The fair value of long-term debt has been estimated by management based on the consideration of applicable interest rates, including certain instruments at variable or floating rates and the nominal fixed interest rate (1.0%) associated with the Company’s PPP Loan and other available information (including quoted prices of similar instruments available to the Company).  The fair value of long-term debt was measured using Level 2 inputs (Note 1).

In February 2021, the Company extinguished the building note payable. Refer to Note 20 for further discussion related to the extinguishment of the building note payable.

 

Note 15. Income Taxes

The components of loss before taxes were as follows:

 

 

 

2020

 

 

2019

 

United States

 

$

(17,584

)

 

$

(16,452

)

Foreign

 

 

2,860

 

 

 

950

 

Loss before income taxes

 

$

(14,724

)

 

$

(15,502

)

The provision (benefit) for income taxes consisted of the following for year ended December 31:

 

 

 

2020

 

 

2019

 

 

 

Current

 

 

Deferred

 

 

Total

 

 

Current

 

 

Deferred

 

 

Total

 

United States

 

$

5

 

 

$

 

 

$

5

 

 

$

4

 

 

$

 

 

$

4

 

Foreign

 

 

 

 

 

195

 

 

 

195

 

 

 

(212

)

 

 

(199

)

 

 

(411

)

Provision (benefit) for income taxes

 

$

5

 

 

$

195

 

 

$

200

 

 

$

(208

)

 

$

(199

)

 

$

(407

)

 

A reconciliation of the provision (benefit) for income taxes at the United States statutory rate to the effective rate of the Company for the years ended December 31 was as follows:

 

 

 

2020

 

 

2019

 

United States statutory rate (21%)

 

$

(3,092

)

 

$

(3,255

)

Effect of foreign disregarded entity

 

 

329

 

 

 

(151

)

Taxes on foreign operations

 

 

76

 

 

 

64

 

Net change in valuation allowances

 

 

3,824

 

 

 

4,224

 

Reduction in uncertain tax positions

 

 

 

 

 

(818

)

Permanent differences

 

 

(728

)

 

 

83

 

Return to provision adjustments

 

 

133

 

 

 

(163

)

Deferred tax adjustments

 

 

(291

)

 

 

(318

)

Other

 

 

(51

)

 

 

(73

)

Provision (benefit) for income taxes

 

$

200

 

 

$

(407

)

Effective tax rate

 

 

(1.4

)%

 

 

2.6

%

 

The components of deferred income tax assets and liabilities consisted of the following at December 31:

 

 

 

2020

 

 

2019

 

Deferred tax assets

 

 

 

 

 

 

 

 

Accounts receivable

 

$

116

 

 

$

110

 

Inventories

 

 

597

 

 

 

710

 

Accrued expenses and other current liabilities

 

 

1,352

 

 

 

477

 

Net operating loss carryforwards

 

 

32,582

 

 

 

27,710

 

Tax credit carryforwards

 

 

676

 

 

 

676

 

Other

 

 

961

 

 

 

1,968

 

Valuation allowance

 

 

(34,881

)

 

 

(30,666

)

Total deferred tax assets

 

 

1,403

 

 

 

985

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

Property and equipment

 

 

539

 

 

 

690

 

Other

 

 

864

 

 

 

94

 

Total deferred tax liabilities

 

 

1,403

 

 

 

784

 

Net deferred tax assets(a)

 

$

 

 

$

201

 

 

(a)

At December 31, 2019, net deferred tax assets were reflected in other noncurrent assets in the accompanying consolidated balance sheet.

 

49


 

 

The Company has provided a valuation allowance for certain of its net deferred tax assets as a result of the Company not generating consistent net operating profits in certain jurisdictions in which it operates. As such, certain benefits from deferred taxes in any of the periods presented have been fully offset by changes in the valuation allowance for net deferred tax assets. The Company continues to assess its future taxable income by jurisdiction based on recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that the Company may be able to enact in future periods, the impact of potential operating changes on the business and forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that the Company is able to reach the conclusion that its net deferred tax assets are realizable based on any combination of the above factors in a single, or in multiple, taxing jurisdictions, a reversal of the related portion of the Company’s existing valuation allowances may occur.

