The ExOne Company
Annual Report 2015
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Dear Fellow Stockholders:
ExOne continues to evolve as a leader in the advancement of 3D printing, anchored by our binder jetting technology
and strength in printing media development, technical support and customer training. Our key accomplishments
during 2015 include the following:
» Non-machine Revenue Grew 18%
We fi nished the year with $24.9 million of non-machine revenue, refl ecting 18% growth
over 2014. This growth comes even as we have reduced pricing of certain of our products
in 2015 to encourage faster adoption of the technology. Further, over the past fi ve years,
our non-machine revenue has grown at a compound annual growth rate in excess of
20%. We believe that this steady growth is indicative of the increasing acceptance of
our binder jetting technology for 3D printing focused on foundry applications and metal
components for a growing variety of industrial applications.
» Machine Shipments Set a New Record
We shipped 38 of our 3D printing machines in 2015, setting a record to get our technology to customers. Of those, 26
were included in 2015 sales, four are under lease arrangements with customers and the remaining eight were either
in route to or being placed into service within our customers’ facilities as of year-end. At the end of 2015, the global
installed base of our 3D printing machines was in excess of 200, and we believe we are gaining momentum.
» Successful Launch of Two New Machine Platforms
Our Innovent, which is now our smallest direct printing machine, was introduced in January 2015. It is an ideal size
and price point for university and industry research. Having sold 10 Innovent machines in 2015, our customers
appreciate its speed, fl exibility and cost eff ectiveness, allowing them to experiment with and qualify their proprietary
materials and easily migrate to production.
Our Exerial, announced in March 2015 and displayed at the GIFA International Foundry Trade Fair in Dusseldorf,
Germany in June 2015, is currently one of the world’s largest 3D printing platforms. Ideally suited for series
production, we shipped our fi rst four machines in 2015 and they are currently being integrated into customer facilities.
We anticipate that these machines will realize their potential of transforming casting production with their speed and
design fl exibility. This machine is also being evaluated by leading automotive manufacturers for use in their
production processes.
» New Educational Centers are Facilitating Sales and Integration Processes
Our state-of-the-art Design and Re-Engineering for Additive Manufacturing (“DREAM”) Center opened in August
2015 in our North Huntingdon, PA facility. It is a physical and virtual site for customer creativity and collaboration that
we believe will maximize the benefi ts of our binder jetting technology. Similarly, we off ered education and training
programs relating to our indirect printing machines through our ExOne Academy (which was opened in late 2014)
within our new Gersthofen, Germany facility. Both of these facilities are expanding customer knowledge of
optimizing 3D printing in an effi cient and technologically advanced manner.
» Materials Research Led to Development of New Tools and Binders
Water Wash-out Tooling, a new application for binder jetting technology which aids in the development of
manufacturing and composite tooling, was qualifi ed by our development team in 2015. We also expanded the suite
of our 3D printing binder off erings with the addition of a new class of phenolic binder, referred to as cold hardening
phenolic (“CHP”). Developed for use in the 3D printing of high-strength molds and cores for metal castings, CHP
accelerates the 3D printing process and reduces capital requirements by eliminating the need for additional
equipment such as a microwave.
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Our Dynamic Culture
As an emerging growth company, we function in a dynamic environment fi lled with constant change whereby we
must adapt to the diverse needs of our global markets. We believe that the primary driver aff ecting our technology
adoption rate is the capital spending cycle of our industrial users which is infl uenced by many factors including
currency considerations and other macroeconomic factors.
» We recognize that our indirect printing opportunities require unique solutions and specifi c application support
to assist our customers in their conversion from prototyping to production. Accordingly, we are dedicating more
time and resources to facilitate their transition.
» In direct printing, we are focusing on applications that uniquely benefi t from the binder jetting process due to
speed and avoidance of heat stresses. As a result, our research is concentrating on carbon and ceramics, as well
as on “monolithic” grades of steel and nickel alloys. The materials development process has a longer cycle due to
the demanding criteria for material certifi cations but holds substantial opportunity for future growth.
» We are continuing to mature operationally as an organization and becoming more disciplined in managing our
processes, as well as our human and fi nancial resources. Over the last few years, we made signifi cant investments
in technology, infrastructure and product development. As a result, we are now able to respond more eff ectively
to the changes and opportunities that are presented by our dynamic operating realm.
Outlook for 2016
ExOne is well positioned going into 2016. Given our strong backlog at the end of 2015, as well as our pipeline of
business opportunities, we are confi dent in our expectations for revenue growth and improved fi nancial performance
in 2016. At the same time, we are cautiously optimistic and we will continue to monitor those macroeconomic
factors that aff ect our business such as the energy sector, capital spending and the impact of recent foreign currency
devaluations. Accordingly, we also intend to implement operational improvements to increase our facility utilization
and enhance working capital management with an eye toward profi table growth and sustained liquidity.
As an emerging growth company focused on bringing game-changing technology to manufacturing applications in
the global industrial space, a long-term perspective is required to achieve sustainable viability. Based on growing
adoption of 3D printing in the marketplace and our own successes and continued progress, we still hold to our original
vision for the scope of opportunity that we presented in our IPO. We believe that 2016 will position the Company to
demonstrate that viability.
In closing, I want to thank all of our employees and stakeholders for their dedication and commitment to the
continued advancement of our binder jetting technology and execution of our strategy. As the largest investor in The
ExOne Company, I have full confi dence that we will be successful in expanding the adoption of 3D printing in industrial
manufacturing applications.
Sincerely,
S. Kent Rockwell
Chairman and Chief Executive Offi cer
For more information regarding certain factors that could cause future results to differ, possibly materially, from historical performance or
from those anticipated in forward-looking statements, see the “Cautionary Statement Concerning Forward Looking Statements” in our
2015 Annual Report on Form 10-K which accompanies this letter.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
(cid:3)
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
(State or Other Jurisdiction of
Incorporation or Organization)
46-1684608
(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
Common Stock, par value $0.01 per share
Name of Each Exchange On Which Registered
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 (cid:3) 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 (cid:3) 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 (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). Yes ⌧ No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(cid:3)
(cid:3) (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
⌧
(cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of
1934). Yes (cid:3) No ⌧
The aggregate market value of common stock held by non-affiliates for the last business day of the registrant’s most recently completed second
fiscal quarter was approximately $116.3 million.
As of March 22, 2016, 16,067,954 shares of common stock, par value $0.01 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 2016 Annual Meeting of Stockholders (“Proxy Statement”) are incorporated by reference into
Part III of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
Explanatory Note ....................................................................................................................................................................................
Implications of Being an Emerging Growth Company ..........................................................................................................................
Trademarks, Service Marks and Trade Names .......................................................................................................................................
Cautionary Statement Concerning Forward Looking Statements...........................................................................................................
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3
PART I ...................................................................................................................................................................................................
Item 1. Business ...................................................................................................................................................................
3
Item 1A.Risk Factors ............................................................................................................................................................ 14
Item 1B.Unresolved Staff Comments .................................................................................................................................. 26
Item 2. Properties ................................................................................................................................................................ 27
Item 3. Legal Proceedings................................................................................................................................................... 27
Item 4. Mine Safety Disclosures ......................................................................................................................................... 27
PART II.................................................................................................................................................................................................. 28
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ................................................................................................................................................................. 28
Item 6. Selected Financial Data.......................................................................................................................................... 30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................... 31
Item 7A.Quantitative and Qualitative Disclosures about Market Risk ........................................................................... 41
Item 8. Financial Statements and Supplementary Data .................................................................................................. 42
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................... 73
Item 9A.Controls and Procedures ....................................................................................................................................... 73
Item 9B.Other Information.................................................................................................................................................. 74
PART III ............................................................................................................................................................................................... 75
Item 10. Directors, Executive Officers and Corporate Governance................................................................................. 75
Item 11. Executive Compensation........................................................................................................................................ 75
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .... 75
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................... 75
Item 14. Principal Accountant Fees and Services .............................................................................................................. 75
PART IV ............................................................................................................................................................................................... 75
Item 15. Exhibits and Financial Statement Schedules ...................................................................................................... 75
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EXPLANATORY NOTE
As used in this Annual Report on Form 10-K, unless the context otherwise requires or indicates, the terms “ExOne,” “our
Company,” “the Company,” “we,” “our,” “ours,” and “us” refer to The ExOne Company and its wholly-owned subsidiaries.
On January 1, 2013, 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. We refer to this as the “Reorganization.” As a result of
the Reorganization, The Ex One Company, LLC became the Company, a Delaware corporation, the common and preferred interest
holders of The Ex One Company, LLC became holders of common stock and preferred stock, respectively, of the Company and the
subsidiaries of The Ex One Company, LLC became the subsidiaries of the Company. The preferred stock of the Company was
converted into common stock on a 9.5 to 1 basis (1,998,275 shares of common stock) immediately prior to our initial public offering
(“IPO”).
On February 6, 2013, the Company’s Registration Statement on Form S-1, as amended (File No. 333-185933) was declared
effective for the Company’s IPO, pursuant to which the Company registered the offering and sale of 6,095,000 shares of our common
stock at a public offering price of $18.00 per share for an aggregate offering price of $109.7 million. The IPO closed on February 12,
2013.
On September 9, 2013, we commenced a secondary public offering of 3,054,400 shares of our common stock at a price to the
public of $62.00 per share, of which 1,106,000 shares were sold by us and 1,948,400 were sold by selling stockholders (including
consideration of the exercise of the underwriters’ over-allotment option). The secondary offering closed on September 13, 2013.
All consolidated financial information in this report includes the accounts of ExOne, its wholly-owned subsidiaries, ExOne
Americas LLC (United States), ExOne GmbH (Germany), ExOne KK (Japan); effective in August 2013, ExOne Property GmbH
(Germany); effective in March 2014, MWT—Gesellschaft für Industrielle Mikrowellentechnik mbH (Germany); effective in May
2014, ExOne Italy S.r.l (Italy); effective in July 2015, ExOne Sweden AB (Sweden); and through March 27, 2013 (see further
description below), two variable interest entities (“VIEs”) in which ExOne was identified as the primary beneficiary, Lone Star Metal
Fabrication, LLC (“Lone Star”) and Troy Metal Fabricating, LLC (“TMF”).
All financial information for periods prior to January 1, 2013 is of The Ex One Company, LLC, our predecessor company, and its
subsidiaries, and all financial information for periods prior to March 27, 2013, include TMF and Lone Star, two VIEs in which ExOne
was identified as the primary beneficiary.
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
We qualify as an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”). An EGC may take advantage of specified reduced reporting requirements and is relieved of certain other significant
requirements that are otherwise generally applicable to public companies.
As an EGC:
• We are exempt from the requirement to obtain an attestation and report from our independent registered public accounting
firm on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act;
• We are permitted to provide less extensive disclosure about our executive compensation arrangements;
• We are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute
arrangements; and
• We have elected to use an extended transition period for complying with new or revised accounting standards.
We will continue to operate under these provisions until December 31, 2018, or such earlier time that we are no longer an EGC.
We would cease to be an EGC if we have more than $1.0 billion in annual revenues, qualify as a “large accelerated filer” under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which requires us to have more than $700 million in market
value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We
may choose to take advantage of some, but not all, of these reduced burdens.
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
We have registrations in the United States for the following trademarks: EXONE, X1 ExOne Digital Part Materialization (plus
design), EXCAST, EXMAL, EXTEC, LUXCELIS, M-FLEX, ORION, S MAX, S-PRINT, X1 and X1-LAB. We also have
applications for registration pending for the following trademarks: EXERIAL, INNOVENT, M-PRINT and S-MAX. We also have
registrations for EXONE in China, Europe (Community Trade Mark), Japan, and South Korea, and an application for registration
pending in Canada for that trademark. We have registrations for X1 ExOne Digital Part Materialization (plus design) in China, Europe
(Community Trade Mark), Japan, and South Korea, and applications for registration pending in Brazil and Canada for that mark. We
have a registration for the mark X1 in Europe (Community Trade Mark). We have a registration for the mark EX-1 in Europe
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(Community Trade Mark). We have registrations for a stylized form of X1 in Europe (Community Trade Mark) and South Korea. We
have registrations for DIGITAL PART MATERIALIZATION in Japan and South Korea and an application pending for that mark in
Canada. We have a registration for the trademarks EXERIAL, INNOVENT, M-FLEX and S-MAX in Europe (Community Trade
Mark). We also have a registration in Canada for the trademark LUXCELIS. Additionally, in March 2014 we acquired the trade
names for Machin-A-Mation Corporation (“MAM”) and MWT — Gesellschaft für Industrielle Mikrowellentechnik mbH (“MWT”).
This Annual Report on Form 10-K also contains 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: timing and length of
sales of three dimensional (“3D”) printing machines; risks related to global operations including effects of foreign currency and risks
related to the situation in the Ukraine; our ability to qualify more industrial materials in which we can print; the availability of skilled
personnel; the impact of increases in operating expenses and expenses relating to proposed investments and alliances; our strategy,
including the expansion and growth of our operations; the impact of loss of key management; our plans regarding increased
international operations in additional international locations; sufficiency of funds for required capital expenditures, working capital,
and debt service; the adequacy of sources of liquidity; expectations regarding demand for our industrial products, operating revenues,
operating and maintenance expenses, insurance expenses and deductibles, interest expenses, debt levels, and other matters with regard
to outlook; demand for aerospace, automotive, heavy equipment, energy/oil/gas and other industrial products; individual customer
contractual requirements; the scope, nature or impact of alliances and strategic investments and our ability to integrate strategic
investments; 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 effect of litigation and contingencies;
the impact of disruption of our manufacturing facilities or production service centers (“PSCs”); the adequacy of our protection of our
intellectual property; material weaknesses in our internal control over financial reporting; the impact of customer specific terms in
machine sale agreements on the period in which we recognize revenue; the impact of market conditions and other factors on the
carrying value of long-lived assets; and our ability to continue as a going concern.
These and other important factors, including those discussed under 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.
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Item 1. Business.
The Company
PART I
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 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 nine PSCs, which are located in the United States, Germany, Italy, Sweden and Japan. We
build 3D printing machines at our facilities in the United States and Germany. We also supply the associated materials, including
consumables and replacement parts, and other services, including training and technical support that is 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 printing capacity (as measured by build box size and printhead speed) uniquely position us to serve the needs of industrial
customers.
Our 3D printing machines use our binder jetting technology, powdered materials, chemical binding agents and integrated software
to print 3D products directly from computer models by repeatedly depositing very thin layers of powdered materials and selectively
placing chemical binding agents to form the printed product. One of our key industry advantages is that our 3D printing machines are
able to print products in materials which we believe are desired by industrial customers. Currently, our 3D printing machines are able
to manufacture casting molds and cores from specialty sands and ceramics, which are the traditional materials for these casting
products. Of equal importance, our 3D printing machines are capable of direct product materialization by printing industrial metals,
including stainless steel, bronze, iron, bonded tungsten, IN Alloy 625 and glass. We are in varying stages of qualifying additional
industrial materials and advancing materials that are printable in our 3D printing machines. Our current emphasis is related to
monolithic metals and certain ceramics.
We believe that we are a leader in providing 3D printing machines, 3D printed and other products, materials and services to
industrial customers in the aerospace, automotive, heavy equipment, energy/oil/gas and other industries. In an effort to further solidify
this position, we have (i) expanded our PSC network to nine global locations, (ii) increased capacity and upgraded technology in our
production facilities in Germany, including consolidating our operations from five buildings to one multi-purpose manufacturing,
research and development, sales and administrative facility, (iii) expanded our materials development initiatives and (iv) deployed the
first phase of an Enterprise Resource Planning (“ERP”) system for our Europe operations to promote operational efficiency and
financial controls.
Our revenue growth is driven by increasing customer acceptance of our 3D printing technology. We believe that we can
accelerate customer adoption of our technology by delivering turnkey 3D printing services and products, from design through product
completion. In developing our next generation 3D printing machine platforms, we successfully focused on achieving the volumetric
output rate demanded by our industrial customers. Our refined strategic focus emphasizes all phases of the production cycle, notably
enhancements to pre-print, such as Computer Aided Design (“CAD”), simulation, and design optimization, as well as post-print
processing, including metal finishing technologies and precision casting capabilities. We are exploring a combination of strategic
investments, and/or alliances, some of which we believe will promote advances in pre-print and post-print processing.
We conduct a significant portion of our business with a limited number of customers. Our top five customers represented
approximately 19.0%, 23.1% and 25.5% of total revenue for 2015, 2014 and 2013, respectively. There were no customers for 2015,
2014 or 2013 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, with the timing of such sales dependent on the customer’s capital budgeting cycle, which may vary from
period to period. The nature of the 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 are high volume, but generally result in a significantly
lower aggregate price per order as compared to 3D printing machine sales. The nature of the revenue from 3D printed and other
products, materials and services does not leave us dependent upon a single or a limited number of customers.
The Company manages its business globally in a single 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
subsidiaries in the United States, Germany, Italy, Sweden and Japan.
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 purchased by another company. In 2007, we were acquired by S. Kent Rockwell through his wholly-owned
company Rockwell Forest Products, Inc. On January 1, 2013, our Reorganization was completed when The Ex One Company, LLC
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was merged with and into a newly created Delaware corporation, which changed its name to The ExOne Company. On February 12,
2013, we completed our IPO, raising approximately $90.4 million in net proceeds after expenses to us. On September 13, 2013 we
completed a secondary public offering, raising an additional $64.9 million in net proceeds after expenses to us.
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 increasingly being 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 poised to displace traditional manufacturing
methodologies in a growing range of industrial applications. Our 3D printing process differs from other forms of 3D printing
processes, in that we use a chemical binding agent and focus on industrial products and materials.
ExOne and 3D Printing
We provide 3D printed and other products, materials and services primarily to industrial customers and other end-market users.
We believe that we are an early entrant into the AM industrial products market and are one of the few providers of 3D printing
solutions to industrial customers in the aerospace, automotive, heavy equipment and energy/oil/gas industries.
Our binder jetting 3D printing technology was developed over 15 years ago by researchers at MIT. Our 3D printing machines
build or print products from CAD by depositing successive thin layers of particles of materials such as sand or metal powder 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, printed products may need post-production processing. We generally use
silica sand or foundry sand for casting, both of which typically require no additional processing. Products printed in other materials,
such as glass or metals, or for use in specific applications, may need varying amounts of heat treating, drying or other post-processing.
Pre-Print. We believe that our customers have the opportunity to take greater advantage of the design freedom that our 3D
printing technology provides. While we 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 believe that additional pre-print capabilities would
empower our customers to fully exploit the design freedom of 3D printing. As a result, we are exploring ways to develop, through a
combination of strategic investments, and/or alliances, advanced CAD, simulation and design optimization tools. With these enhanced
pre-print capabilities, our customers will be able to imagine, design, optimize and produce their ideal products, unconstrained by the
limitations imposed by traditional manufacturing technologies.
Industrial Materials. As we experience increased demand for our products globally, it is essential that the material supply chain
and distribution channels match and be in close proximity to our current and prospective customers. To ensure that such a supply
chain exists or quickly develops, we may vertically integrate the supply of our print media. In addition, for the highest quality printed
products, the sand grains and metal particles used in the 3D printing process must be uniform in size and meet very specific tolerances.
Vertically integrating would have the additional advantage of ensuring that our PSCs and 3D printing machine customers have
certainty of access to the highest quality print media, meeting the exact specifications of our 3D printing machines.
Our Machines. Our 3D printing machines consist of a build box that includes a machine platform and a computer processor
controlling the printheads for applying layers of industrial materials and binding agents. We currently build our 3D printing machines
in both Germany and the United States. Our 3D printing machines are used to produce molds for castings, products for end users and
prototypes. In some situations, we can make prototypes in metal rather than resin polymer, or make a part from a mold for the casting
of a newly designed part, which we then cast at a qualified foundry. As a result, the prototype can be made from the same material as
the final production part, which allows for more accurate testing of the prototype. We provide a broad spectrum of qualified materials
for direct product materialization and are continuing to qualify additional materials for use in our printing process.
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Our 3D printing machines are used primarily to manufacture industrial products that are ordered in relatively low volumes, are
highly complex and have a high value to the customer. For example, the manufacture of an aircraft requires several complex parts,
such as transmission housings (also known as gear-casings), which are needed in relatively low volume and have a high performance
value in the aircraft. There are also a variety of machine parts made in traditional machining processes that can be made more cheaply
using those processes. Over time, we may be able to manufacture some of those parts more cost effectively. Our technology is not
appropriate for the mass production of simple parts, such as injection molded parts or parts made in metal stamping 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 ever expect to use our technology
to make simple, low-cost, mass-produced parts.
The bulk of our 3D printing machines are used to make complex sand molds, which are used to cast these kinds of parts for
several industries; although, in some cases, we make the end part directly. We intend to expand the direct part production segment of
our business as we grow. In addition, as our technologies advance and our unit cost of production decreases, we believe that we can
increase the type and number of products that our 3D printing machines can manufacture in a cost-effective manner, expanding our
addressable market. The latest generation in our machine portfolio allows customers to engage with our binder jetting technology for
industrial series production, beyond the rapid prototyping and small batch production for which our other systems are being used.
Post-Print Processing. After a product is printed, the bound and unbound powder in the build box requires curing of the chemical
binding agent. In the case of molds and cores, curing generally occurs at room temperature and the printed product is complete after
the binder is cured. For certain applications, 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 have identified and work with high quality
foundries, and we are exploring ways to enhance the quality of precision castings in order to drive additional demand for our molds
and cores and the machine platforms that print them. In conjunction with precision foundry capabilities, we believe that our casting
technology offers a number of advantages over traditional casting methods, including increased yield, weight reduction and improved
thermal range.
For other materials, such as stainless steel, bronze, iron and bonded tungsten, the product needs to be 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 porous structure. The porous structure can be further infiltrated with another material to fill the voids. After the sintering and
infiltration, the product can be polished and finished with a variety of standard industrial methods and coatings. We believe that our
direct materialization capabilities enable customers to develop the ideal design for products, free of the design constraints inherent in
traditional manufacturing, in the industrial metal of choice and in a more efficient manner than traditional manufacturing methods.
Customers and Sales
Educating Our Customers
Educating our customers and raising awareness in our target markets about the many uses and benefits of our 3D printing
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 PSCs. We
also seek to expose key potential users to our products through our PSCs, installed machines at customers’ locations, university
programs, and sales and marketing efforts.
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Production Service Centers
We have established a network of nine PSCs in North Huntingdon, Pennsylvania; Troy, Michigan; Houston, Texas; Auburn,
Washington; North Las Vegas, Nevada; Gersthofen, Germany, Desenzano del Garda, Italy; Jönköping, Sweden, and Kanagawa,
Japan. Our five PSCs located in the United States were certified to ISO 9001:2008 as Industrial Additive Manufacturers. Through our
PSCs, we provide sales and marketing and delivery of support and printing services to our customers. At our PSCs, our customers see
our 3D printing machines in operation and can evaluate their production capabilities before ordering (i) a 3D printing machine or (ii) a
printed product or service. The PSCs are scalable and have a well-defined footprint that can be easily replicated to serve additional
regional markets. As described below, placing our PSCs in strategic locations around the world is an important part of our business
strategy.
For all customers, we offer the following support and services through our PSCs:
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Pre-production Collaboration. Our pre-print services include data capture using software that enables customers to
translate their product vision into a digital design format that can be used as an input to our 3D printing equipment. We
help our customers successfully move from the design stage to the production stage, and help customers evaluate the
optimal design and industrial materials for their production needs. For example, we worked with a customer to design and
manufacture parts that eliminated significant weight from a helicopter, which was possible because of the precision of our
AM process. Our 3D printing machines are also able to deliver a replacement for a product broken by the customer
rapidly or often immediately because we will already have the production computer file. Using subtractive manufacturing
would take significantly longer.
Consumables. We provide customers with the inputs used in our 3D printing machines, including tools, printing
media/industrial materials, and bonding agents.
Training and Technical Support. Our technicians train customers to use our 3D printing machines through hands-on
experience at our PSCs and provide field support to our customers, including design assistance, education on industrial
materials, operations and printing training, instruction on cleaning, and maintenance and troubleshooting.
Replacement Parts and Service. We generally offer a twelve month warranty with the sale of a 3D printing machine to a
customer. Thereafter, we offer a variety of service and support plans.
Our Competitive Strengths
We believe that our competitive strengths include:
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Volumetric Output Rate. We believe that our 3D printing machines provide 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 printhead speed and 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. For example, the machine cost per cubic inch for our mid-size
Flex machine is approximately 5% of the comparable machine cost of its predecessor model, assuming a constant 80%
utilization rate over a five-year period. 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.
Printing Platform Size. The size of the build box area and the platform 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. The Exerial is one of the largest commercially available 3D printing
build platforms at 3,168 liters. The Exerial is uniquely equipped with two build boxes, each 1.5 times larger than the
single build box in our next largest model, the S-Max, a 1,260-liter platform machine, resulting in a total print volume of
approximately 2.5 times that of the S-Max. We believe that our technology and experience give us the potential to develop
large build 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 cater to the varying demands of our customers. Our two
largest platforms, the Exerial and S-Max machines, are differentiated from the machines of our competitors in their ability
to print in an industrial size and scale. Our Innovent size platform provides a small build box for both lab work and
qualification, as well as small part production.
Industrial Materials. Currently, our 3D printing machines are able to manufacture casting molds and cores from specialty
sands and ceramics, which are the traditional materials for these casting products. Of equal importance, our 3D printing
machines are capable of direct product materialization by printing in industrial metals, including stainless steel, bronze,
iron, bonded tungsten, IN Alloy 625 and glass. We are in varying stages of qualifying additional industrial materials and
advancing materials that are printable in our machines. Our current emphasis is related to monolithic metals and certain
ceramics.
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Chemical Binding. We use liquid 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. As an example, in order to increase the print speed of laser-based technologies, another
expensive industrial laser must be added to the manufacturing process, raising the unit cost of production.
International Presence. Since our inception, we have structured our business to cater to major international markets. We
have established one or more PSCs in each of North America, Europe and Asia. 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.
Co-location of High Value Production. Over the last few years, many United States industrial manufacturers have
outsourced products supply or otherwise created long, relatively inflexible supply chains for their high-complexity, high-
value products. We believe that over the next few years, many of these companies will need to build these products in the
United States, near their main manufacturing facilities, in order to be competitive domestically and internationally. We
believe we are well positioned to help these manufacturers co-locate the production of products so as to optimize our
customers’ supply chains.
Our Business Strategy
The principal elements of our growth strategy include:
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Qualify New Industrial Materials Printable In Our Systems. Our 3D printing machines are used for both development
and commercial printing. We believe certain of our customers are interested in printing materials for their own
development or other interests without regard to utilizing our post- processing methods. We have qualified for printing for
production by customers or in our PSCs the following direct printed materials: 420 stainless steel infiltrated with bronze;
316 stainless steel infiltrated with bronze; iron infiltrated with bronze; IN Alloy 625; bronze; bonded tungsten and glass.
We have also qualified silica sand and ceramics for indirect printing. We are in varying stages of qualifying additional
industrial materials and advancing materials that are printable in our machines. Our current emphasis is related to
monolithic metals and certain ceramics. These qualified materials are distinguishable from printable materials in that they
are commercially available for sale in industrial densities or for finished products printed at our PSCs. Our 3D printing
machines are used for both development and commercial printing. Additional materials printable in our printing systems
include cobalt-chrome, IN Alloy 718, iron-chrome-aluminum, 17-4 stainless steel, 316 stainless steel and tungsten
carbide. By expanding both qualified and printable materials, we believe we can expand our market share and better serve
our industrial customer base. During 2013, we established our ExOne Materials Application Laboratory (“ExMAL”),
which focuses principally on materials testing. In 2015, we qualified a new application for our additive manufacturing
process, Water Wash-out Tooling, designed to aid in the development of manufacturing and composite tooling through
ExMAL. We believe ExMAL will continue to assist us in increasing the rate at which we are able to qualify new materials
and applications.
Increase the Efficiency of Our Machines to Expand the Addressable Market. We intend to invest in further developing
our machine technology so as to increase the volumetric output per unit of time that our machines can produce. In 2011,
we began selling a new second generation mid-sized platform, the S-Print machine. In 2013, we began selling our new M-
Flex machine. In 2014, we began selling our S-Max+ and M-Print machines. In 2015, we began selling our Innovent and
Exerial machines. In each case, the new machines are designed to increase the volumetric output per unit of time through
advances in printhead speed and build box size. The Exerial machine is unique compared to ExOne’s predecessor systems
in that it contains multiple industrial stations that allow for continuous production and simultaneous processing and is
targeted at larger scale production. Achieving improved production speed and efficiency will expand our potential market
for our 3D printing machines and for products made in our PSCs.
Focus Upon Customer Training and Education to Promote Awareness. As part of our ExOne Training and Education
Center (“ExTEC”) we have supplied 3D printing equipment to numerous universities and research institutions in an effort
to expand the base of future adopters of our technology. At ExTEC, technicians guide our current and prospective
customers in the optimal use of 3D printing and customers gain digital access to our 3D printing knowledge database as it
continues to evolve. We make ExTEC accessible to universities, individual customers, employees/trainees, designers,
engineers and others interested in 3D printing. We will continue to educate the marketplace about the advantages of 3D
printing. In addition to using ExTEC and our regional PSCs to educate our potential customers, in 2014 we launched the
ExTEC Academy in order to advance technical expertise, training and service support for our customer base. Our ExTEC
Academy targets not only binder jetting awareness but training of customers and technicians in operations and service. We
currently offer ExTEC Academy instruction on indirect printing and machine operation in Gersthofen, Germany, with
plans to expand our ExTEC Academy offerings into locations in the United States and Japan. In 2015, we also opened a
new state-of-the-art Design and Re-Engineering for Additive Manufacturing ("DREAM") center located within our North
Huntingdon, Pennsylvania facility. The DREAM center was strategically developed as a physical and virtual site for
collaboration with customers to explore and incorporate the benefits of our binder jetting technology. By providing global
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access to our creative technical expertise and offering the most advanced software currently available, the DREAM center
enables customers to create designs of metal components which maximize the benefits of additive manufacturing. The
DREAM center is expected to be a catalyst for the 3D production of parts without the limitations of traditional
manufacturing.
Reducing Overall Costs of Operating Our Machines. We continue to reduce costs associated with operating our 3D
printing machines. We seek to qualify lower cost printing materials, including binder, sand and powdered metals, as well
as lower cost replacement parts for our 3D printing machines. We use a variety of means, including traditional supply
chain and development projects, to reduce those costs. We believe as we lower 3D printing machine run costs we will
improve adoption rate by forming more cost efficient production processes.
Advance Pre-Print Design and Post-Print Processing Capabilities to Accelerate the Growth of Our 3D Printing
Technology. Our next generation 3D printing machine platforms have achieved the volumetric output rate and quality
necessary to serve industrial markets on a production scale. We believe that there is an opportunity to similarly advance
the pre-print and post-print processing phases of product materialization to more fully exploit the transformative power of
our 3D printing machines and drive growth. These opportunities relate to both direct and indirect product materialization.
For direct printing production, we believe that enhancing pre-print processes, notably design optimization tools and
suitable print material availability, can greatly accelerate our capture of market share in the near-term. Additionally,
enhancements to post-print processing will increase the applications for printed products. Through ExMAL, we are
developing post-print processing technologies to achieve fully dense product materialization without the need for
infiltration, and we are exploring technology sharing partnerships to further this initiative. In indirect production utilizing
3D printed molds and cores, advanced performance casting technologies can be leveraged to increase yields and reduce
weight of casted products. To address the market opportunity and fill the execution gap, we have developed a suite of
processes, many of which are proprietary, for producing high-quality castings through a process that we call ExCast.
ExCast provides industry guidance and support through all stages of production, from CAD at the design stage, through
the 3D materialization of molds and cores, casting of the end product and rapid delivery to the end-user.
Expand the Network of Production Service Centers. Our PSCs provide a central location for customer collaboration and
provide customers with a direct contact point to learn about our 3D printing technology, purchase products printed by us,
and purchase our 3D printing machines. We plan to focus on the utilization and productivity of our existing PSC network,
and to consider the appropriate global expansion to match our perceived demand for production as well as prototyping.
During 2015 we expanded our PSC network to include Jönköping, Sweden situated in southern Sweden. This PSC was
established in collaboration with Swerea, the Swedish Research Institute for Industrial Renewal and Sustainable Growth.
In 2015, we installed 3D printing machines and began direct metal printing capabilities in our existing PSCs located in
Germany and Japan. Each of our nine PSCs are located in a major industrial center near existing and potential customers.
We continuously monitor both customer and market trends in assessing the opportunity to further expand our global PSC
network.
Pursue Growth Opportunities Through Alliances and/or Strategic Investments. We intend to opportunistically identify
and, through alliances and/or strategic investment, integrate and advance complementary businesses, technologies and
capabilities. Our goal is to expand the functionality of our products, provide access to new customers and markets, and
increase our production capacity.
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Our Machines and Machine Platforms
We produce a variety of 3D printing machines in order to enable designers and engineers to rapidly, efficiently, and cost-
effectively design and produce industrial prototypes and production parts. The models of our 3D printing machines differ based on the
materials in which they print, build box size, and production speeds, but all utilize our advanced technology and designs. The variation
in the models of 3D printing machines that we produce allows for flexibility of use based on the needs of our customers.
Exerial. The Exerial is our newest indirect 3D printing machine. It is unique compared to our other indirect 3D printing
systems in that it contains multiple industrial stations that allow for continuous production and simultaneous processing. The
Exerial is distinctly equipped with two build boxes, each 1.5 times larger than the single build box in our next largest model, the
S-Max. Notably, the Exerial system offers a total build platform of 3,168 liters and is expected to be capable of printing output
rates nearly four times faster than the S-Max. The Exerial utilizes a new recoater system, multiple printheads and automation
controls. As part of the development of the Exerial, we have filed six patents related to machine design elements. We formally
debuted this 3D printing machine at the GIFA International Foundry Trade Fair in Dusseldorf, Germany in June 2015 and began
selling this machine in 2015.
S-Max/S-Max+. The S-Max machine is our second largest indirect 3D printing machine presently available. We
introduced the S-Max machine in 2010 to provide improved size and speed over the predecessor model, the S-15. The S-Max
has a build box size of 1,800mm x 1,000mm x 700mm. The S-Max machine is generally used by customers interested in
printing complex molds and cores on an industrial scale for casting applications. Each of our global PSCs has at least one S-Max
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machine installed on-site. In addition to our traditional S-Max machine, during 2014 we introduced an S-Max+ configuration
designed for easier post-processing of the build box for certain applications which require phenolic or sodium silicate binder for
printing.
S-Print/M-Print. The S-Print (indirect) and M-Print (direct) machines are our mid-sized 3D printing machines presently
available. Both the S-Print and M-Print have a build box size of 800mm x 500mm x 400mm. The S-Print machine is generally
used by customers interested in printing objects made from silica sand and ceramics, with a particular focus on industrial
applications for smaller casting cores that are often required for the aerospace industry, especially in hydraulic applications. The
build box size also permits the use of exotic and expensive print materials, such as ceramics, that are required for high heat/high
strength applications. The M-Print machine is generally used by customers interested in direct printing of objects made from
metals and glass. We have installed both S-Print and M-Print machines in certain of our PSCs to complement our S-Max
machines currently in use.
M-Flex. The M-Flex machine is our most flexible direct 3D printing machine presently available. We introduced the M-
Flex machine platform in 2013 to satisfy the demand for a large range of industrial customers that are interested in directly
printing metals, ceramic and glass products. We have further developed a collaborative process for assisting the users in
production implementation through our ExTEC and ExMAL organizational efforts. The M-Flex has a build box size of 400mm
x 250mm x 250mm.
Innovent. The Innovent is the smallest of our direct 3D printing machines presently available. We introduced the Innovent
machine in 2014 to provide improved size and speed over the predecessor model, the X1-Lab. As an industrial-grade,
laboratory-sized machine, Innovent allows for testing material properties, specifically in educational institutions, research
laboratories, and research and development departments at commercial organizations. Innovent is uniquely designed in that it
balances a specific build box for the technical qualification of materials with a smaller overall lab machine platform size, when
compared to other industrial-grade 3D printing machines. Innovent offers a build volume that is eight times larger than the
previous X1-Lab model – measuring at 65mm x 160mm x 65mm.
MWT Microwave. We manufacture industrial grade microwaves to be used in conjunction with our 3D printing systems
for thermally processing certain sand molds or cores that are 3D printed using binders, such as phenolic binder, that require a
drying process. Our microwave technology improves casting quality and reduces production costs for customers in specific
industries, such as magnesium parts for aviation and steel alloy parts for hydraulic components. Our microwaves are customized
designs and work with various of our systems, including Exerial, S-Max+ and S-Print.
Binding
We use liquid chemical binding agents (including furan, phenolic and sodium silicate) during the 3D printing process. We
initially introduced the availability of phenolic binding agent in July 2013, which binder is used with ceramic sands in the 3D printing
of molds and cores, offering customers three primary benefits as compared with other binders:
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Casting higher heat alloys;
Creating a higher strength mold or core; and
Improving the quality of the casting due to reduced expansion of the mold or core.
These capabilities address challenges faced by the automotive, aerospace, heavy equipment and energy/oil/gas industries.
In September 2015, we expanded our suite of 3D printing binder offerings to add a new class of phenolic binding agent, referred
to as cold hardening phenolic ("CHP"). The CHP binder accelerates the 3D printing process by eliminating the infrared heating lamp
that is utilized in the printing process with traditional phenolic binders. Using CHP, the polymerization of 3D printed molds and cores
may occur at room temperature, further reducing both printing and curing time and eliminating the need for additional equipment such
as a microwave. Alternatively, if additional drying is desired this may be achieved in a conventional air oven, equipment which is
maintained by most industrial manufacturers. Our initial introduction of CHP is through delivery to customers of benchmark and
production parts printed in our Gersthofen, Germany PSC. We are in the process of optimizing our indirect printing machine
platforms for utilization of CHP in 2016.
Sodium silicate reduces or eliminates the release of fumes and gas in the casting process, helping to reduce costs associated with
air ventilation and electrical and maintenance equipment, which we believe will appeal to casting houses that are in search of cleaner
environmental processes.
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. As an example, in order to increase the print speed of laser-based technologies, another
expensive industrial laser must be added to the manufacturing process, raising the unit cost of production.
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Marketing and Sales
We market our products under the ExOne brand name in our three major geographic regions — North America, Europe and Asia.
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, all of our product and service offerings
provided by our PSCs 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 PSCs.
Acquisitions
The Company made two acquisitions in March 2014.
On March 3, 2014, our ExOne Americas LLC subsidiary acquired substantially all the assets of MAM, a specialty machine shop
located in Chesterfield, Michigan, for an aggregate purchase price of approximately $4.9 million. The purpose of this acquisition was
to complement our existing PSC in Troy, Michigan, by expanding our post-processing capabilities.
On March 6, 2014, our ExOne GmbH subsidiary acquired all of the shares of MWT, a pioneer in industrial-grade microwaves
with leading design and manufacturing experience based in Elz, Germany, for approximately $4.8 million. The purpose of this
acquisition was to complement our existing indirect 3D printing machine systems with microwave technologies which enhance our
post-processing offerings available to customers. During 2015, we took the step to integrate our MWT microwave manufacturing
operation with our Gersthofen, Germany manufacturing operations.
Our Customers
Our customers are located primarily in North America, Europe and Asia. We are a party to non-disclosure agreements with many
of our customers, and therefore, are often prohibited from disclosing many of our customers’ identities. Our customers include several
Fortune 500 companies that are leaders in their respective markets. The primary industries that we currently serve are:
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Aerospace;
Automotive;
Heavy equipment; and
Energy/oil/gas.
We conduct a significant portion of our business with a limited number of customers. Our top five customers represented
approximately 19.0%, 23.1% and 25.5% of total revenue for 2015, 2014 and 2013, respectively. There were no customers for 2015,
2014 or 2013 that individually represented 10.0% or greater of 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, with the timing of such sales dependent on the customer’s capital budgeting cycle, which may vary from
period to period. The nature of the 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 are high volume, but generally result in a significantly
lower aggregate price per order as compared to 3D printing machine sales. The nature of the revenue from 3D printed and other
products, materials and services does not leave us dependent upon a single or a limited number of customers.
For 3D printing machines, our terms of sale vary by transaction. To reduce credit risk in connection with 3D printing machine
sales, we may, depending upon the circumstances, require certain amounts be prepaid. In some circumstances, we may require
payment in full and may require international customers to furnish letters of credit. For 3D printed and other products and materials,
our terms of sale generally require payment within 30 to 60 days after delivery, although we also recognize that longer payment
periods are customary in some countries where we transact business. Services arrangements are generally billed in accordance with
specific contract terms which typically correspond to performance of the related services.
Services and Warranty
We have fully trained service technicians to perform machine installations in North America, Europe and Asia. We generally
provide an industry standard twelve month warranty on sales of 3D printing machines. Customers can purchase additional service
contracts for maintenance and service. We also sell replacement parts which we maintain in stock worldwide to assist in providing
service expeditiously to our customers.
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Suppliers
Our largest suppliers in 2015, based upon dollar volume of purchases, were Bauer GmbH & Co KG, Erhardt & Leimer GmbH,
Bosch Rexroth AG, Fuji Film Dimatix, Astro Manufacturing & Design, Sciullo Machine and T&S Materials.
We buy our industrial materials from several suppliers and, except as set forth below, the loss of any one would not materially
adversely affect 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 though vendors with whom we
have existing and good relationships. The loss of any one of these providers or vendors would not materially adversely affect our
business.
Research and Development
We spent approximately $7.3 million, $8.2 million and $5.1 million on research and development during 2015, 2014 and 2013,
respectively. We expect to continue to invest significantly in research and development in the future.
A significant portion of our research and development expenditures have been focused on the:
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Chemistry of print materials and binder formulation;
• Mechanics of droplet flight into beds of powder;
• Metallurgy of thermally processing metals that are printed through AM;
• Mechanics of spreading powders in a job box;
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Transfer of digital data through a series of software links, to drive a printhead; and
Synchronizing all of the above to print ever-increasing volumes of material per unit time.
Intellectual Property
Patents and MIT Licenses. Our technology is covered by a variety of patents or licenses for use of patents. We are the worldwide
licensee of certain patents of 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). Additionally, we hold patents solely as majority owner, as a result of our own technological developments. Our patents are
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 hold process patents and have applied for other patents for equipment, processes, materials and 3D
printing applications. The expiration dates of our patents range from 2016 to 2031. We believe that the expiration of patents in the
near term will not impact our business.
The MIT Patents under which we are licensed have expiration dates ranging from 2017 to 2021 in the United States. We believe
that the expiration of these licenses will not impact our business; however, the expiration may allow our competitors that were
previously prevented from doing so to utilize binder jetting 3D printing. Nonetheless, 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.
We entered into an Amended and Restated Exclusive Patent License Agreement with MIT in June 2011. The terms of the
amended agreement required that we remit both license fees and royalties to MIT based upon net sales of licensed products, processes
and consumables. The term of the agreement commenced on January 1, 2011, and was to remain in force until the expiration or
abandonment of all issued patent rights.
On January 22, 2013, we agreed with MIT to an amendment of its exclusive patent license agreement. The Amended MIT
License Agreement provides for, among other things, (i) a reduction in the term of the agreement between us and MIT from the date
of expiration or abandonment of all issued patent rights to December 31, 2016, (ii) an increase in the annual license maintenance fees
due for the years ended December 31, 2013 through December 31, 2016 from $50,000 annually to $100,000 annually, with amounts
related to 2013 through 2016 guaranteed by us, (iii) a settlement of all past and future royalties on net sales of licensed products,
processes and consumables for a one-time payment of $200,000 (paid in March 2013), and (iv) a provision for optional extension of
the term of the arrangement between the parties for an annual license maintenance fee of $100,000 for each subsequent year beyond
2016.
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Trademarks. We have registrations in the United States for the following trademarks: EXONE, X1 ExOne Digital Part
Materialization (plus design), EXCAST, EXMAL, EXTEC, LUXCELIS, M-FLEX, ORION, S MAX, S-PRINT, X1 and X1-LAB. We
also have applications for registration pending for the following trademarks: EXERIAL, INNOVENT, M-PRINT and S-MAX. We
also have registrations for EXONE in China, Europe (Community Trade Mark), Japan, and South Korea, and an application for
registration pending in Canada for that trademark. We have registrations for X1 ExOne Digital Part Materialization (plus design) in
China, Europe (Community Trade Mark), Japan, and South Korea, and applications for registration pending in Brazil and Canada for
that mark. We have a registration for the mark X1 in Europe (Community Trade Mark). We have a registration for the mark EX-1 in
Europe (Community Trade Mark). We have registrations for a stylized form of X1 in Europe (Community Trade Mark) and South
Korea. We have registrations for DIGITAL PART MATERIALIZATION in Japan and South Korea and an application pending for
that mark in Canada. We have a registration for the trademarks EXERIAL, INNOVENT, M-FLEX and S-MAX in Europe
(Community Trade Mark). We also have a registration in Canada for the trademark LUXCELIS. Additionally, in March 2014 we
acquired the trade names for Machin-A-Mation Corporation (“MAM”) and MWT — Gesellschaft für Industrielle Mikrowellentechnik
mbH (“MWT”).
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 nondisclosure 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 Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
Competition
Other companies are active in the market for 3D printing products and services. These companies use a variety of AM
technologies, including:
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Direct metal deposition;
Direct metal laser sintering;
Electron beam melting;
Fused deposition modeling;
Laser consolidation;
Laser sintering;
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Polyjet;
Selective laser melting;
Selective laser sintering; and
Stereolithography.
Some of the companies that have developed and employ one or more AM technologies include: 3D Systems Corporation,
Stratasys Inc., Voxeljet AG, EOS Optronics GmbH, EnvisionTEC GmbH and Solid Model Ltd.
Some of these processes and companies compete with some of the products and services that we provide. Despite the challenging
competitive landscape, we believe that we are the only AM printing solutions provider that focuses primarily on industrial applications
on a production scale. Our competitive advantages, including the size of our build platforms, the speed of our printheads, the variety
of materials used by industrial manufacturers in which we can print, the industry qualification of many of the materials we print in, our
robust market capabilities, and our suite of machine system families offering scale and flexibility, also serve to differentiate us from
the other competitors in the AM market.
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 gains recognition. 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.
Seasonality
Purchases of our 3D printing machines often follow a seasonal pattern owing to the capital budgeting cycles of our customers.
Generally, 3D printing machine sales are higher in our third and fourth quarters than in our first and second quarters.
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Backlog
At December 31, 2015, our backlog was approximately $16.5 million, of which, approximately $15.8 million is expected to be
fulfilled during the next twelve months. At December 31, 2014, our backlog was approximately $13.2 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 the
competitive position of us and our subsidiaries. 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.
Employees
At December 31, 2015, we employed a total of 311 (275 full-time) employees at our eleven global locations. None of these
employees is a party to a collective bargaining agreement, and we believe our relations with them are good.
Product and Geographic Information
Refer to 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 Item 1A, “Risk Factors”.
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 (the “SEC”), which we make available on our website free of
charge at http://www.exone.com/financials.cfm. 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 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, 2015, which is available on our corporate website at
www.exone.com. Stockholders may also obtain copies of exhibits without charge by contacting our Executive Vice President, Chief
Legal Officer and Corporate Secretary at (724) 863-9663.
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Item 1A. Risk Factors.
RISK FACTORS
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 significantly increase the number of materials in which we can print products fast enough to meet our
business plan.
Our business plan is heavily dependent upon our ability to steadily increase the number of qualified materials in which our
machines can print products. Our 3D printing machines are capable of direct product materialization by printing in industrial metals,
including stainless steel, bronze, iron, bonded tungsten, IN Alloy 625 and glass. We are in varying stages of qualifying additional
industrial materials and advancing materials that are printable in our machines. By expanding into these other materials, we believe
we can expand our market share and better serve our industrial customer base. Qualifying new materials is a complicated engineering
task, and there is no way to predict whether, or when, any given material will be qualified. If we cannot hire people with sufficient
technical skills to work on qualifying new materials for printing, or if we lack the resources necessary to create a steady flow of new
materials, we will not be able to meet our business plan goals and a competitor may emerge that is better at qualifying new materials,
either of which would have an adverse effect on our business results.
Any future success in qualifying new materials for printing may attract more competitors into our markets, including competitors
with greater financial, technical, marketing, and other resources than we have.
If we succeed in qualifying a growing number of materials for use in our 3D printing machines, that will increase our addressable
market. However, as we create a larger addressable market, our market may become more attractive to other 3D printing companies or
large companies that are not 3D printing companies, but which may see an economic opportunity in the markets we have created.
Because we are a supplier of 3D printed products to industrial companies, an increase in the number of competitors for our
addressable market is likely to adversely affect our business and financial results.
We may not be able to adequately increase demand for our products.
Our business plan is built around a steady increase in the demand for our products. However, only a relatively small number of
our potential customers know of the existence of AM and are familiar with its capabilities, and even fewer understand the potential
benefits of using AM to manufacture products. If we do not develop effective strategies to raise awareness among potential customers
of the benefits of AM and 3D printing, we may be unable to achieve our planned rate of growth, which could adversely affect our
results of operations.
We may not be able to 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. In addition, as we move into new geographic areas, we will need to
recruit skilled employees in those areas. 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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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. Because our business is changing and evolving rapidly,
our historical operating results may not be useful in predicting our future operating results. A significant portion of our machine orders
are typically received during the third or fourth quarter of the fiscal year as a result of the timing of capital expenditures of our
customers. Thus, revenues and operating results for any future period are not predictable with any significant degree of certainty. We
also typically experience weaker demand for our machines in the first and second quarters. For these reasons, 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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The degree of market acceptance of our products;
The mix of products that we sell during any period;
Our long sales cycle;
Generally weaker demand for machines in the first and second quarters;
Development of competitive systems by others;
Our response to price competition;
Delays between our expenditures to develop and market new or enhanced machines and products and the generation of
sales from those products;
Changes in the amount we spend to promote our products and services;
The geographic distribution of our sales;
Changes in the cost of satisfying our warranty obligations and servicing our installed base of products;
Our level of research and development activities and their associated costs and rates of success;
General economic and industry conditions that affect end-user demand and end-user levels of product design and
manufacturing, including the adverse effects of the current economic crisis affecting Europe;
Changes in accounting rules and tax laws; or
Changes in interest rates that affect returns on our cash balances and short-term investments.
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.
We may not be able to generate operating profits.
Since our inception, we have not generated operating profits. In the event that we are unable to execute on our business plan, we
may be unable to generate profits in the future.
Our operating expenses (which include research and development and selling, general and administrative expenses) were
approximately $29.9 million (excluding approximately $4.4 million of a goodwill impairment charge), $32.2 million and $21.2
million for 2015, 2014, and 2013, respectively. Our research and development expenses are due primarily to continued investment in
our 3D printing machine technology and costs associated with our materials qualification activities, including research and
development headcount. Our selling, general and administrative expenses are due primarily to personnel costs associated with
managing a public company and certain professional service fees (including legal, audit and other consulting expenses). 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.
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We may incur future impairment charges to our long-lived assets held for use.