The following table summarizes changes to the Company’s valuation allowances for the years ended December 31:

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

30,666

 

 

$

26,563

 

Net increases in allowances

 

 

3,824

 

 

 

3,857

 

Net increases in net operating losses offset by uncertain tax

   positions

 

 

 

 

 

368

 

Foreign currency translation adjustments

 

 

391

 

 

 

(122

)

Balance at end of period

 

$

34,881

 

 

$

30,666

 

 

At December 31, 2020, the Company had $115,285 in net operating loss carryforwards, subject to certain limitations, $70,761 of which expire from 2033 to 2037, and $676 in tax credit carryforwards which begin to expire in 2023, to offset the future taxable income of its United States subsidiary. At December 31, 2020, the Company had United States state net operating loss carryforwards of $11,567, subject to certain limitations, which begin to expire in 2023. At December 31, 2020, the Company had $2,549 in net operating loss carryforwards which expire from 2022 through 2026, to offset the future taxable income of its Japanese subsidiary. At December 31, 2020, the Company had $24,450 in net operating loss carryforwards, which do not expire but may be limited as to their use in a particular period, to offset the future taxable income of its German subsidiary.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (including accrued interest and penalties) at December 31 was as follows:

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

 

 

$

1,186

 

Additions based on tax positions related to the current year

 

 

 

 

 

 

Additions for tax positions of prior years

 

 

 

 

 

5

 

Reductions for tax positions of prior years

 

 

 

 

 

(1,186

)

Settlements

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

(5

)

Balance at end of period

 

$

 

 

$

 

 

50


 

 

The Company includes interest and penalties related to income taxes as a component of the provision (benefit) for income taxes in the accompanying statement of consolidated operations and comprehensive loss (there were 0 such interest or penalties included in the provision (benefit) for income taxes in 2020 or 2019).

During 2019, the Company’s ExOne GmbH (2010-2014 tax years) and ExOne Property GmbH (2013-2014 tax years) subsidiaries were under examination by local taxing authorities in Germany.  

In January 2019, the examination of ExOne GmbH (2010-2013 tax years) and ExOne Property GmbH (2013 tax year) was concluded by the local taxing authorities in Germany without significant adjustment to previously established tax positions.  As a result, during 2019, the Company recorded a reversal of certain of its previously recorded liabilities for uncertain tax positions of $1,075, of which $257 was offset against net operating loss carryforwards.

In December 2019, the examination of ExOne GmbH (2014 tax year) and ExOne Property GmbH (2014 tax year) was concluded by the local taxing authorities in Germany without significant adjustment to previously established tax positions. As a result, during 2019, the Company recorded a reversal of certain of its previously recorded liabilities for uncertain tax positions of $111, all of which was offset against net operating loss carryforwards.

The Company files income tax returns in the United States, Germany, and Japan.  The Company filed income tax returns in Italy through 2018. The following table summarizes tax years remaining subject to examination for each of the Company’s subsidiaries at December 31, 2020:

 

Jurisdiction

 

Tax Years

Remaining Subject

to Examination

United States

 

2017-2020

Germany

 

2016-2020

Japan

 

2018-2020

Italy

 

2015-2018

 

Note 16. Equity-Based Compensation

On January 24, 2013, the Board adopted the 2013 Equity Incentive Plan (the “Plan”). In connection with the adoption of the Plan, 500,000 shares of common stock were reserved for issuance pursuant to the Plan, with automatic increases in such reserve available each year annually on January 1 from 2014 through 2023 equal to the lesser of 3.0% of the total outstanding shares of common stock as of December 31 of the immediately preceding year, or a number of shares of common stock determined by the Board, provided that the maximum number of shares authorized under the Plan could not exceed 1,992,241 shares, subject to certain adjustments. The maximum number of shares authorized under the Plan was reached on January 1, 2017. At December 31, 2020, 499,189 shares remained available for future issuance under the Plan.