As a result of continued operating losses and cash flow deficiencies, during 2015 we completed certain tests for the recoverability
of long-lived assets held for use at the asset group level. Assessing the recoverability of long-lived assets held for use requires
significant judgments and estimates by management. We will be required to conduct additional testing for the recoverability of long-
lived assets held for use to the extent that a triggering event requiring such test is identified in a future period. A significant decrease
in the market price of a long-lived asset, adverse change in the use or condition of a long-lived asset, adverse change in the business
climate or legal or regulatory factors impacting a long-lived asset and continued operating losses and cash flow deficiencies associated
with a long-lived asset, among other indicators, could cause a future assessment to be performed which may result in an impairment of
long-lived assets held for use. The amount of any impairment could be significant and could have a material adverse impact on our
financial condition and results of operations for the period in which the impairment is recorded.
Our independent registered public accounting firm may conclude that there is substantial doubt regarding our ability to continue
as a going concern.
As a result of our continued operating losses, cash flow deficiencies and liquidity, our independent registered public accounting
firm may conclude, in connection with the audit of our consolidated financial statements that there is substantial doubt regarding our
ability to continue as a going concern. If our independent registered public accounting firm issues a “going concern” opinion, it could
impair our ability to finance our operations through the sale of equity, incurring debt, or other financing alternatives. If we fail to raise
sufficient additional capital, we will not be able to completely execute our business plan. As a result our business would be
jeopardized and the Company may not be able to continue.
We may not be able to introduce new machines and related industrial materials acceptable to the market or to improve the
technology and industrial materials used in our current machines.
Our revenues are derived from 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 our
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 new industrial materials in 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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Enhance our existing products and technologies;
Continue to leverage advances in industrial printhead technology;
Develop new products and technologies that address the increasingly sophisticated and varied needs of prospective end-
users, particularly with respect to the physical properties of industrial materials and other consumables;
Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis;
Develop products that are cost-effective or that otherwise gain market acceptance;
Distinguish ourselves from our competitors in our industry; and
Adequately protect our intellectual property as we develop new products and technologies.
ExOne 3D printing machine customer contractual requirements often have specific, individual needs that may in turn impact the
period in which we recognize the revenue under accounting principles generally accepted in the United States of America
(“GAAP”) relating to that 3D printing machine sale.
Once a customer makes the decision to purchase a 3D printing machine from us, we may then be required to address specific,
individual factors relating, among other things, to that customer’s purchase, its intended use of that 3D printing machine or relating to
the installation of that machine in the customer’s facilities. These specific, individual requirements are often required by the customer
to be included in our commercial agreements relating to the purchase. 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.
If the market does not develop as we expect, our revenues may stagnate or decline.
The marketplace for industrial manufacturing is dominated by conventional manufacturing methods that do not involve AM
technology. If AM technology does not gain market acceptance as an alternative for industrial manufacturing, or if the marketplace
adopts AM based on a technology other than our technology, we may not be able to increase or sustain the level of sales of our
products and 3D printing machines and our results of operations would be adversely affected as a result.
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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. We do not carry key-man insurance on
any member of management.
Our business is subject to risks associated with doing business globally.
Sales outside of the United States were 50.9%, 51.9% and 63.0% for 2015, 2014 and 2013, respectively. In addition, one of our
growth strategies is to pursue additional opportunities for our business in several areas of the world outside of the United States, any
or all of which could be adversely affected by the risks set forth below. Our operations outside of the United States are subject to risks
associated with the political, regulatory and economic conditions of the countries in which we operate, such as:
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Civil unrest, acts of terrorism and similar events;
Fluctuations in foreign currency exchange rates;
Potentially longer sales and payment cycles;
Potentially greater difficulties in collecting accounts receivable;
Potentially adverse tax consequences;
Reduced protection of intellectual property rights in certain countries;
Difficulties in staffing and managing foreign operations;
Laws and business practices favoring local competition;
Costs and difficulties of customizing products for foreign countries;
Compliance with a wide variety of complex foreign laws, treaties and regulations;
Tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in
certain foreign markets; and
Becoming subject to the laws, regulations and court systems of many jurisdictions.
Any of these factors could materially adversely affect sales of our products to global customers or harm our reputation, which
could adversely affect our results of operations. In addition, the consequences of terrorism or armed conflicts are unpredictable, and
we may not be able to foresee events that could have an adverse effect on our market opportunities or our business.
Continuing political instability in the Ukraine, sanctions against Russia, and Russia’s response to those sanctions, could materially
adversely affect our business, results of operations and financial condition.
In March 2014, the Crimea region of the Ukraine was annexed by Russia. In response to this annexation and subsequent
hostilities aimed at the Ukraine, other nations, including the United States and the European Union, imposed evolving economic
sanctions against Russia. United States and European concerns related to the political and military conditions in the region have
prompted increasing levels of economic sanctions, targeting certain Russian companies in the finance, energy and defense industries
and named Russian nationals that have been deemed to have direct involvement in destabilizing the situation in the Ukraine, as well as
imposing restrictions on trading and access to capital markets (“Russian Sanctions”). In response, Russia announced its own trading
sanctions against nations that implemented or supported the Russian Sanctions, including the United States and some European Union
nations.
One of our growth strategies is to pursue opportunities for our business in several areas of the world outside of the United States.
This strategy includes pursuing opportunities in Russia through our German subsidiary, ExOne GmbH, which has sold products and
services (including 3D printing machines) to customers located in Russia.
ExOne GmbH is subject to the Russian Sanctions, primarily those imposed by the European Union, specifically Germany, related
to doing business in Russia. The Russian Sanctions may delay or prevent ExOne GmbH’s ability to collect on existing or future
accounts receivable from customers in Russia, to make future sales and to service existing ExOne equipment in Russia or to sell and
deliver spare parts and consumables for our machines located in Russia.
In the event that the United States’ and the European Union’s political relationships with Russia further deteriorate, it is possible
that additional and even more severe sanctions could be imposed by the United States or European Union against Russia or that Russia
could impose additional retaliatory measures in response to current or future Russian Sanctions. These possible additional sanctions
and measures could further disrupt or prevent our ability to do any business in Russia, may further increase the economic uncertainty
in the affected regions and lead to further fluctuation in the value of foreign currencies, such as the Euro, used in these regions.
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Our international operations pose currency risks, which may adversely affect our operating results.
Our operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency
transaction and translation risks. In general, we conduct our business, earn revenue and incur costs in the local currency of the
countries in which we operate. As a result, our international operations present risks from currency exchange rate fluctuations. The
financial condition and results of operations of each of our foreign operating subsidiaries are reported in the relevant local currency
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. Therefore, 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.
In the future, we may not benefit from favorable exchange rate translation effects, and unfavorable exchange rate translation
effects may harm our operating results. In addition to currency translation risks, we incur currency transaction risks whenever we enter
into either a purchase or a sale transaction using a different currency from the currency in which we receive revenues. In such cases
we may suffer an exchange loss because we do not currently engage in currency swaps or other currency hedging strategies to address
this risk.
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.
One of our principal stockholders is able to exert substantial influence in determining the outcome of matters which require the
approval of our stockholders.
At December 31, 2015, S. Kent Rockwell, our Chairman and CEO, beneficially owned approximately 21.8% of our outstanding
shares of common stock. On January 11, 2016, we entered into a subscription agreement with an entity under common control by Mr.
Rockwell resulting in the issuance of an additional 1,423,877 shares of our common stock to the related entity. Immediately following
this issuance, Mr. Rockwell beneficially owned approximately 28.8% of our outstanding shares of common stock. As a result of his
ownership percentage in our common shares, Mr. Rockwell may have effective control over the election of our Board of Directors 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 of Mr. Rockwell.
We may need to raise additional capital from time to time if we are going to meet our growth strategy and may be unable to do so
on attractive terms.
Expanding our business to meet the growth strategy may require additional investments of capital from time to time, and our
existing sources of cash and any funds generated from operations may not provide us with sufficient capital. For various reasons,
including any current noncompliance with existing or future lending arrangements, additional financing may not be available when
needed, or may not be available on terms favorable to us. If we fail to obtain adequate capital on a timely basis or if capital cannot be
obtained at reasonable costs, we may not be able to achieve our planned rate of growth, which will adversely affect our results of
operations. Additional equity financing may result in ownership and economic dilution to our existing stockholders and/or require us
to grant certain rights and preferences to new investors. Also, although S. Kent Rockwell, our Chairman and CEO and our controlling
stockholder, recently provided capital to us through a related entity, he has no obligation to do so and our stockholders should have no
expectation that he will do so in the future.
On January 8, 2016, we announced our entry into an At Market Issuance Sales Agreement (“ATM”) with FBR Capital Markets &
Co. (“FBR”) and MLV & Co. LLC (“MLV”) pursuant to which FBR and MLV will act as distribution agents in the sale of up to $50.0
million in the aggregate of ExOne common equity in “at the market offerings” as defined in Rule 415 under the Securities Act of
1933, as amended (the “Securities Act”). Our ability to raise capital through the use of our ATM may be restricted for various reasons,
including our adherence with SEC regulations prohibiting the sale of our common equity securities for certain periods of time or other
adverse market conditions.
We are highly dependent upon sales to certain industries.
Our revenues of 3D printing machines and products have historically been concentrated to companies in the aerospace,
automotive, heavy equipment, and energy/oil/gas industries and those industries’ respective suppliers. To the extent any of these
industries experience a downturn, our results of operations may be adversely affected.
For example, the energy/oil/gas industry is highly cyclical and demand for our products and services in such industry is
substantially dependent on the level of expenditures by the industry for the exploration, development and production of crude oil and
natural gas reserves, which are sensitive to oil and natural gas prices and generally dependent on the industry’s view of future oil and
gas prices. Crude oil prices have dropped precipitously since September 2014. As oil and gas companies reduce planned capital
spending in light of the decline in commodity prices, our results of operations may be adversely affected.
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Additionally, if any of these industries or their respective suppliers or other providers of manufacturing services develop new
technologies or alternatives to manufacture the products that are currently manufactured using our 3D printing machines, it may
adversely affect our results of operations.
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 manage the expansion of our operations effectively in order to achieve our projected levels of growth.
We have expanded our operations significantly in recent periods, and our business plan calls for further expansion over the next
several years. We anticipate that further development of our infrastructure and an increase in the number of our employees will be
required to achieve our planned broadening of our product offerings and customer base, improvements in our 3D printing machines
and materials used in our 3D printing machines, and our planned international growth. In particular, we must increase our marketing
and services staff to support new marketing and service activities and to meet the needs of both new and existing customers. Our
future success will depend in part upon the ability of our management to manage our growth effectively. If our management is
unsuccessful in meeting these challenges, we may not be able to achieve our anticipated level of growth which would adversely affect
our results of operations.
We may not be able to consummate and/or effectively integrate strategic transactions.
We may from time to time engage in strategic transaction 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 completed two acquisitions in the first quarter of 2014 and are currently exploring a combination of strategic investments,
and/or alliances, some of which we believe will promote advances in pre-print and post-print processes. With respect to strategic
investments, and/or alliances we are currently pursuing, there is no guarantee that we will 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. We may not be able to
successfully negotiate and complete a specific investment, or alliance on favorable terms. If we do complete transactions, they may
not ultimately strengthen our competitive position or may not be accretive to ExOne for a period of time which may be significant
following the completion of such transaction.
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. Our use of cash to pay for transactions would limit other
potential uses of our cash, including investments in our sales and marketing and product development organizations, and in
infrastructure. 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.
Global economic, political and social conditions have adversely impacted our sales and may continue to do so.
The uncertain direction and relative strength of the global economy, difficulties in the financial services sector and credit markets,
continuing geopolitical uncertainties and other macroeconomic factors all affect spending behavior of potential end-users of our
products. The prospects for economic growth in the United States and other countries (particularly countries within Europe, Russia,
India and China) remain uncertain and may cause end-users to further delay or reduce technology purchases. The recent global
financial crisis affecting the banking system and financial markets has resulted in a tightening of credit markets, lower levels of
liquidity in many financial markets and extreme volatility in fixed income, credit, currency and equity markets. These conditions may
make it more difficult for our end-users to obtain financing.
As a global company, we may be adversely affected by violations of the FCPA, similar anti-bribery laws in other jurisdictions in
which we currently or may in the future operate, or various international trade and export laws.
Our business plan envisions that we will conduct increasing amounts of business outside of the United States, which will create
various domestic and foreign regulatory challenges. The Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and
similar anti-bribery laws in other jurisdictions generally prohibit United States-based companies and their intermediaries from making
improper payments to non-United States officials for the purpose of obtaining or retaining business. We have policies and controls in
place designed to ensure internal and external compliance with these and other anti-bribery laws. To ensure compliance, our anti-
bribery policy and training on a global basis provides our employees with procedures, guidelines and information about anti-bribery
obligations and compliance. Further, we require our partners, subcontractors, agents and others who work for us or on our behalf to
comply with anti-bribery laws. We also have procedures and controls in place designed to ensure internal and external compliance.
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However, such anti-bribery policy, training, internal controls, and procedures will not always protect us from reckless, criminal or
unintentional acts committed by our employees, agents or other persons associated with us. If we are found to be in violation of the
FCPA or other anti-bribery laws (either due to the intentional or inadvertent acts of our employees, or due to the intentional or
inadvertent acts of others), we could suffer criminal or civil penalties, including monetary damages or other sanctions, which could
have a material adverse effect on our business. In addition, actual or alleged violations could damage our reputation and adversely
affect our results of operations.
We rely on our information technology systems to manage numerous aspects of our business and customer and supplier
relationships, and a disruption or failure of these systems could adversely affect our results of operations.
We depend on our information technology (“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. 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 superior 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 could significantly limit our ability to manage and operate our business efficiently. These systems are 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 results of
operations.
Regulations related to conflict-free minerals may cause us to incur additional expenses and may create challenges with our
customers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and
accountability regarding the use of “conflict” minerals mined from the Democratic Republic of Congo (the “DRC”) and adjoining
countries. These conflict minerals include tantalum, tin, gold or tungsten. The SEC has established annual disclosure and reporting
requirements for those companies who manufacture or contract to manufacture certain products containing conflict minerals sourced
from the DRC and adjoining countries. These requirements could adversely affect the sourcing, supply and pricing of tantalum, tin,
gold or tungsten used in our products. As there may be only a limited number of suppliers offering conflict-free minerals, we cannot
ensure that we will be able to obtain these conflict-free minerals in sufficient quantities or at competitive prices. Compliance with
these requirements may also increase our costs, including costs that may be incurred in conducting due diligence procedures to
determine the sources of certain minerals used in our products and other potential changes to products, processes or sources of supply
as a consequence of such verification activities. In addition, we may face challenges with our customers if we are unable to
sufficiently verify the origins of the minerals used in our products.
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 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 may not have adequate insurance for potential liabilities.
In the ordinary course of business, we may be subject to various product and non-product related claims, lawsuits and
administrative proceedings seeking damages or other remedies arising out of our commercial operations. We maintain insurance to
cover our potential exposure for most claims and losses. However, our insurance coverage is subject to various exclusions, self-
retentions and deductibles, may be inadequate or unavailable to protect us fully, and may be cancelled or otherwise terminated by the
insurer. Furthermore, we face the following additional risks under our insurance coverage:
• We may not be able to continue to obtain insurance coverage on commercially reasonable terms, or at all;
• We may be faced with types of liabilities that are not covered under our insurance policies, such as environmental
contamination or terrorist attacks, and that exceed any amounts that we may have reserved for such liabilities;
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The amount of any liabilities that we may face may exceed our policy limits and any amounts we may have reserved for
such liabilities; and
• We may incur losses resulting from interruption of our business that may not be fully covered under our insurance
policies.
Even a partially uninsured claim of significant size, if successful, could materially adversely affect our business, financial
condition, results of operations and liquidity. However, even if we successfully defend ourselves against any such claim, we could be
forced to spend a substantial amount of money in litigation expenses, our management could be required to spend valuable time in the
defense against these claims and our reputation could suffer, any of which could adversely affect our results of operations.
If any of our manufacturing facilities or PSCs 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. Our PSCs are
located in North Huntingdon, Pennsylvania; Troy, Michigan; Houston, Texas; Auburn, Washington; North Las Vegas, Nevada;
Gersthofen, Germany, Desenzano del Garda, Italy; Jönköping, Sweden; and Kanagawa, Japan.
If the operations of these facilities are materially disrupted, we would be unable to fulfill customer orders for the period of the
disruption, we would 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.
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, Italy, Sweden and
Japan, and it may be difficult for us to restrict our competitors from benefitting 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.
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, much of our key technology is not protected by patents. Since 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 generally enter into confidentiality
and/or license agreements with our employees, consultants, vendors and advertisers, and generally limit access to and distribution of
our proprietary information. However, we cannot provide assurance that any steps taken by us will prevent misappropriation of our
trade secrets and intellectual property.
We enjoy license rights and exclusivity of certain patents and intellectual property and cannot adequately estimate the effects of
their expiration upon the entrance or advancement of competitors into the AM industrial market.
We have exclusive license and non-exclusive license rights to certain patents that we utilize in the industrial market. Some of
these patents expired in 2015, and others are scheduled to expire in future periods. The expiration of these patents could reduce
barriers to entry into the AM industrial market, which could result in the reduction of our market share and earnings potential. We
cannot adequately estimate the effect that the expiration of these patents will have upon the entrance or advancement of other AM
manufacturers into the industrial market.
We may not be able to obtain patent protection or otherwise adequately protect or enforce our intellectual property rights, which
could impair our competitive position.
Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We rely primarily
on patents, trademarks, and trade secrets, as well as non-disclosure agreements and other methods, to protect our proprietary
technologies and processes globally. Despite our efforts to protect our proprietary technologies and processes, it is possible that
competitors or other unauthorized third parties may obtain, copy, use, or disclose our technologies and processes. We cannot assure
you that any of our existing or future patents or other intellectual property rights will not be challenged, invalidated, or circumvented
or will otherwise provide us with meaningful protection. We may not be able to obtain foreign patents corresponding to our United
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States or foreign patent applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be
available. 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 be subject to alleged infringement claims.
We may be subject to intellectual property infringement claims from individuals, vendors, and other companies who have
acquired or developed patents in the field of AM for purposes of developing competing products or for the sole purpose of asserting
claims against us. Any claims that our products or processes infringe on 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. If we are unable to effectively defend our
technologies and processes, our market share, sales and profitability could suffer, which could adversely affect our results of
operations.
Certain of our employees and patents are subject to German law.
Many of our employees work in Germany and are subject to German employment law. Ideas, developments, discoveries and
inventions made by such employees and consultants are subject to the provisions of the German Act on Employees’ Inventions
(Gesetz über Arbeitnehmererfindungen), which regulates the ownership of, and compensation for, inventions made by employees. We
face the risk that disputes can occur between us and our employees or ex-employees pertaining to alleged non-adherence to the
provisions of this act that may be costly to defend and take up our management’s time and efforts whether we prevail or fail in such
dispute. In addition, under the German Act on Employees’ Inventions, certain employees retained rights to patents they invented or
co-invented prior to 2009. Although most of these employees have subsequently assigned their interest in these patents to us, there is a
risk that the compensation we provided to them may be deemed to be insufficient in the future and we may be required under German
law to increase the compensation due to such employee for the use of their patent. In those cases where employees have not assigned
their interests to us, we may need to pay compensation for the use of those patents. If we are required to pay additional compensation
or face other disputes under the German Act on Employees’ Inventions, our results of operations could be adversely affected.
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 will use the net proceeds that we have received or will receive 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.
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, or the perception that such sales could occur
as a result of our recently announced “at the market offerings,” other utilization of our universal shelf registration statement or
otherwise 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:
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Failure to meet our targeted revenues and gross margin;
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;
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;
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Changes in the cost of satisfying our warranty obligations and servicing our 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 public’s 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;
The market’s reaction to our reduced disclosure as a result of being an EGC under the JOBS Act;
Threatened or actual litigation;
Changes in our senior management; and
General economic trends and other external factors.
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
commentary, or ceases publishing reports about us or our business.
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 would 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 are incurring increased costs as a result of operating as a public company, and our management is required to devote
substantial time to new compliance initiatives.
As a public company whose shares are listed on The NASDAQ Stock Market, we incur significant accounting, legal and other
expenses that we did not incur as a private company, and these expenses will increase even more after we are no longer an EGC. We
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), 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
have increased our legal and financial compliance costs, introduced new costs (including stock exchange listing fees and costs related
to investor relations and stockholder reporting), and made 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 management’s 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 of Directors, our board committees or as
executive officers.
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As long as we remain an EGC as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not EGCs. These exemptions include, but are not limited to, not
being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, less extensive
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the
requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved and an extended transition period for complying with new or revised accounting standards. We will
continue to operate under these provisions for up to five years from our IPO or such earlier time that we are no longer an EGC. We
would cease to be an EGC if we have more than $1.0 billion in annual revenues, qualify as a “large accelerated filer” under the
Exchange Act, which requires us to have more than $700 million in market value of our common stock held by non-affiliates at the
end of our second fiscal quarter, or issue more than $1.0 billion of non-convertible debt over a three-year period.
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. As a result, capital appreciation, if any, of our shares will be investors’ sole source of gain
for the foreseeable future.
The right of shareholders to receive liquidation and dividend payments on our common stock is junior to the rights of holders of
future 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 the shares of 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. Our Board of Directors is authorized to issue classes or series of preferred stock in
the future without any action on the part of our common shareholders.
As an EGC under the JOBS Act we follow certain permitted corporate governance practices instead of the otherwise applicable
SEC and NASDAQ requirements, which may result in less protection than is accorded to investors in a non-EGC.
As an EGC we follow certain corporate governance practices instead of those otherwise required by the SEC and under the listing
requirements of the NASDAQ Stock Market. Following our EGC governance practices, as opposed to the requirements that would
otherwise apply to a company listed on the NASDAQ Stock Market, may provide less protection to you than what is accorded to
investors under the Listing Rules for the NASDAQ Stock Market applicable to non-EGC issuers and could make our common stock
less attractive to investors.
As an EGC, we delay adoption of new or revised accounting standards, which may make our stock less attractive to investors and
our trading price more volatile.
Pursuant to the JOBS Act, as an EGC, we have elected to take advantage of an extended transition period for any new or revised
accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the SEC, which means that when
a standard is issued or revised and it has different application dates for public or private companies, we, as an EGC, will delay
adoption of the standard until it applies to private companies. This may make a comparison of our financial statements with any other
public company that is either not an EGC or is an EGC that has opted out of using the extended transition period difficult, as different
or revised standards may be used. If some investors find our common stock less attractive as a result, there may be a less active trading
market for our common stock and our stock price may be more volatile and could decline.
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 SEC’s 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 company’s 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.
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In connection with the preparation of our consolidated financial statements for the year ended December 31, 2015, we concluded
that there are 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 control deficiency, or combination of deficiencies, in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be
prevented or detected on a timely basis. A description of the identified material weaknesses in internal control over financial reporting
is as follows:
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The design and operating effectiveness of internal controls related to our financial reporting process were not sufficient to
allow for accurate and timely reporting of our consolidated financial results. We did not maintain adequate control with
respect to the application of GAAP. This was principally due to a lack of personnel with adequate knowledge and
experience in GAAP. As a result, we recorded certain manual, post-close adjustments in order to prepare our consolidated
financial statements.
The design and operating effectiveness of internal controls related to our information technology systems was not
sufficient to allow for accurate and timely reporting of our consolidated financial results. Each of our primary locations
(United States, Germany, Italy, Sweden and Japan) utilizes separate and distinct information technology platforms to
record, process and summarize transactions. As a result, our process to consolidate and report financial information is
substantially a manual process and inherently subject to error.
The design and operating effectiveness of internal controls related to our consolidation process and management’s review
of our consolidated financial results did not operate at a level of precision sufficient to allow for accurate and timely
reporting of our consolidated financial results. Our consolidation process is substantially a manual process and inherently
subject to error. Further, because of internal control weaknesses identified with respect to our financial reporting process
and information technology systems, management was unable to complete an adequate review of either subsidiary or
consolidated financial results at a sufficient level of precision to prevent or detect misstatements. As a result, we recorded
certain manual, post-close adjustments in order to prepare our consolidated financial statements.
With the oversight of senior management and our audit committee, we have put into place a comprehensive plan to remediate the
underlying causes of the identified material weaknesses. Our plan throughout 2015 was, and into 2016 is, to continue to take
additional steps and implement measures to remediate the underlying causes of the identified material weaknesses, including:
(i) Enhancing our global accounting and reporting process (including our global consolidation of financial information) by
redesigning and strengthening the operating effectiveness of internal controls over financial reporting. This includes a
detailed review of our existing processes, improvements to the design of our internal controls (including conversion of
historically manual control activities to automated control activities), updating documentation related to our business
process flows, internal testing of operating effectiveness of our controls and remediation activities, as necessary. This
process began in mid-2014 and we expect it to continue during 2016 and beyond as a means of continuous improvement.
(ii) Evaluating our information technology systems to further integrate existing systems or invest in improvements to our
technology sufficient to generate accurate and timely financial information. On January 1, 2015, we implemented the first
phase of a new ERP system for our Europe operations. Despite certain difficulties encountered in the initial
implementation phase of this project, resulting in a delay of the filing of our Quarterly Report on Form 10-Q for the period
ended March 31, 2015, we believe that this system, when fully implemented, provides a substantial upgrade in operational
and financial reporting as compared to our legacy systems. We continue to address the difficulties encountered in the
initial implementation in a variety of ways, including through the direct hire of personnel and collaboration with external
consultants, both with system expertise, in an effort to resolve identified issues in a timely and efficient manner. Our 2016
information technology plan includes additional upgrades or enhancements of both this system, as well as our other
existing information technologies with the overall goal of a simple, common and global platform for processing, recording
and analyzing financial and operational data.
(iii) Continuing to add financial personnel with adequate knowledge and experience in GAAP. In 2015, we hired a new Chief
Financial Officer and new Heads of Accounting and Controlling for our Europe operations, each of whom possess
extensive knowledge of GAAP and experience in working with or for a United States based multi-national operation. As
part of our redesign of our global reporting structure and responsibilities, we have added additional personnel (both
temporary and permanent) with requisite GAAP experience to both our United States and Europe operations during
2015. We do not expect a further significant investment in personnel in 2016.
We documented and evaluated our internal control over financial reporting in order to report on the effectiveness of our internal
controls as of December 31, 2015, and, as described in Item 9A, “Controls and Procedures”, management has determined that our
internal control over financial reporting was ineffective as of December 31, 2015. Furthermore, as our business continues to grow
internationally, our internal controls will become more complex and will require significantly more resources and attention to
remediate existing control deficiencies and improve the effectiveness of our internal controls over financial reporting. If our
management cannot favorably assess the effectiveness of our internal controls over financial reporting, investor confidence in our
financial results may weaken, and our share price may suffer.
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Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this
Annual Report on Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of
and for the periods presented in accordance with GAAP.
Additionally, Section 404(b) of the Sarbanes-Oxley Act requires an attestation from our independent registered public accounting
firm on the effectiveness of our internal control over financial reporting. As an EGC, we will not be required to comply with
Section 404(b) until we file our Annual Report on Form 10-K for the year ended December 31, 2018 with the SEC, provided we
maintain our status as an EGC until December 31, 2018.
The additional measures necessary to remediate the underlying causes of our identified material weaknesses and our future
compliance with Section 404(b) will require that we incur substantial accounting expense and expend significant management efforts.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial
reporting in the future. 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, or if our independent registered public accounting firm determines we have a material weakness or significant
deficiency in our internal control over financial reporting once that firm begins its Section 404(b) attestations, 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 NASDAQ, 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:
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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, including through the use of our ATM, we will 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.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties.
We have the following locations:
Location
United States
North Huntingdon, Pennsylvania
Troy, Michigan
Chesterfield, Michigan
Houston, Texas
North Las Vegas, Nevada
St. Clairsville, Ohio
Auburn, Washington
Europe
Gersthofen, Germany
Desenzano del Garda, Italy
Jönköping, Sweden
Asia
Kanagawa, Japan
Nature of Facility
Owned or Leased Approximate Square Footage
Corporate Headquarters,
Machine Manufacturing, PSC
and Machine Sales Center
PSC
Specialty Machining
PSC
PSC
Research and Development
PSC
European Headquarters,
Machine Manufacturing, PSC
and Machine Sales Center
PSC and Machine Sales Center
PSC
Owned
67,886
Owned
Owned
Owned
Owned
Owned
Leased
19,646
21,175
12,000
17,240
12,860
11,600
Owned
200,585
Leased
Leased
3,300
N/A*
PSC and Machine Sales Center
Owned
18,882
*
We have a cooperation agreement with Swerea SWECAST AB in Sweden which allows for the use of certain undefined
operating space sufficient to support our PSC operations at the facility.
Item 3. Legal Proceedings.
ExOne and its subsidiaries 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.
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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.” The
following table sets forth the ranges of high and low sales prices per share of our common stock as reported on the NASDAQ Stock
Market for the periods indicated. Such quotations represent inter-dealer prices without retail markup, markdown or commission and
may not necessarily represent actual transactions.
Year Ended December 31, 2014
First quarter
Second quarter
Third quarter
Fourth quarter
Year Ended December 31, 2015
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
70.25 $
42.57 $
48.66 $
26.46 $
33.05
24.34
20.35
14.91
High
Low
17.92 $
15.97 $
11.42 $
12.67 $
13.19
11.08
5.81
6.50
$
$
$
$
$
$
$
$
Stockholders
As of March 7, 2016, there were 30 stockholders of record, which excludes stockholders whose shares were held in nominee or
street name by brokers. The actual number of common stockholders 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 of Directors and will depend on many factors, including general economic and business conditions, our strategic plans,
our financial results and conditions, legal requirements, any contractual obligations or limitations, and other factors that our Board of
Directors 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, 2015:
Plan Category
Equity Compensation Plans Approved by Security
Holders
Equity Compensation Plans Not Approved by
Security Holders
Number of Securities
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Remaining Available for
Future Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in the
First Column)(1)
210,970
$
17.43
1,644,242
N/A
N/A
N/A
(1) A maximum of 1,041,021 shares of common stock were reserved for issuance under the Plan for 2015, and awards of incentive
stock options and restricted stock were made in 2015 for a total of 26,000 awards. Forfeitures and expirations of previously
issued awards totaled 4,167 for 2015. The Plan provides for automatic increases in the reserve available annually on January 1
from 2014 through 2023 equal to the lesser of (i) 3.0% of the total outstanding shares of common stock as of December 31 of
the immediately preceding year or (ii) a number of shares of common stock determined by our Board of Directors, provided that
the maximum number of shares authorized under the Plan will not exceed 1,992,241 shares, subject to certain adjustments.
Based on 14,524,637 shares outstanding on December 31, 2015, an additional 435,739 shares of common stock may be reserved
for issuance under the Plan for 2016 for a total of 1,454,927 being available for issuance under the Plan for 2016.
28
7238c3.pdf
Stock Performance Graph
The following graph compares the performance of our common stock with (i) the NASDAQ Composite Index and (ii) the S&P
1500 Industrial Machinery Index. Such information shall not be deemed to be “filed.”
COMPARISON OF CUMULATIVE TOTAL RETURN
BASED UPON ANINITIAL INVESTMENT OF $100 ON FEBRUARY 7, 2013
$250
$200
$150
$100
$50
$0
2/7/2013
6/30/2013
12/31/2013
6/30/2014
12/31/2014
6/30/2015
12/31/2015
The ExOne Company
Nasdaq Composite Index
S&P 1500 Industrial Machinery Index
Company/Index
The ExOne Company
NASDAQ Composite Index
S&P 1500 Industrial Machinery
Index
February 7,
2013
June 30,
2013
December 31,
2013
June 30,
2014
December 31,
2014
June 30,
2015
December 31,
2015
$
$
$
100 $
100 $
233 $
108 $
228 $
134 $
149 $
139 $
63 $
150 $
42 $
158 $
38
158
100 $
106 $
134 $
139 $
137 $
138 $
125
29
7238c3.pdf
Item 6. Selected Financial Data.
The data presented in the Selected Financial Data table should be read in conjunction with the information required to be provided
in Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated
financial statements and related notes thereto in Part II Item 8 of this Annual Report on Form 10-K.
(dollars in thousands except per share amounts and machine unit data)
Statement of consolidated operations and
comprehensive loss data:
Revenue - third party
Revenue - related party
Total
Gross profit
Research and development
Selling, general and administrative
Interest expense
Net loss attributable to ExOne
Net loss attributable to ExOne per common share:
Basic
Diluted
Consolidated balance sheet data:
Working capital (deficit)**
Cash and cash equivalents
Property and equipment—net
Goodwill
Total assets**
Line of credit
Demand note payable to member
Long-term debt and capital and financing lease obligations
Redeemable preferred units
Preferred units
Common units
Common stock
Additional paid-in capital
Total stockholders’ / members’ equity (deficit)
Other data:
Machine units sold:
S-Max+
S-Max
S-Print
S-15
M-Print***
M-Flex
Innovent***
X1-Lab
Micromachinery
2015
For the years ended December 31,
2013
2012
2014
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
38,918 $
1,435
40,353 $
8,343 $
7,279 $
22,576 $
152 $
(25,865) $
43,029 $
871
43,900 $
10,457 $
8,178 $
24,029 $
144 $
(21,843) $
39,480 $
—
39,480 $
15,573 $
5,127 $
16,119 $
372 $
(6,455) $
28,657 $
—
28,657 $
12,143 $
1,930 $
18,285 $
842 $
(10,168) $
(1.79) $
(1.79) $
(1.52) $
(1.52) $
(0.51)
(0.51)
N/A*
N/A*
34,503 $
19,342 $
54,832 $
— $
107,958 $
— $
— $
2,113 $
— $
— $
— $
144 $
156,627 $
89,073 $
58,541 $
36,202 $
55,298 $
4,665 $
133,127 $
— $
— $
2,592 $
— $
— $
— $
144 $
154,902 $
118,545 $
114,754 $
98,445 $
32,772 $
— $
158,435 $
— $
— $
3,233 $
— $
— $
— $
144 $
153,363 $
146,700 $
(4,504) $
2,802 $
12,467 $
— $
32,897 $
528 $
8,666 $
10,566 $
— $
18,984 $
10,000 $
— $
— $
41 $
1
7
2
1
1
3
10
1
—
26
1
11
1
1
1
9
—
4
—
28
—
13
3
1
—
6
—
5
1
29
—
9
3
1
—
—
—
—
—
13
2011
15,290
—
15,290
3,643
1,531
7,286
1,570
(8,037)
N/A*
N/A*
(605)
3,496
7,919
—
18,241
—
—
5,429
18,984
—
10,000
—
—
(15,599)
—
1
1
2
—
—
—
1
—
5
*
**
Information not comparable for 2012 and 2011 as a result of the Reorganization of the Company as a corporation on January 1,
2013. Refer to Note 1 to consolidated financial statements and related notes thereto in Part II Item 8 of this Annual Report on
Form 10-K.
Amounts relating to 2014, 2013, 2012 and 2011 have been revised as a result of our adoption of FASB guidance relating to the
presentation of deferred income taxes in November 2015. Refer to Note 1 to consolidated financial statements and related notes
thereto in Part II Item 8 of this Annual Report on Form 10-K.
*** During 2015, one M-Print unit and two Innovent units were sold to related parties. During 2014, one M-Print unit was sold to a
related party. There were no sales of 3D printing machines to related parties during 2013, 2012 or 2011. Refer to Note 18 to
consolidated financial statements and related notes thereto in Part II Item 8 of this Annual Report on Form 10-K.
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7238c3.pdf
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 the “Selected Financial Data” in Part II Item 6 and 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, 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 Item 1, “Cautionary Statements Concerning Forward Looking Statements” and 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 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
printed products for customers through our nine production PSCs, which are located in the United States, Germany, Italy, Sweden and
Japan. We build 3D printing machines at our facilities in the United States and Germany. We also supply the associated materials,
including consumables and replacement parts, and other services, including training and technical support, necessary for purchasers of
our machines to print products. We believe that our ability to print in a variety of industrial materials, as well as our industry-leading
printing capacity (as measured by build box size and printhead speed) uniquely position us to serve the needs of industrial customers.
2015 Developments and 2016 Outlook
Our results of operations for 2015 were negatively affected by lower than expected sales of 3D printing machines as a result of
longer than expected sales cycles for certain customers and as a result, our gross profit was negatively affected based on a lower
contribution margin from the sale of these units. We have additionally experienced overall increased costs of production, principally
in the form of expanded facilities and personnel costs both of which were attributable to the transition and expansion of our German
and United States operations and deployment of the first phase of our new ERP system for our Europe operations (both resulting in
production and operational inefficiencies). Our selling, general and administrative expenses and research and development expenses
have both declined in 2015, as we stabilize our operating expenses as a public company. We additionally recognized a goodwill
impairment charge in 2015 in connection with completing an interim test for impairment during the quarter ended September 30,
2015, as a result of a significant decline in our market capitalization and continued operating losses and cash flow deficiencies.
Note the following operations highlights for 2015:
•
•
•
•
Introduction of Innovent 3D printing system for research and education customers. In January 2015, we announced
the introduction of our new laboratory-sized machine offering, the Innovent, which allows for testing material properties,
specifically in educational institutions, research laboratories and research and development departments at commercial
organizations. Compared to our previous laboratory-sized machine offering, the X1-Lab, the Innovent offers a build
volume that is eight times larger and incorporates software and mechanical component upgrades that mirror our M-Flex
and M-Print platforms, allowing for integrated use of the platforms together for testing (Innovent) and prototype and
series production (M-Flex or M-Print).
Introduction of six new printable materials for use in our 3D printing systems. In February 2015, we announced the
introduction of six new printable materials for use in our 3D printing systems: Cobalt-Chrome, IN Alloy 718, Iron-
Chrome-Aluminum, 17-4 Stainless Steel, 316 Stainless Steel and Tungsten Carbide. The introduction of these print
materials allows customers interested in 3D printing materials for their own product development the opportunity to
utilize a wider variety of materials, each offering unique properties and uses.
Transition to our new facility in Gersthofen, Germany. In 2015, we completed our transition to our new facility in
Gersthofen, Germany which has resulted in approximately doubling our available facility space and has substantially
increased our production capacity of indirect printing machines and PSC operations. This transition has also resulted in a
full consolidation of our German production, research and development, sales and marketing and administrative teams
under one combined facility.
Expansion of our North Huntingdon, PA facility. In March 2015, we completed our expansion of our North
Huntingdon, PA facility which has resulted in approximately doubling our available PSC production space for this facility
and has also expanded our available space for research and development activities.
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•
Debut of the Exerial 3D printing system and delivery of the initial production units. In June 2015, we debuted the
Exerial machine platform at the GIFA International Foundry Trade Fair in Dusseldorf, Germany. The Exerial is unique
compared to our other indirect printing systems in that it contains multiple industrial stations that allow for continuous
production and simultaneous processing. The Exerial is distinctly equipped with two build boxes, each 1.5 times larger
than the single build box in our next largest model, the S-Max. Notably, the Exerial system offers a total build platform of
3,168 liters and is expected to be capable of printing output rates nearly four times faster than the S-Max. The Exerial
utilizes a new recoater system, multiple printheads and automation controls. As part of the development of the Exerial, we
have filed six patents related to machine design elements. We shipped our initial production units in June 2015.
• Qualification of Water Wash-out Tooling process for industrial 3D printing applications. In July 2015, we
announced the qualification of a new application for our additive manufacturing process, Water Wash-out Tooling,
designed to aid in the development of manufacturing and composite tooling. Intended for the production of hollow parts,
typical of mandrel or clamshell molding, our Water Wash-out Tooling process involves the 3D printing of a core in sand,
ceramics or carbon, applying a composite lay-up and curing. The final core is then washed out with only the structural
composite part remaining. Water Wash-out Tooling is ideal for printing mandrels for filament winding, tape placement or
hand lay-up; plugs and source tools; styling and design models; hollow or trapped shape fabrication; and one-off parts for
part validation.
• Opening of the ExOne DREAM Center. In July 2015, we announced the opening of our new state-of-the-art Design and
Re-Engineering for Additive Manufacturing (“DREAM”) center located in our North Huntingdon, PA facility. The
DREAM center has been strategically developed as a physical and virtual site for collaboration with customers to explore
and incorporate the benefits of our binder jetting technology. By providing global access to our creative technical
expertise and offering the most advanced software currently available, the center will enable customers to create designs
of metal components which maximize the benefits of additive manufacturing.
• Opening of our PSC in Sweden. In August 2015, we announced the opening of our ninth PSC in Jönköping, Sweden in
collaboration with Swerea, the Swedish Research Institute for Industrial Renewal and Sustainable Growth. Swerea has
research specialists who are leaders in the development of new technologies, methods and products for direct application
in industry, with 3D printing being an area of focus. Establishing our latest PSC in this facility creates a cost effective
opportunity for our introduction of binder jetting technologies to a market that is focused on the benefits of additive
manufacturing for industrial applications.
•
•
•
Introduction of ExOne cold hardening phenolic binder. In September 2015, we announced the expansion of the
available suite of our binders to include ExOne cold hardening phenolic, or CHP. Phenolic binders, which we originally
introduced in July 2013, are generally used in connection with ceramic sands to produce 3D printed molds and cores that
provide the benefit of high heat alloy casting, higher internal strength and higher quality, on the basis of reduced
expansion of the mold or core. CHP accelerates the 3D printing process by eliminating the infrared heating lamp that is
utilized in the printing process with traditional phenolic binders. In addition, additional curing and drying processes,
which previously required the use of an industrial microwave, may be achieved through use of a conventional air oven
typically maintained by most industrial manufacturers. Our initial introduction of CHP is through delivery to customers
of benchmark and production parts printed in our Gersthofen, Germany PSC. We are in the process of optimizing our
indirect printing machine platforms for utilization of CHP with an availability date targeted in 2016.
At market issuance offering. In January 2016, we announced our entry into our ATM with FBR and MLV pursuant to
which FBR and MLV will act as distribution agents in the sale of up to $50,000 in the aggregate of ExOne common
equity in “at the market offerings” as defined in Rule 415 under the Securities Act. Through March 22, 2016, we sold
91,940 shares under the ATM at a weighted average selling price of approximately $9.17 per share resulting in gross
proceeds of approximately $843. Net proceeds to us from the sale of shares under the ATM during this time period were
approximately $595 (after deducting offering costs of approximately $248).
Registered direct offering to a related party. In January 2016, we announced our entry into a subscription agreement
with Rockwell Forest Products, Inc. and S. Kent Rockwell for the registered direct offering and sale of 1,423,877 shares
of ExOne common equity at a per share price of $9.13 (a $0.50 premium from the closing price on the close of business
on January 8, 2016). Gross proceeds from the sale of shares in this offering were approximately $13,000. Net proceeds to
us from the sale of shares in this offering were approximately $12,400 (after deducting offering expenses).
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With our facilities expansion substantially behind us, and our new machine platforms (Exerial, S-Max+ and Innovent) gaining
market attention, we continue to focus our attention on improving the operational effectiveness of our business with the primary goal
being the continued global adoption of our binder jetting technologies. This includes further expanding our business focus from
predominantly prototyping activities and short-run production to series production, principally through our introduction of the Exerial
machine platform. We intend to place a firm emphasis of maximizing revenues from our 3D printing machines and continuing to grow
our revenues from 3D printed and other products, materials and services. We also plan to continue to effectively manage our costs of
production (focusing on our print material costs and machine manufacturing costs) and operating expenses such that we align our
spending plans with the anticipated growth of our business.
How We Measure Our Business
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:
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, (i) the adoption rate of our 3D printing
technology, (ii) end-user product design and manufacturing activity, (iii) the capital expenditure budgets of end-users and
potential end-users and (iv) 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, among others, (i) the overall low unit volume of 3D printing machine
sales, (ii) the sales mix of machines for a given period and (iii) the customer-driven acceleration or delay of orders and shipments
of machines.
3D printed and other products, materials and services. 3D printed and other products, materials and services consist of sales of
(i) products printed in our global PSC network or manufactured through our specialty machining or ExCast strategy,
(ii) consumable materials and replacement parts for the network of 3D printing machines installed by our global customer base
and (iii) services for maintenance and certain research and development activities. Our PSCs utilize our 3D printing machine
technology to print products to the specifications of customers. In addition, our PSCs also provide support and services such as
pre-production collaboration prior to printing products for a customer. Sales of consumable materials, replacement parts and
service maintenance contracts are linked to the aftermarket opportunities from our growing network of 3D printing machines
installed by our global customer base. Research and development arrangements are a function of customer-specific needs in
applying our additive manufacturing technologies.
Cost of Sales and Gross Profit. Our cost of sales consists primarily of labor (related to our global workforce), materials (for both
the manufacture of 3D printing machines and for our PSC 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 properties, 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.
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. 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.
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Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of employee-
related costs (salaries and benefits) of our executive officers, and 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, accounting, consulting and other
professional services.
Interest Expense. Interest expense consists of the interest cost associated with outstanding long-term debt and capital and
financing lease arrangements. We expect our interest expense to continue to decrease as our outstanding debt is lowered over time.
Included in our business strategy is the consideration of early retirement of debt (where practicable).
(Benefit) Provision for Income Taxes. Prior to our Reorganization, we were organized as a limited liability company. Under the
provisions of the Internal Revenue Code and similar state provisions, we were taxed as a partnership and were not liable for income
taxes. Following our Reorganization, we are taxed as a corporation for United States federal, state, local and foreign income tax
purposes. Current statutory tax rates in the jurisdictions in which we operate, the United States, Germany, Italy, Sweden and Japan, are
approximately 35.0% (including state taxes), 28.4%, 31.0%, 22.0% and 33.1%, respectively.
Results of Operations
Summary
Net loss attributable to ExOne for 2015 was $25,865 or $1.79 per basic and diluted share, compared with a net loss attributable to
ExOne of $21,843 or $1.52 per basic and diluted share for 2014. The increase in our net loss was principally due to (i) a decrease in
our revenues and gross profit attributed to an unfavorable mix of sales and increases in production costs associated with the expansion
of our global facilities (ii) a goodwill impairment charge of $4,419 as a result of a significant decline in our market capitalization,
combined with continued operating losses and cash flow deficiencies. These changes were partially offset by (i) decreases in both
research and development activities (for materials qualification and machine development) and selling, general and administrative
expense (due mostly to lower provisions for bad debts and selling commissions and favorable currency exchange).
Net loss attributable to ExOne for 2014 was $21,843 or $1.52 per basic and diluted share, compared with a net loss attributable to
ExOne of $6,455 or $0.51 per basic and diluted share for 2013. The increase in our net loss was principally due to (i) a decrease in our
gross profit attributed to an unfavorable mix of sales and increases in production costs associated with the expansion of our global
facilities and (ii) an increase in operating expenses attributed to increased spending in research and development activities (for
materials qualification and machine development) and selling, general and administrative expense (due to increased personnel costs
and an increase in provisions for bad debts).
Revenue
The following table summarizes revenue by product line for each of the years ending December 31:
3D printing machines
3D printing machines - third party
3D printing machines - related party
3D printed and other products, materials
and services
3D printed and other products, materials
and services - third party
3D printed and other products, materials
and services - related party
2015
2014
2013
$14,100
1,364
15,464
34.9% $21,977
815
3.4%
22,792
38.3%
50.1% $24,851
—
1.8%
24,851
51.9%
62.9%
0.0%
62.9%
24,818
61.5% 21,052
48.0% 14,629
37.1%
71
24,889
$40,353
0.2%
61.7%
100.0%
56
21,108
$43,900
0.1%
48.1%
100.0%
—
14,629
$39,480
0.0%
37.1%
100.0%
Revenue for 2015 was $40,353 compared with revenue of $43,900 for 2014, a decrease of $3,547 or 8.1%. This decrease was
principally due to (i) decreases in revenues from 3D printing machines as a result of lower volumes (26 units sold in 2015 versus 28
units sold in 2014) and (ii) an unfavorable mix of sales of 3D printing machines based on unit type (principally a reduction in sales of
S-Max units from 2014 to 2015, resulting in a lower average selling price of 3D printing machines sold). Partially offsetting this
decrease was a net increase in revenue associated with 3D printed and other products, materials and services driven by (i) an overall
continued increase in customer acceptance and demand for our additive manufacturing technologies, resulting in higher PSC volumes,
(ii) an increase in materials and service revenues associated with an increased network of our 3D printing machines installed by our
global customer base and (iii) strategic price reductions for certain of our product offerings. Unfavorable changes in currency also
impacted revenues from both product lines (principally appreciation of the United States dollar against the Euro and Japanese Yen).
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Revenue for 2014 was $43,900 compared with revenue of $39,480 for 2013, an increase of $4,420, or 11.2%. This increase was
principally due to an increase in revenues from 3D printed and other products, materials and services driven by (i) an overall
continued increase in customer acceptance and demand for our additive manufacturing technologies, resulting in higher PSC volumes,
(ii) an increase in revenues associated with our ExCast activities, (iii) an increase in materials and service revenues associated with an
increased network of our 3D printing machines installed by our global customer base and (iv) revenues attributable to MAM and
MWT (acquired in March 2014). Offsetting this increase was a decrease in revenues from 3D printing machines as a result of a
reduction in volumes (one fewer unit sold as compared to 2013) and an unfavorable mix of sales of 3D printing machines based on
unit type (resulting in a lower average selling price of machines sold) for 2014 as compared to 2013.
The following table summarizes 3D printing machines sold by type for each of the years ending December 31 (please refer to Part
I Item 1, “Our Machines and Machine Platforms” of this Annual Report on Form 10-K for a description of 3D printing machines by
type):
3D printing machine units sold:
S-Max+
S-Max
S-Print
S-15
M-Print*
M-Flex
Innovent*
X1-Lab
Micromachinery
2015
2014
2013
1
7
2
1
1
3
10
1
—
26
1
11
1
1
1
9
—
4
—
28
—
13
3
1
—
6
—
5
1
29
*
During 2015, one M-Print unit and two Innovent units were sold to related parties. During 2014, one M-Print unit was sold to a
related party. There were no sales of 3D printing machines to related parties during 2013. Refer to Note 18 to consolidated
financial statements and related notes thereto in Part II Item 8 of this Annual Report on Form 10-K.
Cost of Sales and Gross Profit
Cost of sales for 2015 was $32,010 compared with cost of sales of $33,443 for 2014, a decrease of $1,433, or 4.3%. This decrease
was principally as a result of a decrease in the volume of sales of 3D printing machines and the mix of 3D printing machines sold,
resulting in overall lower revenues (and cost of sales) from the sale of 3D printing machines. This decrease was offset by an increase
in our production costs associated with (i) our global facilities transition and expansion in Germany and the United States, (ii) costs
incurred in connection with our ERP system deployment and (iii) costs associated with our continued development of operations at
our Italy PSC and commencement of operations at our Sweden PSC, all resulting in production inefficiencies. Favorable changes in
currency also impacted cost of sales (principally appreciation of the United States dollar against the Euro and Japanese Yen).
Gross profit for 2015 was $8,343 compared with gross profit of $10,457 for 2014, a decrease of $2,114, or 20.2%. Gross profit
percentage was 20.7% for 2015, compared with 23.8% for 2014. The decrease in gross profit was the result of the decrease in
revenues offset by the decrease in cost of sales as further cited above.
Cost of sales for 2014 was $33,443 compared with cost of sales of $23,907 for 2013, an increase of $9,536, or 39.9%. This
increase was principally as a result of an increase in our production costs associated with (i) the expansion of our global facilities
(including an increase in our labor force and personnel costs) including our commencement of operations at our Italy PSC, (ii) costs
incurred in connection with the development of our ExCast strategy and (iii) costs associated with our decision to discontinue our laser
micromachining product line. This increase was offset by a decrease in the volume of sales of 3D printing machines and the mix of 3D
printing machines sold, resulting in lower revenues (and cost of sales) from the sale of 3D printing machines.