Stock options and restricted stock issued by the Company under the Plan are generally subject to service conditions resulting in annual vesting on the anniversary of the date of grant over a period typically ranging between one and three years. Certain equity-based compensation awards issued by the Company under the Plan vest immediately upon issuance. Stock options issued by the Company under the Plan have contractual lives which expire over a period typically ranging between five and ten years from the date of grant, subject to continued service to the Company by the participant.

On February 6, 2019, the Compensation Committee of the Board adopted the 2019 Annual Incentive Program (the “2019 Program”) as a subplan under the Plan. The 2019 Program provided an opportunity for performance-based compensation in the form of common stock to senior executive officers of the Company, among others. The target annual incentive for each 2019 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2019 Program. During 2019, there was 0 compensation expense associated with the 2019 Program as a result of underperformance against the 2019 financial goals of the Company. NaN shares of vested common stock were issued in connection with the 2019 Program.

51


 

On February 5, 2020, the Compensation Committee of the Board adopted the 2020 Annual Incentive Program (the “2020 Program”) as a subplan under the Plan. The 2020 Program provided an opportunity for performance-based compensation in the form of common stock to senior executive officers of the Company, among others. The target annual incentive for each 2020 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2020 Program. During 2020, there was 0 compensation expense associated with the 2020 Program as a result of underperformance against the 2020 financial goals of the Company. NaN shares of vested common stock were issued in connection with the 2020 Program as a result.

The following table summarizes the total equity-based compensation expense recognized by the Company:

 

 

 

2020

 

 

2019

 

Equity-based compensation expense recognized:

 

 

 

 

 

 

 

 

Stock options

 

$

417

 

 

$

709

 

Restricted stock

 

 

790

 

 

 

696

 

Other(a)

 

 

18

 

 

 

11

 

Total equity-based compensation expense before income taxes

 

 

1,225

 

 

 

1,416

 

Benefit for income taxes(b)

 

 

0

 

 

 

0

 

Total equity-based compensation expense net of income taxes

 

$

1,225

 

 

$

1,416

 

 

(a)

For both periods presented, Other represents expense associated with certain employee contractual amounts to be settled in equity.

(b)

The benefit for income taxes from equity-based compensation for each of the periods presented has been determined to be $0 based on valuation allowances against net deferred tax assets.

At December 31, 2020, total future compensation expense related to unvested awards yet to be recognized by the Company was $295 for stock options and $1,364 for restricted stock. Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of 2.3 years.

The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

 

 

 

2020

 

 

2019

 

Weighted average fair value per stock option

 

$4.55 - $6.20

 

 

$2.51 - $3.68

 

Volatility

 

58.0% - 63.5%

 

 

53.3% - 60.1%

 

Average risk-free interest rate

 

0.2%

 

 

1.5% - 2.5%

 

Dividend yield

 

0.0%

 

 

0.0%

 

Expected term (years)

 

2.5 - 3.5

 

 

2.5 - 3.5

 

 

Volatility is estimated based on the historical volatility of the Company’s stock price consistent with the expected term of the awards. The average risk-free rate is based on a weighted average yield curve of risk-free interest rates consistent with the expected term of the awards. Expected dividend yield is based on historical dividend data as well as future expectations. Expected term is calculated using the simplified method as the Company does not have sufficient historical exercise experience upon which to base an estimate.