Gross profit for 2014 was $10,457 compared with gross profit of $15,573 for 2013, a decrease of $5,116, or 32.9%. Gross profit
percentage was 23.8% for 2014, compared with 39.4% for 2013. The decrease in gross profit was the result of the increase in cost of
sales offset by the increase in revenues as further cited above.
Research and Development
Research and development expenses for 2015 were $7,279 compared with research and development expenses of $8,178 for
2014, a decrease of $899, or 11.0%. This decrease was due primarily to a reduction in costs associated with machine development
activities following the introduction of the Exerial and Innovent in 2015. Favorable changes in currency also impacted research and
development expenses (principally appreciation of the United States dollar against the Euro).
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Research and development expenses for 2014 were $8,178 compared with research and development expenses of $5,127 for
2013, an increase of $3,051, or 59.5%. This increase was due primarily to (i) increased costs associated with our materials
qualification activities, including materials usage, professional fees and facilities costs associated with our materials development
laboratory in the United States, (ii) continued investment in enhancing our 3D printing machine technology, including new machine
development, for both direct and indirect printing and (iii) personnel costs associated with an increased headcount (including salaries,
related benefits, travel expenses and equity-based compensation).
Selling, General and Administrative
Selling, general and administrative expenses for 2015 were $22,576 compared with selling, general and administrative expenses
of $24,029 for 2014, a decrease of $1,453, or 6.0%. This decrease was principally due to a lower provision for bad debts (a net credit
in 2015 versus a charge for 2014 associated with certain customer balances) and lower sales commissions expense. Partially offsetting
this decrease were increases for personnel costs associated with an increased headcount (including salaries, related benefits, travel
expenses and equity-based compensation and other growth-related expenses (principally consulting and professional fees, including
costs associated with the deployment of our new ERP system). Favorable changes in currency also impacted selling, general and
administrative expenses (principally appreciation of the United States dollar against the Euro).
Selling, general and administrative expenses for 2014 were $24,029 compared with selling, general and administrative expenses
of $16,119 for 2013, an increase of $7,910, or 49.1%. This increase was principally due to (i) personnel costs associated with an
increased headcount (including salaries, related benefits, travel expenses and equity-based compensation), (ii) an increase in
provisions for bad debts as a result of certain receivables experiencing deteriorating credit quality based on either customer-specific or
macroeconomic factors, (iii) other growth-related expenses (consulting and professional fees), (iv) higher selling expenses (including
higher sales commissions expense and increased trade show expenses), and (v) the impact of the MAM and MWT acquisitions
(acquired in March 2014), principally amortization of identified intangible assets.
Impairment
During the quarter ended September 30, 2015, as a result of the significant decline in our market capitalization and continued
operating losses and cash flow deficiencies, we identified a triggering event requiring both (i) a test for the recoverability of long-lived
assets held for use at the asset group level and (ii) a test for impairment of goodwill at the reporting unit level. Assessing the
recoverability of long-lived assets held for use and goodwill requires significant judgments and estimates by our management.
For purposes of testing long-lived assets for recoverability, we operate as three separate asset groups: United States, Europe and
Japan. In assessing the recoverability of long-lived assets held for use, we determined the carrying amount of long-lived assets held for
use to be in excess of the estimated future undiscounted net cash flows of the related assets. We proceeded to determination of the fair
value of our long-lived assets held for use, principally through use of the market approach. Our use of the market approach included
consideration of market transactions for comparable assets. Our management concluded that the fair value of long-lived assets held
for use exceeded their carrying value and as such no impairment loss was recorded.
We subsequently performed an impairment test for goodwill. For purposes of testing goodwill for impairment, we operate as a
singular reporting unit. In assessing goodwill for impairment, we compared the fair value of our reporting unit to its carrying value.
We determined the fair value of our reporting unit through a combination of the market approach and income approach. Our use of
the market approach included consideration of our market capitalization along with consideration of other factors that could influence
the use of market capitalization as a fair value estimate, including premiums or discounts to be applied based on both market and
entity-specific data. Our use of the income approach included consideration of present value techniques, principally the use of a
discounted cash flow model. In performing the impairment test for goodwill, we determined the carrying amount of goodwill to be in
excess of the implied fair value of goodwill. As a result, we recognized an impairment loss of approximately $4,419 associated with
goodwill during the quarter ended September 30, 2015.
During the quarter ended December 31, 2015, as a result of continued operating losses and cash flow deficiencies, we identified a
triggering event requiring a test for the recoverability of long-lived assets held for use at the asset group level. We conducted a similar
recoverability test to the test further described above at the asset group level. Our management concluded that the fair value of long-
lived assets held for use exceeded their carrying value and as such no impairment loss was recorded.
A significant decrease in the market price of a long-lived asset, adverse change in the use or condition of a long-lived asset,
adverse change in the business climate or legal or regulatory factors impacting a long-lived asset and continued operating losses and
cash flow deficiencies associated with a long-lived asset, among other indicators, could cause a future assessment to be performed
which may result in an impairment of our long-lived assets held for use, resulting in a material adverse effect on our financial position
and results of operations.
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Interest Expense
Interest expense for 2015 was $152 compared with interest expense of $144 in 2014, an increase of $8, or 5.6%. This increase
was due principally to the commitment fee on the unused portion of our revolving credit facility (added in October 2015), partially
offset by lower average outstanding debt balance for 2015 for all other instruments as compared to 2014.
Interest expense for 2014 was $144 compared with interest expense of $372 in 2013, a decrease of $228, or 61.3%. This decrease
was due principally to a lower average outstanding debt balance for 2014, as compared to 2013, mostly due to (i) the retirement of the
demand note payable to a member in February 2013 and (ii) the settlement of debt held by variable interest entities in connection with
our acquisition of certain related assets of those entities in March 2013.
Other Expense (Income) — Net
Other expense (income) — net for 2015 was ($45) compared with other expense (income) — net of ($210) for 2014 and other
expense (income) — net of ($98) for 2013. Amounts for all periods consist principally of interest income on cash and cash equivalent
balances and other financing activity benefits.
(Benefit) Provision for Income Taxes
The (benefit) provision for income taxes for 2015, 2014 and 2013 was ($173), $159 and $370, respectively. The effective tax rate
for 2015, 2014 and 2013 was 0.7% (benefit on a loss), 0.7% (provision on a loss) and 6.2% (provision on a loss), respectively. For
2015, 2014 and 2013, the effective tax rate differed from the United States federal statutory rate of 34.0% primarily due to net changes
in valuation allowances for the period.
We have provided a valuation allowance for our net deferred tax assets as a result of our inability to generate consistent net
operating profits in jurisdictions in which we operate. As such, any benefit from deferred taxes in any of the periods presented in our
consolidated financial statements has been fully offset by changes in the valuation allowance for net deferred tax assets. We continue
to assess our future taxable income by jurisdiction based on (i) our recent historical operating results, (ii) the expected timing of
reversal of temporary differences, (iii) various tax planning strategies that we may be able to enact in future periods, (iv) the impact of
potential operating changes on our business and (v) our forecast results from operations in future periods based on available
information at the end of each reporting period. To the extent that we are able to reach the conclusion that deferred tax assets are
realizable based on any combination of the above factors, a reversal of existing valuation allowances may occur.
Noncontrolling Interests
There was no net income attributable to noncontrolling interests for 2015 and 2014. Net income attributable to noncontrolling
interests for 2013 was $138. Changes in net income attributable to noncontrolling interests for all periods are as a result of the
acquisition of net assets in the related variable interest entities completed during the quarter ended March 31, 2013.
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
Liquidity
We have incurred a net loss in each of our annual periods since our inception. We incurred net losses of approximately $25,865,
$21,843 and $6,317 for 2015, 2014 and 2013, respectively. In connection with the completion of our initial public offering in February
2013 and our secondary public offering in September 2013, we received total unrestricted net proceeds from the sale of our common
stock of approximately $157,311. At December 31, 2015, we had approximately $19,342 in cash and cash equivalents. In addition, in
January 2016, we entered into separate transactions for additional offerings of sale of our common stock resulting in additional
unrestricted net proceeds (see further discussion below).
We believe that our existing capital resources (including the net proceeds from additional offerings of sale of our common stock
referenced above) will be sufficient to support our operating plan. If we anticipate that our actual results will differ from our operating
plan, we believe we have sufficient capabilities to enact cost saving measures to preserve capital. Further, we may seek to raise
additional capital to support our growth through additional debt, equity or other alternatives, or a combination thereof.
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Related Party Revolving Credit Facility
On October 23, 2015, ExOne and its ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors, entered into a Credit
Agreement (the “Credit Agreement”) with RHI Investments, LLC (“RHI”), a related party, on a $15,000 revolving credit facility to (i)
assist us in our efforts to finance customer acquisition of our 3D printing machines and 3D printed and other products and services and
(ii) provide us with additional funding for working capital and general corporate purposes. RHI was determined to be a related party
based on common control by our Chairman and CEO. Prior to execution, the Credit Agreement was subject to review and approval by
the Audit Committee of our Board of Directors and the independent members of our Board of Directors. We incurred approximately
$215 in deferred financing costs associated with the Credit Agreement.
There were no borrowings under the Credit Agreement from October 23, 2015 through December 31, 2015. For the year ended
December 31, 2015, we recorded interest expense relating to the Credit Agreement of approximately $39, of which approximately $28
was related to the commitment fee on the unused portion of the revolving credit facility (100 basis points, or 1.0% on the unused
portion of the revolving credit facility) and $11 was related to the amortization of deferred financing costs (resulting in remaining net
deferred financing costs of approximately $204 at December 31, 2015, which are reflected in prepaid expenses and other current
assets in our consolidated balance sheet.
On January 10, 2016, we delivered notice to RHI of our intent to terminate the Credit Agreement in connection with the closing
of a registered direct offering of common equity to an entity under common control by our Chairman and CEO (see further discussion
below). There were no borrowings under the Credit Agreement from January 1, 2016 through the effective date of its termination,
January 13, 2016. In connection with the termination, we paid in-full our remaining accrued interest under the Credit Agreement of
approximately $5 relating to the commitment fee on the unused portion of the revolving credit facility. In addition, during the quarter
ending March 31, 2016, we will record approximately $204 to interest expense related to the accelerated amortization of previously
deferred financing costs. Upon termination of the Credit Agreement, all liens and guaranties in respect thereof were released.
At Market Issuance Offering
On January 8, 2016, we announced our entry into our ATM with FBR and MLV pursuant to which FBR and MLV will act as
distribution agents in the sale of up to $50,000 in the aggregate of ExOne common equity in “at the market offerings” as defined in
Rule 415 under the Securities Act. Both FBR and MLV have been identified as related parties to us on the basis of significant
influence in that a member of our Board of Directors also serves as a member of the Board of Directors of FBR (which controls
MLV). The terms of this transaction were reviewed and approved by a sub-committee of our Board of Directors (which included each
of the members of the Audit Committee of our Board of Directors except for the identified director who also holds a position on the
Board of Directors of FBR). Terms of the distribution agreement require a 3.0% commission on the sale of common equity shares
under the ATM and a reimbursement of certain legal expenses of approximately $25. Through March 22, 2016, we sold 91,940 shares
under the ATM at a weighted average selling price of approximately $9.17 per share resulting in gross proceeds of approximately
$843. Net proceeds to us from the sale of shares under the ATM during this time period were approximately $595 (after deducting
offering costs of approximately $248, of which approximately $50 was paid to FBR or MLV relating to the aforementioned
reimbursement of certain legal expenses and commissions on the sale of shares under the ATM).
Registered Direct Offering to a Related Party
On January 11, 2016, we announced our entry into a subscription agreement with Rockwell Forest Products, Inc. and S. Kent
Rockwell for the registered direct offering and sale of 1,423,877 shares of ExOne common equity at a per share price of $9.13 (a
$0.50 premium from the closing price on the close of business on January 8, 2016). The terms of this transaction were reviewed and
approved by a sub-committee of independent members of our Board of Directors (which included each of the members of the Audit
Committee of our Board of Directors). The sub-committee of independent members of our Board of Directors were advised on the
transaction by an independent financial advisor and independent legal counsel. Concurrent with the approval of this sale of shares
under the terms identified, the independent members of our Board of Directors also approved the termination of our revolving credit
facility with RHI Investments, LLC (see further discussion above). Gross proceeds from the sale of shares in this offering were
approximately $13,000. Net proceeds to us from the sale of shares in this offering were approximately $12,447 (after deducting
offering costs of approximately $553).
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Cash Flows
The following table summarizes the significant components of cash flows for each of the years ending December 31 and our
ending cash and cash equivalents balance:
Cash used for operating activities
Cash used for investing activities
Cash (used for) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
2015
(10,722) $
(5,078)
(670)
(390)
(16,860) $
2014
(28,932) $
(32,236)
(677)
(398)
(62,243) $
2013
(20,192)
(21,638)
137,512
(39)
95,643
$
$
Cash and cash equivalents
Operating Activities
December 31,
December 31,
2015
2014
$
19,342 $
36,202
Cash used for operating activities for 2015 was $10,722 compared with $28,932 for 2014. The decrease of $18,210, or 62.9%,
was mostly attributed to an increase in cash flows from net changes in assets and liabilities principally impacted by cash inflows
(versus outflows) for accounts receivable from customers based on the timing of payment (mostly the timing of receipt of installment
payments on 3D printing machines), an increase in prepayments received from customers on 3D printing machine sale contracts and
lower outflows associated with inventories. These increases were partially offset by increased cash outflows associated with an
increase in our net loss (net of a goodwill impairment charge of approximately $4,419 in 2015).
Cash used for operating activities for 2014 was $28,932 compared with $20,192 for 2013. The increase of $8,740, or 43.3%, was
mostly attributed to an increase in our net loss and cash outflows associated with accounts receivable (based on the timing of sales and
payments by customers) and inventories (based on an increase in manufacturing capacity). These amounts were offset by lower cash
outflows associated with prepaid expenses and other current assets (based on a reduction in increases of prepayments to vendors) and
deferred revenue and customer prepayments (mostly due to the timing and amount of prepayments by customers).
Investing Activities
Cash used for investing activities for 2015, was $5,078 compared with $32,236 for 2014. The decrease of $27,158, or 84.2%, was
primarily attributed to decreased capital expenditures, mostly due to spending associated with (i) the expansion of our facilities in
Germany (spending complete at the end of 2014), (ii) the acquisition of the land and building associated with our Japanese subsidiary
(completed during the quarter ended June 30, 2014) and (iii) cash paid for acquisitions closed during the quarter ended March 31,
2014 (MAM and MWT).
Cash used for investing activities for 2014, was $32,236 compared with $21,638 for 2013. The increase of $10,598, or 49.0%,
was primarily attributed to increased capital expenditures, mostly due to spending associated with (i) the expansion of our facilities in
Germany and the United States to increase our 3D printing machine manufacturing, PSC, research and development and
administrative facilities and (ii) the acquisition of the land and building associated with our Japanese subsidiary (completed during the
quarter ended June 30, 2014) and cash paid for acquisitions closed during the quarter ended March 31, 2014 (MAM and MWT).
At December 31, 2015, we have no contractual commitments or plans for additional capital expenditures relating to our facilities
expansions. We expect our 2016 capital expenditures to be limited to spending associated with sustaining our existing operations and
strategic asset acquisition and deployment (estimated spending of approximately $2,000 to $3,000).
Financing Activities
Cash used for financing activities for 2015 was $670 compared with $677 for 2014 a decrease of $7 or 0.1%. Cash used for
financing activities in 2015 and 2014 included principal payments on outstanding debt and capital and financing leases. Cash used for
financing activities in 2015 also included deferred financing costs associated with our revolving credit facility with a related party (see
further discussion above). Cash proceeds from the exercise of employee stock options offset cash used for financing activities in 2014.
Cash used for financing activities for 2014 was $677. Cash provided by financing activities for 2013 $137,512.
The principal use of cash for 2014 was $1,010 associated with principal payments on outstanding debt (including the payoff of
debt assumed in connection with the MAM acquisition) and capital and financing leases offset by $333 in cash proceeds from the
exercise of employee stock options.
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The principal sources of cash for 2013 were (i) net proceeds from our initial public offering of $91,083 and (ii) net proceeds from
our secondary public offering of $64,948. Offsetting these sources of cash were outflows of (i) $528 associated with the repayment of
amounts outstanding on our German line of credit, (ii) $9,885 associated with the repayment of amounts outstanding on the demand
note payable to member (which was subsequently retired by us), (iii) $7,650 associated with the repayment of other outstanding debt
and principal payments on financing leases, including repayment of all of the debt assumed from our VIEs in connection with the
acquisition of net assets on March 27, 2013 and settlement of our financing lease obligation with a related party for a cash payment of
approximately $1,372 during the quarter ended June 30, 2013, and (iv) $456 in preferred stock dividends paid prior to conversion of
preferred stock to common stock upon closing of our initial public offering.
At December 31, 2015, we identified that we were not in compliance with the annual cash flow-to-debt service ratio covenant
associated with our building note payable to a United States bank. We requested and were granted a waiver related to compliance with
this annual covenant at December 31, 2015 and through December 31, 2016. Related to our 2015 noncompliance, there were no cross
default provisions or related impacts on other lending agreements.
At December 31, 2014, ExOne GmbH had separate line of credit and security agreements with a German bank for approximately
$600 (€500) and $1,000 (€800), respectively. Both agreements had an indefinite term and were subject to cancellation by either party
at any time upon repayment of amounts outstanding or expiration of certain transactions requiring security. There was no commitment
fee associated with either agreement. The line of credit agreement contained a negative covenant of an annual equity capital ratio for
ExOne GmbH of no less than 50%. At December 31, 2014, there were no outstanding borrowings under the line of credit agreement.
At December 31, 2014, ExOne GmbH had outstanding guarantees or letters of credit of approximately $1,442 (€1,186) against certain
commercial transactions requiring security under the security agreement. Outstanding guarantees or letters of credit in excess of the
security agreement limitation were separately approved by the German bank.
At December 31, 2014, ExOne GmbH identified that it was not in compliance with the annual equity capital ratio covenant
associated with the line of credit agreement. ExOne GmbH did not obtain a waiver related to compliance with this annual covenant
and believed its future borrowing abilities to be restricted on the basis of an event of default under the line of credit agreement. Based
on the cancellable nature of the line of credit agreement, any requests for borrowings were effectively subject to approval by the
German bank. Related to the 2014 noncompliance, there were no cross default provisions or related impacts on other lending
agreements.
In September 2015, ExOne GmbH and the German bank agreed to a cancellation of both the line of credit agreement and security
agreement concurrent with an agreement to a separate credit facility agreement. The credit facility agreement provides for various
short-term financings in the form of overdraft credit, guarantees, letters of credit and collateral security for various commercial
transactions for approximately $1,400 (€1,300). In addition, ExOne GmbH may use the credit facility agreement for short-term, fixed-
rate loans in minimum increments of approximately $110 (€100) with minimum terms of at least thirty days. The overdraft credit
interest rate is fixed at 10.2% while the interest rate associated with transactions requiring security (guarantees, letters of credit or
collateral agreements) is fixed at 1.75%. The credit facility agreement has an indefinite term and is subject to cancellation by either
party at any time upon repayment of amounts outstanding or expiration of certain transactions requiring security. There is no
commitment fee associated with the credit facility agreement. There are no negative covenants associated with the credit facility
agreement. The credit facility agreement has been guaranteed by ExOne. At December 31, 2015, there were no outstanding
borrowings under the credit facility agreement. At December 31, 2015, ExOne GmbH had outstanding guarantees or letters of credit
of approximately $685 (€628) against certain commercial transactions requiring security.
Contractual Obligations
We are required to make future payments under various contracts, including operating and capital lease agreements and long-term
debt agreements.
At December 31, 2015, a summary of our outstanding contractual obligations is as follows:
Operating activities:
Operating leases
Financing activities:
Long-term debt
Capital leases
Interest
Total
Total
2016
2017-2018
2019-2020
Thereafter
$
843 $
340 $
444 $
59 $
—
1,950
163
593
3,549 $
$
138
82
81
641 $
281
79
163
967 $
308
2
139
508 $
1,223
—
210
1,433
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Operating Leases
Operating leases consist of various lease agreements of manufacturing and office facilities, machinery and other equipment and
vehicles, expiring in various years through 2020.
Long-Term Debt
Long-term debt consists of the current and noncurrent portion of a note payable used to finance the acquisition of a building in the
United States. Maturity of this debt instrument extends to 2027.
Capital Leases
Capital leases consist of various lease agreements of machinery and other equipment and vehicles, expiring in various years
through 2019.
Interest
Interest related to long-term debt and capital and financing leases is based on interest rates in effect at December 31, 2015, and is
calculated on instruments with maturities that extend to 2027.
Off Balance Sheet Arrangements
We are not a party to any off balance sheet arrangements.
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 exposed to market risk from fluctuations in foreign currency exchange rates which may adversely affect our results of
operations and financial condition. We seek to minimize these risks through regular operating and financing activities. We do not
currently utilize derivative financial instruments to offset market risk from fluctuations in foreign currency exchange rates.
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 on the appropriate economic and management indicators.
Foreign currency assets and liabilities are translated into their United States dollar equivalents based on year end exchange rates,
and are included in stockholders’ equity as a component of other comprehensive 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 for which settlement is not planned or anticipated in
the foreseeable future, which are included in accumulated other comprehensive loss in the consolidated balance sheet.
We transact business globally and are subject to risks associated with fluctuating foreign exchange rates. Approximately 50.9%,
51.9% and 63.0% of our consolidated revenue was derived from transactions outside the United States for 2015, 2014 and 2013,
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. A hypothetical change in foreign exchange rates of +/- 10.0% for 2015 would result in an increase (decrease)
in revenue of approximately $2,100. These subsidiaries incur nearly all of their expenses (other than intercompany expenses) in their
local functional currencies.
At December 31, 2015, we held approximately $19,342 in cash and cash equivalents, of which approximately $16,385 was held
by our United States parent in United States dollars.
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Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm...............................................................................................................
Statement of Consolidated Operations and Comprehensive Loss ......................................................................................................
Consolidated Balance Sheet ...............................................................................................................................................................
Statement of Consolidated Cash Flows ..............................................................................................................................................
Statement of Changes in Consolidated Stockholders’ / Members’ Equity.........................................................................................
Notes to the Consolidated Financial Statements ................................................................................................................................
Supplementary Quarterly Financial Information (Unaudited) ...........................................................................................................
Page
43
44
45
46
47
48
72
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Board of Directors and Stockholders
The ExOne Company and Subsidiaries
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheet of The ExOne Company and Subsidiaries (the “Company”) as of
December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, stockholders’ / members’
equity, and cash flows for the each of the years in the three-year period ended December 31, 2015. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of The ExOne Company and Subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 2015, in conformity with accounting principles generally accepted
in the United States of America.
/s/ Baker Tilly Virchow Krause, LLP
Pittsburgh, Pennsylvania
March 22, 2016
43
7238c3.pdf
The ExOne Company and Subsidiaries
Statement of Consolidated Operations and Comprehensive Loss
(in thousands, except per-share amounts)
For the years ended December 31,
Revenue
Revenue - third party
Revenue - related party (Note 18)
Cost of sales
Gross profit
Operating expenses
Research and development
Selling, general and administrative
Goodwill impairment (Note 7)
Loss from operations
Other expense (income)
Interest expense
Other (income) expense - net
Loss before income taxes
(Benefit) provision for income taxes (Note 15)
Net loss
Less: Net income attributable to noncontrolling interests
Net loss attributable to ExOne
Net loss attributable to ExOne per common share (Note 3):
Basic
Diluted
Comprehensive loss:
Net loss
Other comprehensive loss:
Foreign currency translation adjustments
Comprehensive loss
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive loss attributable to ExOne
2015
2014
2013
$
38,918
1,435
40,353
32,010
8,343
7,279
22,576
4,419
34,274
(25,931)
152
(45)
107
(26,038)
(173)
(25,865)
—
(25,865) $
$
43,029
871
43,900
33,443
10,457
8,178
24,029
—
32,207
(21,750)
144
(210)
(66)
(21,684)
159
(21,843)
—
(21,843) $
39,480
—
39,480
23,907
15,573
5,127
16,119
—
21,246
(5,673)
372
(98)
274
(5,947)
370
(6,317)
138
(6,455)
(1.79) $
(1.79) $
(1.52) $
(1.52) $
(0.51)
(0.51)
(25,865) $
(21,843) $
(6,317)
(5,332)
(31,197)
—
(31,197) $
(7,851)
(29,694)
—
(29,694) $
(178)
(6,495)
138
(6,633)
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
44
7238c3.pdf
The ExOne Company and Subsidiaries
Consolidated Balance Sheet
(in thousands, except share amounts)
2015
2014
Assets
Current assets:
Cash and cash equivalents
Accounts receivable - net (Note 1)
Inventories - net (Note 5)
Prepaid expenses and other current assets
Total current assets
Property and equipment - net (Note 6)
Goodwill (Note 7)
Other noncurrent assets (Note 8)
Total assets
Liabilities
Current liabilities:
Current portion of long-term debt (Note 10)
Current portion of capital and financing leases (Note 11)
Accounts payable
Accrued expenses and other current liabilities (Note 12)
Deferred revenue and customer prepayments
Total current liabilities
Long-term debt - net of current portion (Note 10)
Capital and financing leases - net of current portion (Note 11)
Other noncurrent liabilities
Total liabilities
Contingencies and commitments (Note 13)
Stockholders' equity
Common stock, $0.01 par value, 200,000,000 shares authorized, 14,446,967
(2015) and 14,417,803 (2014) shares issued and outstanding
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss (Note 2)
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
$
$
$
$
19,342
9,368
19,839
2,918
51,467
54,832
—
1,659
107,958
138
82
3,231
6,410
7,103
16,964
1,812
81
28
18,885
144
156,627
(54,163)
(13,535)
89,073
107,958
$
36,202
14,238
17,014
3,138
70,592
55,298
4,665
2,572
133,127
132
346
2,553
8,118
902
12,051
1,950
164
417
14,582
144
154,902
(28,298)
(8,203)
118,545
133,127
The accompanying notes are an integral part of these consolidated financial statements.
45
7238c3.pdf
The ExOne Company and Subsidiaries
Statement of Consolidated Cash Flows
(in thousands)
For the years ended December 31,
Operating activities
Net loss
Adjustments to reconcile net loss to cash used for operations:
Depreciation and amortization
Deferred income taxes
Equity-based compensation
Provision for bad debts
Changes in fair value of contingent consideration
Loss from sale of property and equipment
Goodwill impairment
Changes in assets and liabilities, excluding effects of acquisitions and foreign
currency translation adjustments:
Decrease (increase) in accounts receivable
Increase in inventories
Decrease (increase) in prepaid expenses and other assets
Increase (decrease) in accounts payable
(Decrease) increase in accrued expenses and other liabilities
Increase (decrease) in deferred revenue and customer prepayments
Cash used for operating activities
Investing activities
Capital expenditures
Increase in restricted cash
Proceeds from sale of property and equipment
Acquisitions, net of cash acquired of $201
Cash effect of deconsolidation of noncontrolling interests in variable interest entities
Cash used for investing activities
Financing activities
Payments on long-term debt
Payments on capital and financing leases
Deferred financing costs
Proceeds from exercise of employee stock options
Net proceeds from issuance of common stock - initial public offering
Net proceeds from issuance of common stock - secondary public offering
Net change in line of credit borrowings
Net change in demand note payable to member
Payment of preferred stock dividends
Cash (used for) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of noncash investing and financing activities
Property and equipment included in accounts payable
Transfer of internally developed 3D printing machines from inventories to property and equipment
for internal use
Transfer of internally developed 3D printing machines from property and equipment to inventories
for sale
Property and equipment acquired through financing arrangements
Net assets acquired through acquisitions, net of cash acquired of $201
Noncash consideration for acquisitions
Conversion of preferred stock dividends payable and accrued interest to principal amounts due under
demand note payable to member
Noncash effect of Reorganization of The Ex One Company, LLC with and into The ExOne Company
Noncash effect of deconsolidation of noncontrolling interests in variable interest entities
2015
2014
2013
$
(25,865)
$
(21,843)
$
(6,317)
5,227
(268 )
1,725
(254 )
(193)
87
4,419
4,567
(8,021 )
703
1,654
(823)
6,320
(10,722)
(4,938)
(330 )
190
—
—
(5,078 )
(132 )
(323)
(215 )
—
—
—
—
—
—
(670)
(390 )
(16,860)
36,202
19,342
$
4,520
(131 )
1,206
2,391
(185)
—
—
(7,162)
(9,098 )
(377)
(97 )
1,861
(17 )
(28,932)
(23,081)
—
—
(9,155 )
—
(32,236 )
(465 )
(545)
—
333
—
—
—
—
—
(677)
(398 )
(62,243)
98,445
36,202
$
122
—
$
$
144
916
$
$
2,372
—
711
152
—
—
—
(823)
(8,083 )
(4,334)
(1,100 )
937
(3,707 )
(20,192)
(19,311)
—
—
—
(2,327)
(21,638 )
(5,488 )
(2,162)
—
—
91,083
64,948
(528 )
(9,885)
(456 )
137,512
(39 )
95,643
2,802
98,445
310
1,334
—
$
819
$
—
4,749
$
5,344
$
3,338
956
—
—
—
—
—
—
$
$
$
$
$
$
$
1,287
89
9,530
375
—
—
—
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$
$
$
$
$
$
534
282
—
—
1,219
2,371
397
$
$
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
46
7238c3.pdf
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7238c3.pdf
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
Basis of Presentation and Principles of Consolidation
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 KK (Japan); effective in August 2013, ExOne Property GmbH (Germany);
effective in March 2014, MWT — Gesellschaft für Industrielle Mikrowellentechnik mbH (Germany); effective in May 2014, ExOne
Italy S.r.l (Italy); effective in July 2015, ExOne Sweden AB (Sweden); and through March 27, 2013 (see further description below),
two variable interest entities (“VIEs”) in which ExOne was identified as the primary beneficiary, Lone Star Metal Fabrication, LLC
(“Lone Star”) and Troy Metal Fabricating, LLC (“TMF”). Collectively, the consolidated group is referred to as the “Company”.
At December 31, 2012, and through March 27, 2013, ExOne leased property and equipment from Lone Star and TMF. ExOne did
not have an ownership interest in Lone Star or TMF and the assets of Lone Star and TMF could only be used to settle obligations of
Lone Star and TMF. ExOne was identified as the primary beneficiary of Lone Star and TMF in accordance with the guidance issued
by the Financial Accounting Standards Board (“FASB”) on the consolidation of VIEs, as ExOne guaranteed certain long-term debt of
both Lone Star and TMF and governed these entities through common ownership. This guidance requires certain VIEs to be
consolidated when an enterprise has the power to direct the activities of the VIE that most significantly impact VIE economic
performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant
to the VIE. The consolidated financial statements therefore include the accounts of Lone Star and TMF through March 27, 2013. On
March 27, 2013, ExOne Americas LLC acquired certain assets, including property and equipment (principally land, buildings and
machinery and equipment) held by the two VIEs, and assumed all outstanding debt of such VIEs. Following this transaction, neither
of the entities continued to meet the definition of a VIE with respect to ExOne, and as a result, the remaining assets and liabilities of
both entities were deconsolidated following the transaction.
On February 6, 2013, the Company commenced an initial public offering of 6,095,000 shares of its common stock at a price to the
public of $18.00 per share, of which 5,483,333 shares were sold by the Company and 611,667 were sold by a selling stockholder
(including consideration of the exercise of the underwriters’ over-allotment option). Following completion of the offering on
February 12, 2013, the Company received net proceeds of approximately $91,996 (net of underwriting commissions).
On September 9, 2013, the Company commenced a secondary public offering of 3,054,400 shares of its common stock at a price
to the public of $62.00 per share, of which 1,106,000 shares were sold by the Company and 1,948,400 were sold by selling
stockholders (including consideration of the exercise of the underwriters’ over-allotment option). Following completion of the offering
on September 13, 2013, the Company received net proceeds of approximately $65,315 (net of underwriting commissions).
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.
Liquidity
The Company has incurred a net loss in each of its annual periods since its inception. As shown in the accompanying statement of
consolidated operations and comprehensive loss, the Company has incurred net losses of approximately $25,865, $21,843 and $6,317
for 2015, 2014 and 2013, respectively. As noted above, in connection with the completion of its initial public offering in February
2013 and secondary public offering in September 2013, the Company received total unrestricted net proceeds from the sale of its
common stock of approximately $157,311. At December 31, 2015, the Company had approximately $19,342 in cash and cash
equivalents. In addition, in January 2016, the Company entered into separate transactions for additional offerings of sale of its
common stock resulting in additional unrestricted net proceeds to the Company (Note 20).
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
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accounts receivable (including the allowance for doubtful accounts); inventories (including the allowance for slow-moving and
obsolete inventory); product warranty reserves; income taxes (including the valuation allowance on certain deferred tax assets);
equity-based compensation; and business combinations (including fair value estimates of contingent consideration) and testing for
impairment of goodwill and long-lived assets. The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable, the results of which forms 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 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 for which settlement is not planned or
anticipated in the foreseeable future, which are included in other comprehensive loss in the consolidated statement of operations and
comprehensive loss.
The Company transacts business globally and is subject to risks associated with fluctuating foreign exchange rates.
Approximately 50.9%, 51.9% and 63.0% of the consolidated revenue of the Company was derived from transactions outside the
United States for 2015, 2014 and 2013, 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.
Revenue Recognition
The Company derives revenue from the sale of 3D printing machines and 3D printed and other products, materials and services.
Revenue is recognized by the Company when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services
have been rendered, (iii) selling price is fixed or determinable and (iv) collectability is reasonably assured.
The Company enters into arrangements that may provide for multiple deliverables to a customer. 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). The Company identifies all products and services that are to be
delivered separately under an arrangement and allocates revenue to each based on their relative fair value. Fair values are generally
established based on the prices charged when sold separately by the Company (vendor specific objective evidence). The allocated
revenue for each deliverable is then recognized ratably based on relative fair values of the components of the sale. In the absence of
vendor specific objective evidence or third party evidence in leading to a relative fair value for a sale component, the Company’s best
estimate of selling price is used. The Company also evaluates the impact of undelivered items on the functionality of delivered items
for each sales transaction and, where appropriate, defers revenue on delivered items when that functionality has been affected.
Functionality is determined to be met if the delivered products or services represent a separate earnings process.
Certain of the Company’s arrangements for 3D printing machines contain acceptance provisions for which the Company must
determine whether it can objectively demonstrate that either company-specific or customer-specific criteria identified in such
provisions have been met prior to recognizing revenue on the transaction. To the extent that the Company is able to effectively
demonstrate that specific criteria are met, revenue is recognized at the time of delivery (generally when title and risk and rewards of
ownership have transferred to the customer), otherwise revenue is deferred until formal acceptance is provided from the customer.
The Company generally provides customers with a standard twelve month warranty on its 3D printing machines. The standard
warranty is not treated as a separate service because the standard warranty is an integral part of the sale of the 3D printing machine. At
the time of sale, a liability is recorded (with an offset to cost of sales in the statement of operations and comprehensive loss) based
upon the expected cost of replacement parts and labor to be incurred over the life of the standard warranty. Following the standard
warranty period, the Company offers its customers optional maintenance service contracts or extended warranties. Deferred
maintenance service revenues are generally recognized when the maintenance services are performed since the Company has
historical evidence that indicates that the costs of performing the services under the contract are not incurred on a straight-line basis.
The Company sells equipment with embedded software to its customers. The embedded software is not sold separately and it is
not a significant focus of the Company’s marketing effort. The Company does not provide post-contract customer support specific to
the software or incur significant costs that are within the scope of FASB guidance on accounting for software to be leased or sold.
Additionally, the functionality that the software provides is marketed as part of the overall product. The software embedded in the
equipment is incidental to the equipment as a whole such that the FASB guidance referenced above is not applicable. Sales of these
products are recognized in accordance with FASB guidance on accounting for multiple-element arrangements.
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Shipping and handling costs billed to customers are included in revenue in the consolidated statement of operations and
comprehensive loss. Costs incurred by the Company associated with shipping and handling are included in cost of sales in the
consolidated statement of operations and comprehensive loss.
In assessing collectability as part of the revenue recognition process, the Company considers a number of factors in its evaluation
of the creditworthiness of the customer, including past due amounts, past payment history, and current economic conditions. If it is
determined that collectability cannot be reasonably assured, the Company will defer recognition of revenue until collectability is
assured. 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 certain amounts be prepaid. In some
circumstances, the Company may require payment in full and may require international customers to furnish letters of credit. These
prepayments are reported as deferred revenue and customer prepayments in the consolidated balance sheet. 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 some countries where it transacts business. Service
arrangements are generally billed in accordance with specific contract terms which typically correspond to performance of the related
services.
The Company has entered into certain contracts for the sale of its products and services with the federal government under fixed-
fee, cost reimbursable and time and materials arrangements. With respect to cost reimbursable arrangements with the federal
government, the Company generally bills for products and services in accordance with provisional rates as determined by the
Company. To the extent that provisional rates billed under these contracts differ from actual experience, a billing adjustment (through
revenue) is made in the period in which the difference is identified (generally upon completion of its annual Incurred Cost Submission
filing as required by the federal government). For 2015, 2014 and 2013, revenues and any adjustments related to these contracts were
not significant.
Cash and Cash Equivalents
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, Italy, Sweden 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
The Company is required to maintain a cash collateral balance to offset certain short-term, unsecured lending commitments from
a financial institution associated with the Company’s corporate credit card program. This balance is considered legally restricted by
the Company. Restricted cash at December 31, 2015, was approximately $330 and is included in prepaid expenses and other current
assets in the consolidated balance sheet. There was no such restriction on cash balances at December 31, 2014.
Accounts Receivable
Accounts receivable are reported at their net realizable value. The Company’s estimate of the allowance for doubtful accounts
related to trade receivables 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 balance to reduce the outstanding receivable 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, 2015 and
2014, the allowance for doubtful accounts was approximately $1,920 and $2,431, respectively. During 2015 the Company recorded a
net credit of approximately ($254) associated with its provision for bad debts, as reversals of previously recorded allowances (based
on collections of the related accounts receivable) exceeded provisions recorded. During 2014 and 2013 the Company recorded
provisions for bad debts of approximately $2,391 and $152, respectively, associated with customer balances for which collectability
became uncertain as a result of deteriorating credit quality based on either customer-specific or macroeconomic factors.
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Inventories
The Company values all of its inventories at the lower of cost, as determined on the first-in, first-out method or market 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
experience and anticipated product demand. 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 (i) their
estimated useful lives or (ii) the estimated or contractual lives of the related leases. Gains or losses from the sale of assets are
recognized upon disposal or retirement of the related assets and are generally recorded in cost of sales in the statement of consolidated
operations and comprehensive loss. Repairs and maintenance are charged to expense as incurred.
The Company evaluates long-lived assets 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. No impairment loss was recorded by
the Company during 2015, 2014 or 2013 (Note 7).
Goodwill
Goodwill represents the excess of purchase price over the fair value of identifiable net assets of acquired entities. Goodwill is not
amortized; instead, it is reviewed for impairment annually or more frequently if indicators of impairment exist (a triggering event) or
if a decision is made to sell or exit a business. A significant amount of judgment is involved in determining if an indicator of
impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity
and credit markets, including a significant decline in an entity’s market capitalization, adverse changes in the markets in which an
entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash
flows, among others.
Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or
one level below an operating segment (an operating segment component). Based on an evaluation of its operational management and
reporting structure, the Company has determined that it operates as a single operating segment, operating segment component, and
reporting unit.
In reviewing goodwill for impairment, an entity has the option to first assess qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not (greater than 50%) that the estimated fair
value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an
impairment is more likely than not, the entity is then required to perform a two-step quantitative impairment test (described below),
otherwise no further analysis is required however, it will continue to be evaluated at least annually as described above. An entity also
may elect not to perform the qualitative assessment and, instead, proceed directly to the two-step quantitative impairment test. The
ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether an entity chooses to perform the
qualitative assessment or proceeds directly to the two-step quantitative impairment test.
Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a
reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact they
would have on the estimated fair value using positive, neutral, and adverse categories based on current business conditions.
Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is determined using
high, medium, and low weighting.
Under the two-step quantitative impairment test, the evaluation of impairment involves comparing the current fair value of a
reporting unit to its carrying value, including goodwill (step 1). The Company determines fair value through a combination of the
market approach and income approach. The market approach includes consideration of the Company’s market capitalization (as a
single reporting unit entity) along with consideration of other factors that could influence the use of market capitalization as a fair
value estimate, including premiums or discounts to be applied based on both market and entity-specific data. The income approach
includes consideration of present value techniques, principally the use of a discounted cash flow model. The development of fair value
under both approaches requires the use of significant assumptions and estimates by management.
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In the event the estimated fair value of a reporting unit is less than the carrying value (step 1), additional analysis would be
required (step 2). The additional analysis (step 2) would compare the carrying amount of the reporting unit’s goodwill with the
implied fair value of that goodwill, which may involve the use of valuation experts. The implied fair value of goodwill is the excess of
the fair value of the reporting unit over the fair value amounts assigned to all of the assets and liabilities of that unit as if the reporting
unit was acquired in a business combination and the fair value of the reporting unit represented the purchase price. If the carrying
value of goodwill exceeds its implied fair value, an impairment loss equal to such excess would be recognized, which could
significantly and adversely impact reported results of operations.
During the quarter ended September 30, 2015, as a result of the significant decline in market capitalization of the Company and
continued operating losses and cash flow deficiencies, the Company identified a triggering event requiring an interim test for
impairment of goodwill at the reporting unit level. In performing the impairment test for goodwill, the Company determined the
carrying amount of goodwill to be in excess of the implied fair value of goodwill. As a result, the Company recognized an impairment
loss of approximately $4,419 (Note 7).
Contingent Consideration
The Company records contingent consideration resulting from a business combination at its fair value on the date of acquisition.
Each reporting period thereafter, the Company revalues these obligations and records increases or decreases in their fair value as a
charge (credit) to selling, general and administrative costs within the statement of consolidated operations and comprehensive loss.
Changes in the fair value of contingent consideration obligations can result from adjustments to (i) forecast revenues, profitability or a
combination thereto or (ii) discount rates. These fair value measurements represent Level 3 measurements, as they are based on
significant unobservable inputs.
Product Warranty Reserves
Substantially all of the Company’s 3D printing machines are covered by a standard twelve month warranty. At the time of sale, a
liability is recorded (with an offset to cost of sales in the statement of operations and comprehensive loss) 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 statement of consolidated operations and
comprehensive loss in the period such a determination is made. At December 31, 2015 and 2014, product warranty reserves were
approximately $1,308 and $1,543, respectively, and were included in accrued expenses and other current liabilities in the consolidated
balance sheet.
Income Taxes
The (benefit) provision for income taxes is determined using the asset and liability approach of accounting for income taxes.
Under this approach, the (benefit) provision 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 subsidiaries in Germany, Italy, Sweden and Japan are taxed as corporations under the taxing regulations of those
respective countries. As a result, the consolidated statement of operations and comprehensive loss includes a (benefit) provision for
income taxes related to these foreign jurisdictions. Any undistributed earnings are intended to be permanently reinvested in the
respective subsidiaries.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities based upon the technical merits of the position. The 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. 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 appropriate taxing authority has completed
its examination even through the statute of limitations remains open. Interest and penalties related to uncertain tax positions are
recognized as part of the (benefit) provision for income taxes in the consolidated statement of operations and comprehensive loss 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 tax benefits are recognized.
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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 consolidated statement of operations and comprehensive loss.
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 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 not significant for 2015, 2014 or 2013.
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. The Company makes discretionary matching contributions of 50% of the first 8% of employee
contributions, subject to certain Internal Revenue Service limitations. The Company’s matching contributions to the plan were
approximately $365, $269 and $92 in 2015, 2014 and 2013, respectively.
Equity-Based Compensation
The Company recognizes compensation expense for equity-based grants using the straight-line attribution method, in which the
expense (net of estimated forfeitures) is recognized ratably over the requisite service period based on the grant date fair value. Fair
value of equity-based awards is estimated on the date of grant using the Black-Scholes pricing model.
Recently Adopted Accounting Guidance
On January 1, 2014, the Company adopted FASB guidance changing the requirements of the Company’s reporting of amounts
reclassified out of accumulated other comprehensive income (loss). These changes require an entity to report the effect of significant
reclassifications out of accumulated other comprehensive income (loss) on the respective line items in net income (loss) if the amount
being reclassified is required to be reclassified in its entirety to net income (loss). For other amounts that are not required to be
reclassified in their entirety to net income (loss) in the same reporting period, an entity is required to cross-reference other disclosures
that provide additional detail about those amounts. These requirements are to be applied to each component of accumulated other
comprehensive income (loss). Other than additional disclosure requirements, the adoption of these changes did not have a significant
impact on the consolidated financial statements of the Company.
On January 1, 2015, the Company adopted FASB guidance clarifying the presentation of unrecognized tax benefits when a net
operating loss carryforward, or similar tax loss or a tax credit carryforward exists. The amendment requires that unrecognized tax
benefits be presented in the consolidated financial statements as a reduction to a deferred tax asset for a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward, unless certain exceptions exist. Previously, there was diversity in practice
as no explicit guidance existed. As the Company had previously followed the now required presentation, the adoption of this guidance
did not have a material impact on the consolidated financial statements of the Company.
In November 2015, the FASB issued changes to the balance sheet classification of deferred taxes, which the Company elected to
early adopt. These changes simplify the presentation of deferred income taxes by requiring all deferred income tax assets and
liabilities to be classified as noncurrent in a classified balance sheet. The current requirement that deferred tax assets and liabilities of
a tax-paying component of an entity be offset and presented as a single amount is not affected by these changes. The Company has
elected to retrospectively apply the adoption of this guidance, which has resulted in a reclassification within the consolidated balance
sheet of deferred income tax amounts at December 31, 2014. This reclassification has resulted in a decrease to accrued expenses and
other current liabilities of approximately $306, a decrease in other noncurrent assets of approximately $303 and an increase in other
noncurrent liabilities of approximately $3 as compared to amounts previously reported.
Recently Issued Accounting Guidance
In May 2014, the FASB issued changes to the recognition of revenue from contracts with customers. These changes created a
comprehensive framework for all entities in all industries to apply in the determination of when to recognize revenue, and, therefore,
supersede virtually all existing revenue recognition requirements and guidance. This framework is expected to provide a consistent
and comparable methodology for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. To achieve this principle, an entity should apply the following steps: (i) identify
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the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price,
(iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity
satisfies a performance obligation. These changes become effective for the Company on January 1, 2019, or January 1, 2018, in the
event that the Company no longer qualifies as an “emerging growth company” (“EGC”) under the Jumpstart Our Business Startups
Act of 2012 (the “JOBs Act”). Management is currently evaluating the potential impact of these changes on the consolidated financial
statements of the Company.
In August 2014, the FASB issued changes to the disclosure of uncertainties about an entity’s ability to continue as a going
concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial
statements unless and until the entity’s liquidation becomes imminent. Even if an entity’s liquidation is not imminent, there may be
conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. Because there is no guidance
in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a
going concern or to provide related note disclosures, there is diversity in practice whether, when, and how an entity discloses the
relevant conditions and events in its financial statements. As a result, these changes require an entity’s management to evaluate
whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as
a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it
is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial
statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the
financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the
significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that
alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least
mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is
substantial doubt about the entity’s ability to continue as a going concern. These changes become effective for the Company on
December 31, 2016. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period
and interim period therein to determine what, if any, impact there will be on the consolidated financial statements of the Company in a
given reporting period.
In April 2015, the FASB issued changes to the presentation of debt issuance costs in financial statements. These changes require
an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset, with an
exception for line of credit arrangements. Amortization of debt issuance costs will continue to be reported as interest expense. These
changes become effective for the Company on December 31, 2016. Early adoption is permitted. The new guidance will be applied
retrospectively to each prior period presented. Management has determined that the adoption of these changes will not have a
significant impact on the consolidated financial statements of the Company.
In July 2015, the FASB issued changes to the measurement of inventories accounted for under any method other than last in, first
out or the retail method. These changes require such inventories to be measured at the lower of cost and net realizable value, with net
realizable value defined as the estimated selling price in the normal course of business, less reasonably predictable costs of
completion, disposal and transportation. These changes become effective for the Company on January 1, 2017. Early adoption is
permitted. The new guidance will be applied prospectively in the interim or annual period adopted. Management has determined that
the adoption of these changes will not have an impact on the consolidated financial statements of the Company.
In February 2016, the FASB issued changes to the accounting for leases. Under the revised guidance, lessees will be required to
recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is
a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) 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. Under the revised
guidance, lessor accounting is largely unchanged and lessees will no longer be provided with a source of off-balance sheet financing.
These changes become effective for the Company on January 1, 2019. Early adoption is permitted. Lessees (for capital and operating
leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for
leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial
statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest
comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently
evaluating the potential impact of these changes on the consolidated financial statements of the Company.
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Note 2. Accumulated Other Comprehensive Loss
The following table summarizes changes in the components of accumulated other comprehensive loss:
For the years ended December 31,
Foreign currency translation adjustments
Balance at beginning of period
Other comprehensive loss
Balance at end of period
2015
2014
2013
$
$
(8,203) $
(5,332)
(13,535) $
(352) $
(7,851)
(8,203) $
(174)
(178)
(352)
Foreign currency translation adjustments consist of (i) 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 (ii) certain long-term
intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.
There were no tax impacts related to income tax rate changes and no amounts were reclassified to earnings for any of the periods
presented.
Note 3. Loss Per Share
The Company presents basic and diluted loss per common share amounts. Basic loss per share is calculated by dividing net loss
available to ExOne common shareholders by the weighted average number of common shares outstanding during the applicable
period. Diluted loss per share is calculated by dividing net loss available to ExOne common shareholders by the weighted average
number of common shares and common equivalent shares outstanding during the applicable period.
As ExOne incurred a net loss during 2015, 2014 and 2013, basic average shares outstanding and diluted average shares
outstanding were the same because the effect of potential shares of common stock, including incentive stock options (210,970 —
2015, 215,137 — 2014 and 173,333 — 2013) and unvested restricted stock issued (77,670— 2015, 80,834 — 2014 and 20,000 —
2013), was anti-dilutive.
The information used to compute basic and diluted net loss attributable to ExOne per common share was as follows:
For the years ended December 31,
Net loss attributable to ExOne
Less: Preferred stock dividends declared
Net loss available to ExOne common shareholders
Weighted average shares outstanding (basic and diluted)
Net loss attributable to ExOne per common share:
Basic
Diluted
Note 4. Acquisitions
MAM
2015
(25,865) $
—
(25,865) $
2014
(21,843) $
—
(21,843) $
14,427,956
14,411,054
2013
(6,455)
(152)
(6,607)
12,838,230
(1.79) $
(1.79) $
(1.52) $
(1.52) $
(0.51)
(0.51)
$
$
$
$
On March 3, 2014, the Company, through its wholly-owned subsidiary ExOne Americas LLC, entered into an Asset Purchase
Agreement to acquire (i) substantially all the assets of Machin-A-Mation Corporation (“MAM”), a specialty machine shop located in
Chesterfield, Michigan, and (ii) the real property on which the MAM business is located from Metal Links, LLC, a Michigan limited
liability company. The total purchase price was approximately $4,917, which includes approximately $4,542 in cash and $375 in
contingent consideration in the form of a two-year earn-out provision. The two-year earn-out provision is based on a combination of
achievement of revenues and gross profit for the acquired business for which the Company assumed full achievement of both targets
for each of the respective years from the date of acquisition.