The activity for stock options was as follows for the year ended December 31:

 

 

 

2020

 

 

2019

 

 

 

Number of

Options

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Grant Date Fair

Value

 

 

Number of

Options

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Grant Date Fair

Value

 

Outstanding at beginning of period

 

 

854,259

 

 

$

9.34

 

 

$

4.49

 

 

 

621,986

 

 

$

10.66

 

 

$

5.52

 

Stock options granted

 

 

28,188

 

 

$

14.12

 

 

$

5.83

 

 

 

319,310

 

 

$

7.34

 

 

$

2.94

 

Stock options exercised

 

 

(127,854

)

 

$

7.30

 

 

$

3.12

 

 

 

(40,432

)

 

$

7.17

 

 

$

3.03

 

Stock options forfeited

 

 

(81,186

)

 

$

7.83

 

 

$

3.40

 

 

 

(9,773

)

 

$

7.67

 

 

$

3.70

 

Stock options expired

 

 

(32,175

)

 

$

12.94

 

 

$

7.44

 

 

 

(36,832

)

 

$

16.94

 

 

$

10.35

 

Outstanding at end of period

 

 

641,232

 

 

$

9.80

 

 

$

4.74

 

 

 

854,259

 

 

$

9.34

 

 

$

4.49

 

Exercisable at end of period

 

 

502,260

 

 

$

10.40

 

 

$

5.21

 

 

 

494,884

 

 

$

10.85

 

 

$

5.59

 

Expected to vest at end of period

 

 

138,972

 

 

$

7.65

 

 

$

3.01

 

 

 

359,375

 

 

$

7.27

 

 

$

2.96

 

 

52


 

 

At December 31, 2020, intrinsic value associated with stock options exercisable and stock options expected to vest was $493 and $306, respectively. The weighted average remaining contractual term of stock options exercisable and stock options expected to vest at December 31, 2020, was 3.1 and 3.7 years, respectively. Stock options with an aggregate intrinsic value of $1,222 were exercised by employees during 2020, resulting in proceeds to the Company from the exercise of stock options of $934. Stock options with an aggregate intrinsic value of $358 were exercised by employees during 2019, resulting in proceeds to the Company from the exercise of stock options of $289. The Company received 0 income tax benefit related to stock option exercises in either period.

The activity for restricted stock was as follows for the year ended December 31:

 

 

 

2020

 

 

2019

 

 

 

Shares of

Restricted

Stock

 

 

Weighted Average

Grant Date Fair

Value

 

 

Shares of

Restricted

Stock

 

 

Weighted Average

Grant Date Fair

Value

 

Outstanding at beginning of period

 

 

66,513

 

 

$

8.76

 

 

 

67,001

 

 

$

8.30

 

Restricted stock granted

 

 

209,891

 

 

$

9.58

 

 

 

66,763

 

 

$

8.98

 

Restricted stock vested

 

 

(87,513

)

 

$

9.08

 

 

 

(62,251

)

 

$

8.65

 

Restricted stock forfeited

 

 

0

 

 

$

0

 

 

 

(5,000

)

 

$

6.75

 

Outstanding at end of period

 

 

188,891

 

 

$

9.52

 

 

 

66,513

 

 

$

8.76

 

Expected to vest at end of period

 

 

188,891

 

 

$

9.52

 

 

 

66,513

 

 

$

8.76

 

 

Restricted stock that vested during 2020 and 2019 had a fair value of $734 and $535, respectively.

Participants have the option to elect net settlement for restricted stock awards.  Under net settlement, the Company withholds shares of stock that would otherwise be delivered to the employee and remits cash equal to the fair value of shares withheld to the taxing authority to satisfy tax withholding obligations.  During 2020 and 2019, the Company withheld shares with a fair value of $28 and $68, respectively, related to the net settlement of restricted stock awards.  

 

 

Note 17. Concentration of Credit Risk

During 2020 and 2019, the Company conducted a significant portion of its business with a limited number of customers, though not necessarily the same customers for each respective period. During 2020 and 2019, the Company’s five most significant customers represented 16.4% and 17.4% of total revenue, respectively. At December 31, 2020 and 2019, accounts receivable from the Company’s five most significant customers were $1,633 and $3,230, respectively.