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The following table summarizes the final allocation of purchase price:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Property and equipment
Intangible assets
Goodwill
Total assets
Accounts payable
Accrued expenses and other current liabilities
Long-term debt
Total liabilities
Total purchase price
$
$
209
224
15
2,998
503
1,407
5,356
56
45
338
439
4,917
The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following
intangible assets:
Customer relationships
Trade name
Noncompetition agreement
Amount
464
24
15
503
$
$
Economic Life
(in years)
7
5
3
Of the $1,407 of goodwill generated as a result of the MAM acquisition, approximately $1,083 will be deductible for income tax
purposes. Goodwill associated with the MAM acquisition relates principally to the complementary nature of the assets acquired in
relation to the existing business held by the Company in Troy, Michigan, the combination of which is expected to further enhance the
post-printing capabilities of ExOne. As the Company operates as a single operating segment (also a single reporting unit), there is no
further assignment of goodwill to a reportable segment.
Immediately following the completion of the MAM acquisition, the Company elected to repay all of the long-term debt assumed
as part of the transaction. Prepayment penalties associated with this repayment were not significant and no gain or loss was recorded
by the Company.
The Company incurred total acquisition-related expenses of approximately $88 in connection with the MAM acquisition, of
which $76 was recognized by the Company during 2014 (the remainder recognized during 2013). Acquisition-related expenses are
expensed as incurred in accordance with FASB guidance associated with business combination activities, with amounts included in
selling, general and administrative expenses in the statement of consolidated operations and comprehensive loss.
The results of operations and pro forma effects of the MAM acquisition are not significant relative to the Company and as such,
have been omitted.
MWT
On March 6, 2014, the Company, through its wholly-owned subsidiary ExOne GmbH, entered into a Purchase and Assignment
Contract to acquire all of the shares of MWT—Gesellschaft für Industrielle Mikrowellentechnik mbH (“MWT”), a pioneer in
industrial-grade microwaves with design and manufacturing experience based in Elz, Germany. The total purchase price was
approximately €3,500 ($4,814) which was settled in cash on the date of acquisition.
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The following table summarizes the final allocation of purchase price:
Cash and cash equivalents
Accounts receivable*
Inventories
Prepaid expenses and other current assets
Property and equipment
Intangible assets
Goodwill
Total assets
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue and customer prepayments*
Deferred income taxes
Total liabilities
Total purchase price
$
$
201
118
476
29
21
1,704
3,685
6,234
128
605
195
492
1,420
4,814
*
Included in accounts receivable and deferred revenue and customer prepayments were amounts due to MWT and the Company
at the date of acquisition of approximately $117 and $195, respectively. These amounts were settled between the parties
immediately following completion of the acquisition, resulting in no impact to the consolidated financial statements of the
Company.
The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following
intangible assets:
Unpatented technology
Trade name
Amount
1,668
36
1,704
$
$
Economic Life
(in years)
4
4
None of the goodwill associated with the MWT acquisition is deductible for income tax purposes. Goodwill associated with the
MWT acquisition relates principally to the complementary nature of the industrial microwave technologies acquired in relation to the
existing business held by the Company in Gersthofen, Germany, the combination of which is expected to further enhance the post-
printing capabilities of ExOne. As the Company operates as a single operating segment (also a single reporting unit), there is no
further assignment of goodwill to a reportable segment.
The Company incurred total acquisition-related expenses of approximately $143 in connection with the MWT acquisition, of
which $138 was recognized by the Company during 2014 (the remainder recognized during 2013). Acquisition-related expenses are
expensed as incurred in accordance with FASB guidance associated with business combination activities, with amounts included in
selling, general and administrative expenses in the statement of consolidated operations and comprehensive loss.
The results of operations and pro forma effects of the MWT acquisition are not significant relative to the Company and as such,
have been omitted.
Acquisition of Net Assets of VIEs
On March 27, 2013, ExOne Americas LLC acquired certain assets, including property and equipment (principally land, buildings
and machinery and equipment) held by two VIEs of the Company, TMF and Lone Star, and assumed all outstanding debt of such
VIEs.
Payments of approximately $1,900 and $200 were made to TMF and Lone Star, respectively, including a return of capital to the
entities of approximately $1,400. As the parties subject to this transaction were determined to be under common control, property and
equipment acquired in the transaction were recorded at their net carrying value on the date of acquisition (approximately $5,400)
similar to a pooling-of-interests. As the VIEs were consolidated by the Company in previous periods, no material differences exist due
to the change in reporting entity, and as such, no restatement of prior period financial statements on a combined basis is considered
necessary. There was no gain or loss or goodwill generated as a result of this transaction, as the total purchase price was equal to the
net book value of assets at the VIE level (previously consolidated by the Company). Simultaneous with the completion of this
transaction, the Company also repaid all of the outstanding debt assumed from the VIEs, resulting in a payment of approximately
$4,700. Subsequent to this transaction, neither TMF or Lone Star continued to meet the definition of a VIE with respect to ExOne, and
as a result, the remaining assets and liabilities of both entities were deconsolidated following the transaction, resulting in a reduction to
equity (through noncontrolling interest) of approximately $2,724.
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Note 5. Inventories
Inventories consist of the following at December 31:
Raw materials and components
Work in process
Finished goods
2015
2014
$
$
9,467
6,048
4,324
19,839
$
$
10,838
4,221
1,955
17,014
Raw materials and components consist of (i) consumable materials and (ii) 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 delivery in accordance
with customer specifications.
At December 31, 2015 and 2014, the allowance for slow-moving and obsolete inventories was approximately $1,909 and $1,241,
respectively, and has been reflected as a reduction to inventories (principally raw materials and components). Included in the
allowance for slow-moving and obsolete inventories at December 31, 2015 and 2014, is approximately $507 and $419 associated with
the Company’s laser micromachining product line which was discontinued at the end of 2014.
Note 6. Property and Equipment
Property and equipment consist of the following at December 31:
Land
Buildings and related improvements
Machinery and equipment
Other
Less: Accumulated depreciation
Construction-in-progress
Property and equipment - net
Economic Life
(in years)
N/A
5 - 40
3 - 20
3 - 20
2015
2014
$
$
6,969 $
28,498
23,935
5,995
65,397
(11,017)
54,380
452
54,832 $
7,154
27,031
18,510
4,935
57,630
(7,213)
50,417
4,881
55,298
Machinery and equipment includes assets leased by the Company of approximately $364 and $1,057 at December 31, 2015 and
2014, respectively.
Machinery and equipment includes assets leased to customers (principally 3D printing machines and related equipment) under
operating lease arrangements of approximately $2,267 and $1,371 at December 31, 2015 and 2014, respectively. The carrying value of
these assets was approximately $1,816 and $844 at December 31, 2015 and 2014, respectively.
Minimum future rentals of machinery and equipment under non-cancellable arrangements at December 31, 2015, are as follows:
2016
2017
2018
2019
2020
Thereafter
$
$
859
439
118
—
—
—
1,416
Depreciation expense was approximately $4,809, $4,139 and $2,372 for 2015, 2014 and 2013, respectively.
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Note 7. Impairment
During the quarter ended September 30, 2015, as a result of the significant decline in the market capitalization of the Company
and continued operating losses and cash flow deficiencies, the Company identified a triggering event requiring both (i) a test for the
recoverability of long-lived assets held for use at the asset group level and (ii) a test for impairment of goodwill at the reporting unit
level. Assessing the recoverability of long-lived assets held for use and goodwill requires significant judgments and estimates by
management.
For purposes of testing long-lived assets for recoverability, the Company operates as three separate asset groups: United States,
Europe and Japan. In assessing the recoverability of long-lived assets held for use, the Company determined the carrying amount of
long-lived assets held for use to be in excess of the estimated future undiscounted net cash flows of the related assets. The Company
proceeded to determination of the fair value of its long-lived assets held for use, principally through use of the market approach. The
Company’s use of the market approach included consideration of market transactions for comparable assets. Management concluded
that the fair value of long-lived assets held for use exceeded their carrying value and as such no impairment loss was recorded.
The Company subsequently performed an impairment test for goodwill. For purposes of testing goodwill for impairment, the
Company operates as a singular reporting unit. In assessing goodwill for impairment, the Company compared the fair value of its
reporting unit to its carrying value. The Company determined the fair value of its reporting unit through a combination of the market
approach and income approach. The Company’s use of the market approach included consideration of the Company’s market
capitalization along with consideration of other factors that could influence the use of market capitalization as a fair value estimate,
including premiums or discounts to be applied based on both market and entity-specific data. The Company’s use of the income
approach included consideration of present value techniques, principally the use of a discounted cash flow model. In performing the
impairment test for goodwill, the Company determined the carrying amount of goodwill to be in excess of the implied fair value of
goodwill. As a result, the Company recognized an impairment loss of approximately $4,419 associated with goodwill during the
quarter ended September 30, 2015.
The following table details the changes in the carrying amount of goodwill for the year ended December 31:
Beginning balance
Acquisition of businesses
Foreign currency translation adjustments
Impairment
Ending balance
$
$
4,665 $
—
(246)
(4,419)
— $
—
5,092
(427)
—
4,665
2015
2014
During the quarter ended December 31, 2015, as a result of continued operating losses and cash flow deficiencies, the Company
identified a triggering event requiring a test for the recoverability of long-lived assets held for use at the asset group level. The
Company conducted a similar recoverability test to the test further described above at the asset group level. Management concluded
that the fair value of long-lived assets held for use exceeded their carrying value and as such no impairment loss was recorded.
A significant decrease in the market price of a long-lived asset, adverse change in the use or condition of a long-lived asset,
adverse change in the business climate or legal or regulatory factors impacting a long-lived asset and continued operating losses and
cash flow deficiencies associated with a long-lived asset, among other indicators, could cause a future assessment to be performed
which may result in an impairment of long-lived assets held for use, resulting in a material adverse effect on the financial position and
results of operations of the Company.
Note 8. Intangible Assets
Intangible assets, which are included in other noncurrent assets on the accompanying consolidated balance sheet, were as follows:
December 31, 2015
Unpatented technology
Customer relationships
Trade names
Noncompetition agreement
Gross Carrying
Amount
Accumulated
Amortization
Net
$
$
1,323 $
464
53
15
1,855 $
(606) $
(122)
(22)
(9)
(759) $
717
342
31
6
1,096
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December 31, 2014
Unpatented technology
Customer relationships
Trade names
Noncompetition agreement
Gross Carrying
Amount
Accumulated
Amortization
Net
$
$
1,474 $
464
56
15
2,009 $
(307) $
(55)
(11)
(4)
(377) $
1,167
409
45
11
1,632
Amortization expense related to the intangible assets was approximately $418 and $381 for 2015 and 2014, respectively. There
were no intangible assets recorded by the Company at December 31, 2013.
Future estimated amortization expense related to the intangible assets at December 31, 2015, is approximately as follows:
2016
2017
2018
2019
2020
Thereafter
$
$
415
410
127
67
66
11
1,096
Note 9. Related Party Revolving Credit Facility
On October 23, 2015, ExOne and its ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors, entered into a Credit
Agreement (the “Credit Agreement”) with RHI Investments, LLC (“RHI”), a related party, on a $15,000 revolving credit facility to (i)
assist the Company in its efforts to finance customer acquisition of its 3D printing machines and 3D printed and other products and
services and (ii) provide additional funding for working capital and general corporate purposes. RHI was determined to be a related
party based on common control by the Chairman and CEO of the Company. Prior to execution, the Credit Agreement was subject to
review and approval by the Audit Committee of the Board of Directors and the independent members of the Board of Directors of the
Company. The Company incurred approximately $215 in deferred financing costs associated with the Credit Agreement.
There were no borrowings under the Credit Agreement from October 23, 2015 through December 31, 2015. For the year ended
December 31, 2015, the Company recorded interest expense relating to the Credit Agreement of approximately $39, of which
approximately $28 was related to the commitment fee on the unused portion of the revolving credit facility (100 basis points, or 1.0%
on the unused portion of the revolving credit facility) and $11 was related to the amortization of deferred financing costs (resulting in
remaining net deferred financing costs of approximately $204 at December 31, 2015, which are reflected in prepaid expenses and
other current assets in the accompanying consolidated balance sheet).
On January 10, 2016, the Company delivered notice to RHI of its intent to terminate the Credit Agreement in connection with the
closing of a registered direct offering of common equity to an entity under common control by the Chairman and CEO of the
Company (Note 20). There were no borrowings under the Credit Agreement from January 1, 2016 through the effective date of its
termination, January 13, 2016. In connection with the termination, the Company paid in-full its remaining accrued interest under the
Credit Agreement of approximately $5 relating to the commitment fee on the unused portion of the revolving credit facility. In
addition, during the quarter ending March 31, 2016, the Company will record approximately $204 to interest expense related to the
accelerated amortization of previously deferred financing costs. Upon termination of the Credit Agreement, all liens and guaranties in
respect thereof were released.
Note 10. Long-Term Debt
Long-term debt consists of the following at December 31:
Building note payable to a United States bank
2015
2014
$
1,950
$
2,082
Terms of the building note payable to a United States bank include monthly payments of approximately $18 including interest at
4.00% through May 2017, and subsequently, the monthly average yield on United States Treasury Securities plus 3.25% for the
remainder of the term through May 2027.
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At December 31, 2015, 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 to a United States bank. The Company requested and was granted a waiver related
to compliance with this annual covenant at December 31, 2015 and through December 31, 2016. Related to the 2015 noncompliance,
there were no cross default provisions or related impacts on other lending agreements.
Future maturities of long-term debt at December 31, 2015, are approximately as follows:
2016
2017
2018
2019
2020
Thereafter
$
$
138
139
142
150
158
1,223
1,950
At December 31, 2014, ExOne GmbH had separate line of credit and security agreements with a German bank for approximately
$600 (€500) and $1,000 (€800), respectively. Both agreements had an indefinite term and were subject to cancellation by either party
at any time upon repayment of amounts outstanding or expiration of certain transactions requiring security. There was no commitment
fee associated with either agreement. The line of credit agreement contained a negative covenant of an annual equity capital ratio for
ExOne GmbH of no less than 50%. At December 31, 2014, there were no outstanding borrowings under the line of credit agreement.
At December 31, 2014, ExOne GmbH had outstanding guarantees or letters of credit of approximately $1,442 (€1,186) against certain
commercial transactions requiring security under the security agreement. Outstanding guarantees or letters of credit in excess of the
security agreement limitation were separately approved by the German bank.
At December 31, 2014, ExOne GmbH identified that it was not in compliance with the annual equity capital ratio covenant
associated with the line of credit agreement. ExOne GmbH did not obtain a waiver related to compliance with this annual covenant
and believed its future borrowing abilities to be restricted on the basis of an event of default under the line of credit agreement. Based
on the cancellable nature of the line of credit agreement, any requests for borrowings were effectively subject to approval by the
German bank. Related to the 2014 noncompliance, there were no cross default provisions or related impacts on other lending
agreements.
In September 2015, ExOne GmbH and the German bank agreed to a cancellation of both the line of credit agreement and security
agreement concurrent with an agreement to a separate credit facility agreement. The credit facility agreement provides for various
short-term financings in the form of overdraft credit, guarantees, letters of credit and collateral security for various commercial
transactions for approximately $1,400 (€1,300). In addition, ExOne GmbH may use the credit facility agreement for short-term, fixed-
rate loans in minimum increments of approximately $110 (€100) with minimum terms of at least thirty days. The overdraft credit
interest rate is fixed at 10.2% while the interest rate associated with transactions requiring security (guarantees, letters of credit or
collateral agreements) is fixed at 1.75%. The credit facility agreement has an indefinite term and is subject to cancellation by either
party at any time upon repayment of amounts outstanding or expiration of certain transactions requiring security. There is no
commitment fee associated with the credit facility agreement. There are no negative covenants associated with the credit facility
agreement. The credit facility agreement has been guaranteed by the Company. At December 31, 2015, there were no outstanding
borrowings under the credit facility agreement. At December 31, 2015, ExOne GmbH had outstanding guarantees or letters of credit
of approximately $685 (€628) against certain commercial transactions requiring security.
Note 11. Leases
Capital and Financing
In March 2012, the Company entered into a sale-leaseback transaction with a bank for a 3D printing machine. Due to continuing
involvement outside of the normal leaseback by the Company, this transaction has been accounted for as a financing lease. Under the
terms of the agreement, the Company received proceeds of approximately $985 (€739) with repayment of the lease occurring over a
three-year period beginning in April 2012. In March 2015, this transaction expired resulting in a repurchase of the 3D printing
machine by the Company. The Company recognized a net gain of approximately $20 (€18) on the repurchase of the 3D printing
machine based on the difference between the purchase price and deferred income on the financing.
In November 2012, the Company entered into a sale-leaseback transaction with a bank for a 3D printing machine. Due to
continuing involvement outside of the normal leaseback by the Company, this transaction has been accounted for as a financing lease.
Under the terms of the agreement, the Company received proceeds of approximately $974 (€737) with repayment of the lease
occurring over a three-year period beginning in January 2013. In December 2015, this transaction expired resulting in a repurchase of
the 3D printing machine by the Company. The Company recognized a net loss of approximately $21 (€19) on the repurchase of the
3D printing machine based on the difference between the purchase price and deferred income on the financing.
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In addition, the Company leases certain other equipment and vehicles under capital lease arrangements, expiring in various years
through 2019.
Future maturities of capital leases at December 31, 2015, are approximately as follows:
2016
2017
2018
2019
2020
Thereafter
$
$
82
72
7
2
—
—
163
Operating
The Company leases various manufacturing and office facilities, machinery and other equipment and vehicles under operating
lease arrangements (with initial terms greater than twelve months), expiring in various years through 2020.
Future minimum lease payments of operating lease arrangements (with initial terms greater than twelve months) at December 31,
2015, are approximately as follows:
2016
2017
2018
2019
2020
Thereafter
$
$
340
259
185
41
18
—
843
Rent expense under operating lease arrangements was approximately $421, $982 and $1,072 for 2015, 2014 and 2013,
respectively.
Note 12. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following at December 31:
Accrued payroll and related costs
Product warranty reserves
Accrued sales commissions
Liability for uncertain tax positions
Accrued professional fees
Accrued license fees
Other
2015
2014
$
1,816
1,308
588
781
203
534
1,180
6,410 $
2,087
1,543
951
871
405
392
1,869
8,118
$
$
Note 13. Contingencies and Commitments
The Company and its subsidiaries 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 the financial position, results of operations
or cash flows of the Company.
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Note 14. Equity-Based Compensation
On January 24, 2013, the Board of Directors of the Company 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 (i) 3.0% of the total
outstanding shares of common stock as of December 31 of the immediately preceding year or (ii) a number of shares of common stock
determined by the Board of Directors, provided that the maximum number of shares authorized under the Plan will not exceed
1,992,241 shares, subject to certain adjustments.
The following table summarizes the total equity-based compensation expense recognized for awards issued under the Plan:
Equity-based compensation expense recognized:
Incentive stock options
Restricted stock
Stock bonus awards
Total equity-based compensation expense before income taxes
Benefit for income taxes*
Total equity-based compensation expense net of income taxes
2015
2014
2013
$
$
807 $
918
—
1,725
—
1,725 $
633 $
376
197
1,206
—
1,206 $
580
131
—
711
—
711
*
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, 2015, total future compensation expense related to unvested awards yet to be recognized by the Company was
approximately $436 for incentive stock options (“ISOs”) and $916 for restricted stock awards. 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 approximately 1.6 years.
Both ISOs and restricted stock awards issued by the Company vest in one-third increments on the first, second and third
anniversaries of the date of grant, respectively. Stock bonus awards issued by the Company vested immediately upon issuance.
During 2015, there were no ISOs issued by the Company. During 2014 and 2013, the fair value of ISOs was estimated on the date
of grant using the Black-Scholes option pricing model with the following assumptions:
Weighted average fair value per ISO
Volatility
Average risk-free interest rate
Dividend yield
Expected term (years)
$
2014
2013
9.60
$
67.00%
1.76%
0.00%
6.0
11.03
68.70%
1.07%
0.00%
6.0
Expected volatility has been estimated based on historical volatilities of certain peer group companies over the expected term of
the awards, due to a lack of historical stock prices for a period at least equal to the expected term of issued 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 has been calculated using
the simplified method as the Company does not have sufficient historical exercise experience upon which to base an estimate.
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The activity for ISOs was as follows:
Outstanding at December 31, 2012
ISOs granted
ISOs exercised
ISOs forfeited
ISOs expired
Outstanding at December 31, 2013
ISOs exercisable at December 31, 2013
ISOs expected to vest at December 31, 2013
Outstanding at December 31, 2013
ISOs granted
ISOs exercised
ISOs forfeited
ISOs expired
Outstanding at December 31, 2014
ISOs exercisable at December 31, 2014
ISOs expected to vest at December 31, 2014
Outstanding at December 31, 2014
ISOs granted
ISOs exercised
ISOs forfeited
ISOs expired
Outstanding at December 31, 2015
ISOs exercisable at December 31, 2015
ISOs expected to vest at December 31, 2015
Number of
ISOs
Weighted Average
Exercise Price
Weighted Average
Grant Date Fair
Value
— $
180,000 $
— $
(6,667) $
— $
173,333 $
— $
164,852 $
— $
18.00 $
— $
18.00 $
— $
18.00 $
— $
18.00 $
—
11.03
—
11.03
—
11.03
—
11.03
Weighted Average
Exercise Price
Weighted Average
Grant Date Fair
Value
Number of
ISOs
173,333 $
62,000 $
(18,529) $
(1,667) $
— $
215,137 $
39,804 $
166,638 $
Number of
ISOs
215,137 $
— $
— $
(3,334) $
(833) $
210,970 $
115,472 $
90,898 $
Weighted Average
Exercise Price
Weighted Average
Grant Date Fair
Value
18.00 $
15.74 $
18.00 $
18.00 $
— $
17.35 $
18.00 $
17.21 $
11.03
9.60
11.03
11.03
—
10.62
11.03
10.53
17.35 $
— $
— $
16.31 $
18.00 $
17.43 $
17.61 $
17.09 $
10.62
—
—
9.96
11.03
10.67
10.78
10.45
At December 31, 2015, there was no intrinsic value associated with ISOs exercisable or ISOs expected to vest. The weighted
average remaining contractual term of ISOs exercisable and ISOs expected to vest at December 31, 2015, was approximately 7.4 and
7.9 years, respectively. ISOs with an aggregate intrinsic value of approximately $312 were exercised by employees during 2014,
resulting in proceeds to the Company from the exercise of stock options of approximately $333. The Company received no income tax
benefit related to these exercises. There were no exercises during 2015 or 2013.
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The activity for restricted stock awards was as follows:
Outstanding at December 31, 2012
Restricted shares granted
Restricted shares vested
Restricted shares forfeited
Outstanding at December 31, 2013
Restricted shares expected to vest at December 31, 2013
Outstanding at December 31, 2013
Restricted shares granted
Restricted shares vested
Restricted shares forfeited
Outstanding at December 31, 2014
Restricted shares expected to vest at December 31, 2014
Outstanding at December 31, 2014
Restricted shares granted
Restricted shares vested
Restricted shares forfeited
Outstanding at December 31, 2015
Restricted shares expected to vest at December 31, 2015
Shares of
Restricted
Stock
Weighted Average
Grant Date Fair
Value
— $
20,000 $
— $
— $
20,000 $
20,000 $
—
23.26
—
—
23.26
23.26
Shares of
Restricted
Stock
Weighted Average
Grant Date Fair
Value
20,000 $
67,500 $
(6,666) $
— $
80,834 $
80,834 $
23.26
22.69
23.26
—
22.78
22.78
Shares of
Restricted
Stock
Weighted Average
Grant Date Fair
Value
80,834 $
26,000 $
(29,164) $
— $
77,670 $
77,670 $
22.78
13.23
22.82
—
19.57
19.57
Restricted shares vesting during 2015 and 2014 had a fair value of approximately $356 and $282, respectively. There was no
restricted share vesting during 2013.
Note 15. Income Taxes
Prior to Reorganization the Company was a limited liability company whereby its members were taxed on a proportionate share
of the Company’s taxable income. Following the merger of The Ex One Company, LLC with and into The ExOne Company, The
ExOne Company became a corporation, taxable for federal, state, local and foreign income tax purposes. On January 1, 2013, the
Company recorded a net deferred tax asset of approximately $410 based on the difference between the book and tax basis of assets
and liabilities as of that date. Due to a history of operating losses by the limited liability company, a valuation allowance of 100% of
the initial net deferred tax asset was established.
The components of loss before taxes were as follows:
United States
Foreign
Loss before income taxes
2015
(13,138) $
(12,900)
(26,038) $
2014
(15,683) $
(6,001)
(21,684) $
2013
(9,675)
3,728
(5,947)
$
$
The (benefit) provision for income taxes consisted of the following:
United States
Foreign
(Benefit) provision for income taxes
$
2015
Deferred
Current
$ — $
Total
Current
20 $
(20) $ — $
290
95
(151)
(153)
290 $ (131) $
95 $ (268) $ (173) $
(20) $
(248)
2014
Deferred
Total
Current
2013
Deferred
Total
20 $ — $ — $ —
370
139
370
159 $
370
370 $ — $
—
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The net benefit for deferred income taxes for 2015 and 2014 includes approximately $116 and $54, respectively, associated with
net operating loss carryforwards.