 

Note 18. Other Expense – Net

 

Other expense – net consisted of the following for the year ended December 31:

 

 

 

2020

 

 

2019

 

Interest income

 

$

(23

)

 

$

(11

)

Foreign currency losses  ̶  net

 

 

571

 

 

 

102

 

Other  ̶  net

 

 

83

 

 

 

20

 

 

 

$

631

 

 

$

111

 

 

 

 

Note 19. Segment and Geographic Information

The Company manages its business globally in a singular operating segment in which it develops, manufactures and markets 3D printing machines, 3D printed and other products, materials and services. Geographically, the Company conducts its business through wholly-owned subsidiaries in the United States, Germany, and Japan.

Geographic information for revenue was as follows (based on the country where the sale originated) for the year ended December 31:

 

 

 

2020

 

 

2019

 

United States

 

$

26,804

 

 

$

20,897

 

Germany

 

 

24,217

 

 

 

20,966

 

Japan

 

 

8,232

 

 

 

11,413

 

 

 

$

59,253

 

 

$

53,276

 

 

53


 

 

Geographic information for long-lived assets was as follows (based on the physical location of assets) at December 31:

 

 

 

2020

 

 

2019

 

United States

 

$

12,176

 

 

$

12,519

 

Germany

 

 

3,851

 

 

 

21,821

 

Japan

 

 

5,273

 

 

 

4,555

 

 

 

$

21,300

 

 

$

38,895

 

 

Refer to Note 8 and Note 11 for further discussion related to a sale-leaseback transaction associated with the Company’s European headquarters and operating facility in Gersthofen, Germany completed in February 2020 and the related impact on long-lived assets located in Germany during 2020.

Note 20. Subsequent Events

Termination of Canaccord Equity Distribution Agreement

On February 9, 2021, the Company terminated the Canaccord Equity Distribution Agreement. At the time of the termination of the agreement, the remaining maximum offering capacity was $9,269. There were no fees or penalties incurred by the Company in connection with the termination of this agreement.

Common Stock Offering

On February 10, 2021, the Company entered into an underwriting agreement pursuant to which the Company agreed to issue and sell up to 1,666,667 shares of its common stock at a public offering price of $54.00 per share. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 205,907 shares of its common stock at the public offering price, less underwriting discounts and commissions. Under the agreement, the Company agreed to pay underwriting discounts and commissions of $2.835 per share, as well as reimburse the underwriters for certain expenses. On February 11, 2021, the underwriters exercised their option to purchase 205,907 shares of the Company’s stock in full.

As a result of this common stock offering, during February 2021, the Company sold 1,872,574 shares of its common stock and received aggregate net proceeds to the Company of approximately $95,000 after underwriting discounts, commissions, legal and accounting fees, and other offering expenses payable by the Company.

Extinguishment of Building Note Payable

On February 26, 2021, the Company extinguished its building note payable (Note 14) in-full through cash payment of $1,199. The Company did not incur any prepayment penalties related to the extinguishment of the building note payable in advance of the maturity date (May 2027). At the extinguishment date, the net carrying amount of the building note payable was $1,185. As a result, the Company recognized a loss on the extinguishment of debt of $14, which represents the write-off of unamortized debt issuance costs, during the three months ended March 31, 2021.

Termination of Related Party Revolving Credit Facility

On March 5, 2021, the Company terminated the related party revolving credit facility (Note 13).  There were no penalties associated with the Company’s termination of the related party revolving credit facility. Due to the termination, the Company accelerated the amortization of the remaining debt issuance costs associated with the related party revolving credit facility, resulting in recognition of a $105 loss on the extinguishment of debt during the three months ended March 31, 2021.

The Company has evaluated all of its activities and concluded that no other subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements, except as described above.

54


 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  

Our management, with the participation of John F. Hartner, our Chief Executive Officer (“CEO”), and Douglas D. Zemba, our Chief Financial Officer (“CFO”), conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 Framework). Based on this assessment, management believes that, as of December 31, 2020, our internal control over financial reporting is effective.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), are controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, in a manner to allow timely decisions regarding required disclosures.

Our management evaluated, with the participation of our CEO and CFO, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2020.

Based on this evaluation, including an evaluation of the rules referred to above in this Item 9A, management has concluded that our disclosure controls and procedures were effective as of December 31, 2020.

Changes in Internal Control Over Financial Reporting

As previously disclosed in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2019, we concluded that there were material weaknesses in the design and operating effectiveness of our internal control over financial reporting as defined in SEC Regulation S-X. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

A description of the previously identified material weaknesses in internal control over financial reporting is as follows:

 

-

We did not maintain adequate control over user access rights for a significant information technology system.

 

-

We did not maintain adequate control over application changes for a significant information technology system.

 

-

We did not maintain adequate control over pricing and discounts associated with sales of certain of our products.

During 2020, management developed and executed remediation plans intended to ensure our disclosure controls and procedures are effective.  This included a comprehensive evaluation of the people, processes, and systems responsible for each of the underlying control activities.  Based on the results of this evaluation, we redesigned and enhanced our existing internal control structure to address the previously identified material weaknesses. Through this process, updated internal controls policies, procedures and controls specifically designed to address the identified material weaknesses were communicated to all individuals responsible for the control activities related to the previously identified material weaknesses. Additionally, during 2020, we increased the size and capability of our finance and accounting function to facilitate execution of our remediation plan and improve our internal controls over financial reporting.

As a result of these remediation actions, management concluded that at December 31, 2020, the previously identified material weaknesses were remediated.

Other than the changes described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

55


 

Item 9B. Other Information.

Termination of a Material Definitive Agreement

On March 5, 2021, the Company, as borrower, and ExOne Americas LLC and ExOne GmbH, as guarantors (collectively, the “Loan Parties”), terminated the Credit Agreement, as amended, with LBM, which had provided us a $10,000,000 revolving credit facility for working capital and general corporate purposes.  LBM is a related party based on common control by S. Kent Rockwell, the Chairman of the Board; Mr. Rockwell is the indirect sole owner of LBM.  A description of the revolving credit facility is provided in Part II, Item 7 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Related Party Revolving Credit Facility” in this Annual Report on Form 10-K and is incorporated herein by reference.  There were no outstanding borrowings under the revolving credit facility at the time of its termination, and we did not incur any penalties or fees associated with the termination.  

 

56


 

 

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 is incorporated by reference from the information under the captions “Proposal 1 — Election of Directors,” “Executive Officers of ExOne,” “Corporate Governance — Audit Committee” and “Corporate Governance — Code of Ethics and Business Conduct” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 12, 2021, which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020.

Item 11. Executive Compensation.

The information required by Item 11 is incorporated by reference from the information under the captions “Compensation of Named Executive Officers,” “Director Compensation,” and “Corporate Governance — Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 12, 2021, which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is incorporated by reference from the information under the caption “Securities Authorized for Issuance Under Equity Compensation Plans” in Part II, Item 5 of this Annual Report on Form 10-K and under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 12, 2021, which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020.

The information required by Item 13 is incorporated by reference from the information under the captions “Corporate Governance —Independence of the Board and Committees” and “Transactions with Related Persons” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 12, 2021, which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 is incorporated by reference from the information under the caption “Audit Fees and Services” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 12, 2021, which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020.

57


 

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements

See Item 8 of Part II of this Annual Report on Form 10-K.

(a)(2) Financial Statement Schedules

Financial statement schedules have been omitted because they are not applicable, not required, or the required information is included in the consolidated financial statements or notes thereto.

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3) Exhibits

The Exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report on Form 10-K.

58


 

EXHIBIT INDEX

 

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

 

Exhibit

Number

  

Description

  

Method of Filing

 

 

 

 

 

 3.1

  

Certificate of Incorporation.

  

Incorporated by reference to Exhibit 3.1 to Form S-1 Registration Statement (#333-185933) filed on January 8, 2013.

 

 

 

 3.2

  

Amended and Restated Bylaws.

  

Incorporated by reference to Exhibit 3.1 of Form 8-K (#001-35806) filed on April 3, 2020.

 

 

 

 4.1

  

Form of Stock Certificate.

  

Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Form S-1 Registration Statement (#333-185933) filed on January 28, 2013.

 

 

 

 4.2

  

Description of the Company’s Common Stock.

 

Incorporated by reference to Exhibit 4.2 to Form 10-K (#001-35806) filed on March 12, 2020.

 

 

 

 

 

10.1

 

2013 Equity Incentive Plan.*

  

Incorporated by reference to Exhibit 10.07.01 to Amendment No. 1 to Form S-1 Registration Statement (#333-185933) filed on January 24, 2013.

 

 

 

10.2

  

Form of Restricted Stock Award Agreement under 2013 Equity Incentive Plan.*

  

Incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 (No. 333-187053) filed on March 5, 2013.

 

 

 

10.3

  

Form of Award Agreements under 2013 Equity Incentive Plan.*

  

Incorporated by reference to Exhibit 10.07.02 to Amendment No. 1 to Form S-1 Registration Statement (#333-185933) filed on January 24, 2013.

 

 

 

10.4

  

Form of Stock Bonus Award Agreement under 2013 Equity Incentive Plan.*

  

Incorporated by reference to Exhibit 10.26 to Form 10-K (#001-35806) filed on March 20, 2014.

 

 

 

 

 

10.5

 

Form of Executive Stock Purchase Program Notice of Inclusion.*

 

Filed herewith.

 

 

 

 

 

10.6

 

First Amendment to The ExOne Company 2013 Equity Incentive Plan dated November 3, 2020.*

 

Filed herewith.

 

 

 

 

 

10.7

 

Credit Agreement dated March 12, 2018 among the Company, ExOne Americas LLC, ExOne GmbH and LBM Holdings LLC.

 

Incorporated by reference to Exhibit 10.9 to Form 10-K (#001-35806) filed on March 15, 2018.

 

 

 

 

 

10.8

 

Escrow Agreement dated March 12, 2018 among the Company, LBM Holdings LLC and Huntington National Bank.

 

Incorporated by reference to Exhibit 10.10 to Form 10-K (#001-35806) filed on March 15, 2018.

 

 

 

 

 

10.9

 

First Amendment to Credit Agreement dated February 18, 2020 among the Company, ExOne Americas LLC, ExOne GmbH and LBM Holdings LLC.

 

Incorporated by reference to Exhibit 10.13 to Form 10-K (#001-35806) filed on March 12, 2020.

 

 

 

 

 

10.10

  

Form of Indemnification Agreement for Officers and Directors.

  

Incorporated by reference to Exhibit 10.1 to Form 8-K (#001-35806) filed on March 29, 2013.

 

 

 

 

 

10.11

 

Change of Control Severance Plan, as amended August 8, 2018.*

 

Incorporated by reference to Exhibit 10.1 to Form 10-Q (#001-35806) filed on November 8, 2018.

 

 

 

 

 

10.12

 

Letter Agreement dated October 25, 2018 between the Company and John F. Hartner.*

 

Incorporated by reference to Exhibit 10.13 to Form 10-K (#001-35806) filed on March 15, 2019.

59


 

 

 

 

 

 

10.13

 

Employment Agreement dated May 15, 2019 between the Company and John F. Hartner.*

 

Incorporated by reference to Exhibit 10.1 to Form 10-Q (#001-35806) filed on August 7, 2019.

 

 

 

 

 

10.14

 

First Amendment to Employment Agreement dated April 3, 2020 between the Company and John F. Hartner.*

 

Incorporated by reference to Exhibit 10.2 on Form 10-Q (#001-35806) filed May 7, 2020

 

 

 

 

 

10.15

 

Lease Agreement for Commercial Premises dated December 10, 2019 between ExOne GmbH and Solidas Immobilien und Grundbesitz GmbH.

 

Incorporated by reference to Exhibit 10.12 to Form 10-K (#001-35806) filed on March 12, 2020.

 

 

 

 

 

10.16

 

Credit Agreement dated February 24, 2020 between Sparkasse and ExOne GmbH.

 

Incorporated by reference to Exhibit 10.14 to Form 10-K (#001-35806) filed on March 12, 2020.

 

 

 

 

 

10.17

 

Promissory Note (Paycheck Protection Program Loan) dated April 18, 2020 in favor of The Huntingdon National Bank.

 

Incorporated by reference to Exhibit 10.4 on Form 10-Q (#001-35806) filed May 7, 2020.

 

 

 

 

 

10.18

 

Underwriting Agreement dated as of February 10, 2021, by and among the Company, Canaccord Genuity LLC and Stifel, Nicolaus & Company, Incorporated, as Representatives for the several Underwriters.

 

Incorporated by reference to Exhibit 10.1 on Form 8-K (#001-35806) filed on February 12, 2021.

 

 

 

 

 

21.1

  

Subsidiaries of the Registrant.

  

Filed herewith.

 

 

 

23.1

  

Consent of Schneider Downs & Co., Inc.

  

Filed herewith.

 

 

 

31.1

  

Rule 13(a)-14(a) Certification of Principal Executive Officer.

  

Filed herewith.

 

 

 

31.2

  

Rule 13(a)-14(a) Certification of Principal Financial Officer.

  

Filed herewith.

 

 

 

32

  

Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.

  

Filed herewith.

 

 

 

101

  

Inline Interactive Data File.

  

Filed herewith.

 

 

 

 

 

104

 

The cover page for the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, has been formatted in Inline XBRL and contained in Exhibit 101.

 

Each management contract and compensatory arrangement in which any director or any named executive officer participates has been marked with an asterisk (*).

You can obtain copies of exhibits to our filings electronically at the SEC’s website at www.sec.gov or by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The exhibits are also available as part of the Annual Report on Form 10-K for the year ended December 31, 2020, which is available on our corporate website at www.exone.com. Stockholders may also obtain copies of exhibits without charge by contacting our General Counsel and Corporate Secretary at (724) 863-9663.

Pursuant to the rules and regulations of the SEC, we have filed certain agreements as exhibits to this Annual Report on Form 10-K. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and may have been qualified by disclosures made to such other party or parties, were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, may reflect the allocation of risk among the parties to such agreements and may apply materiality standards that are different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.

 

60


 

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

The ExOne Company

 

 

By:

/s/ John F. Hartner

 

John F. Hartner

 

Chief Executive Officer

 

 

Date:

March 11, 2021

 

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Date

 

Title

 

 

 

 

 

/s/ John F. Hartner

 

March 11, 2021

 

Director and Chief Executive Officer

(Principal Executive Officer)

John F. Hartner

 

 

 

 

 

 

 

 

 

/s/ Douglas D. Zemba

 

March 11, 2021

 

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

Douglas D. Zemba

 

 

 

 

 

 

 

 

 

/s/ S. Kent Rockwell

 

March 11, 2021

 

Director

S. Kent Rockwell

 

 

 

 

 

 

 

 

 

/s/ John Irvin

 

March 11, 2021

 

Director

John Irvin

 

 

 

 

 

 

 

 

 

/s/ Gregory F. Pashke

 

March 11, 2021

 

Director

Gregory F. Pashke

 

 

 

 

 

 

 

 

 

/s/ Lloyd A. Semple

 

March 11, 2021

 

Director

Lloyd A. Semple

 

 

 

 

 

 

 

 

 

/s/ William Strome

 

March 11, 2021

 

Director

William Strome

 

 

 

 

 

 

 

 

 

/s/ Roger Thiltgen

 

March 11, 2021

 

Director

Roger Thiltgen

 

 

 

 

 

 

 

 

 

/s/ Bonnie K. Wachtel

 

March 11, 2021

 

Director

Bonnie K. Wachtel

 

 

 

 

 

61