A reconciliation of the (benefit) provision for income taxes at the United States statutory rate of 34.0% to the effective rate of the
Company for the years ended December 31 is as follows:
2015
2014
2013
United States statutory rate (34.0%)
(Loss) income of foreign disregarded entity
Taxes on foreign operations
Increase in uncertain tax positions
Goodwill impairment
Net change in valuation allowances
Permanent differences and other
(Benefit) provision for income taxes
Effective tax rate
$
$
(8,853) $
(2,746)
648
—
1,031
9,173
574
(173) $
0.7%
$
(7,373)
(212)
119
210
—
6,980
435
159
(0.7)%
$
(2,022)
87
3
323
—
2,029
(50)
370
(6.2)%
The components of deferred income tax assets and liabilities consist of the following at December 31:
Deferred tax assets
Accounts receivable
Inventories
Property and equipment
Accrued expenses and other current liabilities
Net operating loss carryforwards
Tax credit carryforwards
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Property and equipment
Other
Total deferred tax liabilities
Net deferred tax liabilities*
2015
2014
655 $
796
—
699
17,475
779
1,447
(20,089)
1,762
(943)
(847)
(1,790)
(28) $
836
300
403
849
7,375
765
1,012
(11,069)
471
—
(794)
(794)
(323)
$
$
*
At December 31, 2015 and 2014, net deferred tax liabilities were reflected in other noncurrent liabilities in the consolidated
balance sheet.
The Company has provided a valuation allowance for its net deferred tax assets as a result of the Company not generating
consistent net operating profits. As such, any benefit from deferred taxes in any of the periods presented has 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 (i) recent historical operating results, (ii) the expected timing of reversal of temporary differences, (iii) various
tax planning strategies that the Company may be able to enact in future periods, (iv) the impact of potential operating changes on the
business and (v) 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 deferred tax assets are realizable based on any combination of the
above factors, a reversal of existing valuation allowances may occur.
The following table summarizes changes to the Company’s valuation allowances for the years ended December 31:
Beginning balance
Increase to allowances
Foreign currency translation and other adjustments
Ending balance
2015
2014
$
$
11,069 $
9,173
(153)
20,089 $
5,172
6,980
(1,083)
11,069
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At December 31, 2015, the Company had approximately $39,949 in net operating loss carryforwards which expire from 2033 to
2035 and $765 in tax credit carryforwards which expire in 2023, to offset the future taxable income of its United States subsidiary. At
December 31, 2015, the Company had approximately $2,769 in net operating loss carryforwards which expire from 2016 through
2022, to offset the future taxable income of its Japanese subsidiary. At December 31, 2015, the Company had approximately $11,323
in net operating loss carryforwards which do not expire, to offset the future taxable income of its collective German, Italian and
Swedish subsidiaries.
The Company has a liability for uncertain tax positions related to certain capitalized expenses and intercompany transactions. At
December 31, 2015 and 2014, the liability for uncertain tax positions was approximately $781 and $871, respectively, and is included
in accrued expenses and other current liabilities in the consolidated balance sheet. At December 31, 2015 and 2014, the Company had
an additional liability for uncertain tax positions related to its ExOne GmbH (Germany) subsidiary of approximately $195 (for both
years) which was fully offset against net operating loss carryforwards. At December 31, 2015 and 2014, the Company had an
additional liability for uncertain tax positions related to its ExOne KK (Japan) subsidiary of approximately $285 and $159,
respectively, which were fully offset against net operating loss carryforwards.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at December 31 was as follows:
Beginning balance
Increases related to current year tax positions
Foreign currency translation adjustments
Ending balance
2015
2014
2013
$
$
871 $
—
(90)
781 $
768 $
210
(107)
871 $
416
323
29
768
The Company includes interest and penalties related to income taxes as a component of the (benefit) provision for income taxes in
the consolidated statement of operations and comprehensive loss.
The Company files income tax returns in the United States (effective in 2013), Germany, Italy (effective in 2014), Sweden
(effective 2015) and Japan. The following table summarizes tax years remaining subject to examination for each of the Company’s
subsidiaries at December 31, 2015:
Jurisdiction
United States
Germany*
Italy
Sweden
Japan
Tax Years
Remaining Subject
to Examination
2013-2015
2010-2015
2014-2015
2015
2010-2015
*
At December 31, 2015, our ExOne GmbH (2010-2013) and ExOne Property GmbH (2013) subsidiaries were under examination
by local taxing authorities.
Note 16. Fair Value Measurements
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. When determining the fair value measurements for assets and liabilities which
are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company
would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or
liability, such as inherent risk, transfer restrictions and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and
bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 Observable inputs such as quoted prices in active markets for identical investments that the Company has the ability to access.
Level 2 Inputs include:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;
Inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
Level 3 Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability.
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The Company is required to disclose its estimate of the fair value of material financial instruments, including those recorded as
assets or liabilities in its consolidated financial statements.
The following table sets forth the fair value of the Company’s liabilities measured on a recurring basis by level at December 31:
Contingent consideration*
Level
3
2015
2014
$
— $
190
*
Contingent consideration is included in accrued expenses and other current liabilities in the accompanying consolidated balance
sheet.
The fair value of contingent consideration associated with the MAM acquisition is determined by using certain forecasts of future
profitability of MAM (an unobservable input). The valuation technique utilized by the Company with respect to this instrument is a
discounted cash flow model, principally based on the assumption of achievement of the profitability targets stipulated in the earn-out
provision. Future expected payments have been discounted using a market interest rate assumption.
Terms of the earn-out provision require minimum achievement of revenues and gross profit for the year ended December 31 as
follows:
Revenue
Gross profit
2015
2014*
$
$
3,500 $
875 $
2,490
623
*
For 2014, targets are representative of revenues and gross profit for the period from the date of acquisition (March 3, 2014)
through December 31, 2014.
During 2015, the Company recorded net changes in the fair value of contingent consideration issued in connection with the MAM
acquisition of approximately ($190), with a corresponding amount (a net benefit) recorded to selling, general and administrative
expenses. Changes in contingent consideration recorded by the Company during 2015 are based on (i) revisions of estimates of
revenues and gross profit for MAM for the year ended December 31, 2015 and (ii) the impact of discounting future cash payments on
the associated liabilities. During 2014, the Company recorded net changes in the fair value of contingent consideration issued in
connection with the MAM acquisition of approximately ($185), with a corresponding amount (a net benefit) recorded to selling,
general and administrative expenses. Changes in contingent consideration recorded by the Company during 2015 are based on
(i) revisions of estimates of revenue and gross profit for MAM for the period from acquisition (March 3, 2014) through December 31,
2014 and (ii) the impact of discounting future cash payments on the associated liabilities.
The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial instruments:
Beginning balance
Purchases
Sales
Issuances
Settlements
Realized (gains) losses
Unrealized (gains) losses
Transfers into Level 3
Transfers out of Level 3
Ending balance
Year Ended
December 31,
2015
2014
$
$
190 $
—
—
—
—
(193)
3
—
—
— $
—
—
—
375
—
(195)
10
—
—
190
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The carrying values and fair values of other financial instruments (assets and liabilities) not required to be recorded at fair value
were as follows:
Cash and cash equivalents
Current portion of long-term debt
Current portion of capital and financing leases
Long-term debt - net of current portion
Capital and financing leases - net of current portion
December 31,
2015
December 31,
2014
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$
$
$
$
$
19,342 $
138 $
82 $
1,812 $
81 $
19,342 $
138 $
82 $
1,800 $
81 $
36,202 $
132 $
346 $
1,950 $
164 $
36,202
132
346
2,022
164
The carrying amounts of cash and cash equivalents, current portion of long-term debt and current portion of capital and financing
leases approximate fair value due to their short-term maturities. Cash and cash equivalents are classified in Level 1; current portion of
long-term debt, current portion of capital and financing leases, long-term debt — net of current portion and capital and financing
leases – net of current portion are classified in Level 2.
Note 17. Customer Concentrations
During 2015, 2014 and 2013, the Company conducted a significant portion of its business with a limited number of customers.
For 2015, 2014 and 2013 the Company’s five most significant customers represented approximately 19.0%, 23.1% and 25.5% of total
revenue, respectively. At December 31, 2015 and 2014, accounts receivable from the Company’s five most significant customers were
approximately $4,808 and $6,326, respectively.
Note 18. Related Party Transactions
Revenues
In December 2014, the Company entered into a sale agreement for a 3D printing machine with a powdered metal company with
proprietary powders determined to be a related party based on common control by the Chairman and CEO of the Company. Total
consideration for the 3D printing machine (approximately $1,000) was determined to represent a fair market value selling price (based
on comparable 3D printing machine sales to third parties) and was approved prior to execution by the Audit Committee of the Board
of Directors of the Company. During 2014 and 2015, the Company recorded revenue of approximately $815 and $185, respectively,
based on the delivery of products and/or services. At December 31, 2014, the amount due from this customer relating to this
transaction was approximately $90 (amount net of the value of undelivered products and/or services due to the customer) and was
reflected in accounts receivable – net, on the consolidated balance sheet. All of the proceeds associated with this transaction have
been received by the Company at December 31, 2015.
In March 2015, the Company entered into a separate sale agreement for a 3D printing machine with the same powdered metal
company with proprietary powders described above. Total consideration for the 3D printing machine (approximately $950) was
determined to represent a fair market value selling price (based on comparable 3D printing machine sales to third parties) and was
approved prior to execution by the Audit Committee of the Board of Directors of the Company. During 2015, the Company recorded
revenue of approximately $913 based on the delivery of products and/or services. At December 31, 2015, the Company continued to
defer the remaining consideration covered under this transaction (approximately $37) as certain additional products and/or services
remained undelivered by the Company. All of the proceeds associated with this transaction have been received by the Company at
December 31, 2015.
In June 2015, the Company entered into a sale agreement for a 3D printing machine with a multi-national, diversified metals
company determined to be a related party on the basis that a member of the Board of Directors of the Company also receives his
principal compensation from the related party. Total consideration for the 3D printing machine (approximately $146) was determined
to represent a fair market value selling price (based on comparable 3D printing machine sales to third parties) and was approved prior
to execution by the Audit Committee of the Board of Directors of the Company. During 2015, the Company recorded revenue of
approximately $146 based on the delivery of products and/or services. All of the proceeds associated with this transaction have been
received by the Company at December 31, 2015.
In December 2015, the Company entered into a separate sale agreement for a 3D printing machine with the same multi-national,
diversified metals company described above. Total consideration for the 3D printing machine (approximately $120) was determined to
represent a fair market value selling price (based on comparable 3D printing machine sales to third parties) and was approved prior to
execution by the Audit Committee of the Board of Directors of the Company. During 2015, the Company recorded revenue of
approximately $120 based on the delivery of products and/or services. None of the proceeds associated with this transaction have
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been received by the Company at December 31, 2015. At December 31, 2015, the amount due from this customer relating to this
transaction is reflected in accounts receivable – net, in the consolidated balance sheet.
During 2015 and 2014, additional sales of products and/or services to identified related parties were approximately $71 and $56,
respectively. There were no additional sales of products and/or services to identified related parties during 2013. Amounts due from
these related parties at December 31, 2015 and 2014, were approximately $31 and $30, respectively and are reflected in accounts
receivable – net, on the consolidated balance sheet.
Expenses
In December 2014, the Company entered into a consulting arrangement with Hans J. Sack who was subsequently appointed to the
Board of Directors of the Company on December 17, 2014. Total consideration under the consulting arrangement was approximately
$75, of which approximately $50 was included in selling, general and administrative expenses in the statement of consolidated
operations and comprehensive loss during 2015 based on the services rendered (the remaining amount having been recorded by the
Company during 2014). This arrangement was approved by the Audit Committee of the Board of Directors of the Company in
connection with the appointment of Hans J. Sack to the Board of Directors of the Company. In March 2015, Hans J. Sack resigned
from the Board of Directors of the Company to accept a position as President of the Company.
Separate from the consulting arrangement further described above, the Company has purchased certain raw materials and
components, website design services and the corporate use of an airplane and leased office space from related parties under common
control by the Chairman and CEO of the Company. During 2015, 2014 and 2013, purchases from these related parties were
approximately $27, $90 and $185, respectively. None of the transactions met a threshold requiring review and approval by the Audit
Committee of the Board of Directors of the Company prior to execution. Amounts due to these related parties at December 31, 2015,
were approximately $15 of which approximately $1 and $14 are reflected in accounts payable and accrued expenses and other current
liabilities, respectively, in the accompanying consolidated balance sheet. Amounts due to these related parties at December 31, 2014,
were approximately $29 of which approximately $1 and $28 are reflected in accounts payable and accrued expenses and other current
liabilities, respectively, in the accompanying consolidated balance sheet.
During 2013, the Company provided various services to several identified related parties under common control by the Chairman
and CEO of the Company, primarily in the form of accounting, finance, information technology and human resource outsourcing. The
cost of these services was approximately $133 which were reimbursed to the Company by the respective related parties (recorded as a
credit against selling, general and administrative expense in the statement of consolidated operations and comprehensive loss). The
provision of these services by the Company to the respective related parties was discontinued by the Company in 2013 following the
closing of the initial public offering of the Company.
The Company also receives the benefit of the corporate use of an airplane from a related party under common control by the
Chairman and CEO of the Company for no consideration. The Company estimates the fair market value of the benefits received
during the 2015 and 2014 were approximately $38 and $34, respectively. There were no such benefits received during 2013.
Other
Refer to Note 9 for further discussion relating to the Company’s revolving credit facility with a related party and Note 20 for
further discussion relating to two separate equity offerings in 2016, certain elements of which qualify as related party transactions.
Note 19. Segment, Product 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, Italy, Sweden and Japan.
Revenue by product for the year ended December 31 was as follows:
3D printing machines
3D printed and other products, materials and services
2015
2014
2013
$
$
15,464 $
24,889
40,353 $
22,792 $
21,108
43,900 $
24,851
14,629
39,480
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Geographic information for revenue for the year ended December 31 was as follows (based on the country where the sale
originated):
United States
Germany
Japan
Italy
Sweden
2015
2014
2013
$
$
19,817 $
14,174
5,613
684
65
40,353 $
21,115 $
18,118
4,623
44
—
43,900 $
14,596
14,744
10,140
—
—
39,480
Geographic information for long-lived assets at December 31 was as follows (based on the physical location of assets):
United States
Germany
Japan
Italy
Sweden
Note 20. Subsequent Events
At Market Issuance Offering
2015
2014
$
$
20,984 $
27,417
5,210
1,213
8
54,832 $
20,334
28,522
4,978
1,464
—
55,298
On January 8, 2016, the Company announced that it had entered into an At Market Issuance Sales Agreement (“ATM”) with FBR
Capital Markets & Co. (“FBR”) and MLV & Co. LLC (“MLV”) pursuant to which FBR and MLV will act as distribution agents in
the sale of up to $50,000 in the aggregate of ExOne common equity in “at the market offerings” as defined in Rule 415 under the
Securities Act of 1933, as amended. Both FBR and MLV have been identified as related parties to the Company on the basis of
significant influence in that a member of the Board of Directors of the Company also serves as a member of the Board of Directors of
FBR (which controls MLV). The terms of this transaction were reviewed and approved by a sub-committee of the Board of Directors
of the Company (which included each of the members of the Audit Committee of the Board of Directors except for the identified
director who also holds a position on the Board of Directors of FBR). Terms of the distribution agreement require a 3.0% commission
on the sale of common equity shares under the ATM and a reimbursement of certain legal expenses of approximately $25. Through
March 22, 2016, the Company sold 91,940 shares under the ATM at a weighted average selling price of approximately $9.17 per share
resulting in gross proceeds of approximately $843. Net proceeds to the Company from the sale of shares under the ATM during this
time period were approximately $595 (after deducting offering costs of approximately $248, of which approximately $50 was paid to
FBR or MLV relating to the aforementioned reimbursement of certain legal expenses and commissions on the sale of shares under the
ATM).
Registered Direct Offering to a Related Party
On January 11, 2016, the Company announced that it had entered into a subscription agreement with Rockwell Forest Products,
Inc. and S. Kent Rockwell for the registered direct offering and sale of 1,423,877 shares of ExOne common equity at a per share price
of $9.13 (a $0.50 premium from the closing price on the close of business on January 8, 2016). The terms of this transaction were
reviewed and approved by a sub-committee of independent members of the Board of Directors of the Company (which included each
of the members of the Audit Committee of the Board of Directors). The sub-committee of independent members of the Board of
Directors of the Company were advised on the transaction by an independent financial advisor and independent legal counsel.
Concurrent with the approval of this sale of shares under the terms identified, the independent members of the Board of Directors also
approved the termination of the Company’s revolving credit facility with RHI Investments, LLC (Note 9). Gross proceeds from the
sale of shares in this offering were approximately $13,000. Net proceeds to the Company from the sale of shares in this offering were
approximately $12,447 (after deducting offering costs of approximately $553).
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.
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The ExOne Company and Subsidiaries
Supplemental Quarterly Financial Information (unaudited)
(in thousands, except per-share amounts)
Revenue - third party
Revenue - related party
Total
Gross profit
Net loss attributable to ExOne
Net loss attributable to ExOne per common share*:
Basic
Diluted
Revenue - third party
Revenue - related party
Total
Gross profit
Net loss attributable to ExOne
Net loss attributable to ExOne per common share*:
Basic
Diluted
For the Quarter Ended
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
$
$
$
$
$
$
16,057 $
141
16,198 $
6,069 $
(1,219) $
8,712 $
152
8,864 $
1,169 $
(10,077) $
7,358 $
1,140
8,498 $
1,105 $
(6,898) $
6,791
2
6,793
—
(7,671)
(0.08) $
(0.08) $
(0.70) $
(0.70) $
(0.48) $
(0.48) $
(0.53)
(0.53)
For the Quarter Ended
December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
$
$
$
$
$
$
14,926 $
839
15,765 $
3,855 $
(7,200) $
9,640 $
9
9,649 $
2,487 $
(4,451) $
11,200 $
1
11,201 $
2,496 $
(4,665) $
7,263
22
7,285
1,619
(5,527)
(0.50) $
(0.50) $
(0.31) $
(0.31) $
(0.32) $
(0.32) $
(0.38)
(0.38)
*
Per-share amounts are calculated independently for each quarter presented; therefore the sum of the quarterly per-share amounts
may not equal the per-share amounts for the year.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2015. 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 SEC’s 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
company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost benefit relationship of possible controls and procedures. Based on this evaluation, management concluded as of December 31,
2015, that our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in
our internal control over financial reporting, which are described below.
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2015, we concluded
that there are 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 identified material weaknesses in internal control over financial
reporting is as follows:
The design and operating effectiveness of internal controls related to our financial reporting process were not sufficient to allow
for accurate and timely reporting of our consolidated financial results. We did not maintain adequate control with respect to the
application of GAAP. This was principally due to a lack of personnel with adequate knowledge and experience in GAAP. As a result,
we recorded certain manual, post-close adjustments in order to prepare the consolidated financial statements included in this Annual
Report on Form 10-K.
The design and operating effectiveness of internal controls related to our information technology systems was not sufficient to
allow for accurate and timely reporting of our consolidated financial results. Each of our primary locations (United States, Germany,
Italy, Sweden and Japan) utilizes separate and distinct information technology platforms to record, process and summarize
transactions. As a result, our process to consolidate and report financial information is substantially a manual process and inherently
subject to error.
The design and operating effectiveness of internal controls related to our consolidation process and management’s review of our
consolidated financial results did not operate at a level of precision sufficient to allow for accurate and timely reporting of our
consolidated financial results. Our consolidation process is substantially a manual process and inherently subject to error. Further,
because of internal control weaknesses identified with respect to our financial reporting process and information technology systems,
management was unable to complete an adequate review of either subsidiary or consolidated financial results at a sufficient level of
precision to prevent or detect misstatements. As a result, we recorded certain manual, post-close adjustments in order to prepare the
consolidated financial statements included in this Annual Report on Form 10-K.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal
control system is designed to provide reasonable assurance to our management and Board of Directors regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. All
internal control systems, no matter how well designed, have inherent limitations. Accordingly, even effective controls can provide
only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that the
Company did not maintain effective internal control over financial reporting as of December 31, 2015, due to the existence of
identified material weaknesses.
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As a result of material weaknesses identified, we performed additional analysis and other post-closing procedures to ensure our
consolidated financial statements were prepared in accordance with GAAP. Accordingly, management believes that the consolidated
financial statements and related notes thereto included in this Annual Report on Form 10-K fairly present, in all material respects, our
financial condition, results of operations and cash flows for the periods presented.
As an emerging growth company, we are exempt from the requirement to obtain an attestation report from our independent
registered public accounting firm on the assessment of our internal controls pursuant to the Sarbanes-Oxley Act of 2002 until 2018, or
such time that we no longer qualify as an emerging growth company in accordance with the Jumpstart Our Business Startups Act of
2012.
Changes in Internal Control over Financial Reporting
During 2015, with the oversight of executive management and the Audit Committee of our Board of Directors, we continued to
take steps and additional measures to remediate the underlying causes of our identified material weaknesses including:
(i)
(ii)
Enhancing our global accounting and reporting process (including our global consolidation of financial information) by
redesigning and strengthening the operating effectiveness of internal controls over financial reporting. This includes a
detailed review of our existing processes, improvements to the design of our internal controls (including conversion of
historically manual control activities to automated control activities), updating documentation related to our business
process flows, internal testing of operating effectiveness of our controls and remediation activities, as necessary. This
process began in mid-2014 and we expect it to continue during 2016 and beyond as a means of continuous improvement.
Evaluating our information technology systems to further integrate existing systems or invest in improvements to our
technology sufficient to generate accurate and timely financial information. On January 1, 2015, we implemented the first
phase of a new ERP system for our Europe operations. Despite certain difficulties encountered in the initial
implementation phase of this project, resulting in a delay of the filing of our Quarterly Report on Form 10-Q for the period
ended March 31, 2015, we believe that this system, when fully implemented, provides a substantial upgrade in operational
and financial reporting as compared to our legacy systems. We continue to address the difficulties encountered in the
initial implementation in a variety of ways, including through the direct hire of personnel and collaboration with external
consultants, both with system expertise, in an effort to resolve identified issues in a timely and efficient manner. Our 2016
information technology plan includes additional upgrades or enhancements of this system, as well as our other existing
information technologies (including the addition of a global consolidation software) with the overall goal of a simple,
common and global platform for processing, recording and analyzing financial and operational data.
(iii) Continuing to add financial personnel with adequate knowledge and experience in GAAP. In 2015, we hired a new Chief
Financial Officer and new Heads of Accounting and Controlling for our Europe operations, each of whom possess
extensive knowledge of GAAP and experience in working with or for a United States based multi-national operation. As
part of our redesign of our global reporting structure and responsibilities, we have added additional personnel (both
temporary and permanent) with requisite GAAP experience to both our United States and Europe operations during
2015. We do not expect a further significant investment in personnel in 2016.
Item 9B. Other Information.
None.
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Item 10. Directors, Executive Officers and Corporate Governance.
PART III
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,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “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 18, 2016, which will be filed with the SEC within 120 days of the end of the fiscal
year ended December 31, 2015.
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 18, 2016, which
will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2015.
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 (i) 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 (ii) 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 18, 2016, which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2015.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated by reference from the information under the captions “Independence of the
Board of Directors and Committees” and “Transactions with Related Persons” in our definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 18, 2016, which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2015.
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 18, 2016, which will be filed
with the SEC within 120 days of the end of the fiscal year ended December 31, 2015.
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.
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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.
Signatures
The ExOne Company
By:
/s/ S. Kent Rockwell
S. Kent Rockwell
Chief Executive Officer
Date: March 22, 2016
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/ S. Kent Rockwell
March 22, 2016
/s/ Brian W. Smith
/s/ Lloyd A. Semple
/s/ John Irvin
March 22, 2016
March 22, 2016
March 22, 2016
/s/ Raymond J. Kilmer
March 22, 2016
/s/ Victor Sellier
March 22, 2016
/s/ Bonnie K. Wachtel
March 22, 2016
/s/ William Strome
March 22, 2016
Chief Executive Officer; Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
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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
2.1
2.2
2.3
2.4
2.5
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Description
Method of Filing
Asset Purchase Agreement dated March 27, 2013 between
ExOne Americas LLC (f/k/a ProMetal RCT, LLC) and
Troy Metal Fabricating, LLC.
Asset Purchase Agreement dated March 27, 2013 between
ExOne Americas LLC (f/k/a ProMetal RCT, LLC) and
Lone Star Metal Fabrication, LLC.
Asset Purchase Agreement dated March 3, 2014 by and
between ExOne Americas LLC, Machin-A-Mation
Corporation, Metal Links, LLC and William R. Dega.
Incorporated by reference to Exhibit 2.1 to Form 8-K
(#001-35806) filed on March 29, 2013.
Incorporated by reference to Exhibit 2.2 to Form 8-K
(#001-35806) filed on March 29, 2013.
Incorporated by reference to Exhibit 2.1 to Form 8-K
(#001-35806) filed on March 7, 2014.
Purchase and Assignment Contract dated March 6, 2014
between Reinhard Schulze and ExOne GmbH.
Incorporated by reference to Exhibit 2.2 to Form 8-K
(#001-35806) filed on March 7, 2014.
Real Estate Sale and Purchase Agreement dated May 29,
2014 by and between Dusty YK and ExOne KK.
Incorporated by reference to Exhibit 2.1 to Form 8-K
(#001-35806) filed on June 2, 2014.
Certificate of Incorporation.
Incorporated by reference to Exhibit 3.1 to Form S-1
Registration Statement (#333-185933) filed on January 8,
2013.
Amended and Restated Bylaws, as amended through
August 19, 2013.
Filed herewith.
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.
Amended and Restated Exclusive Patent License
Agreement dated January 1, 2011 between Massachusetts
Institute of Technology and The Ex One Company, LLC.
Incorporated by reference to Exhibit 10.01.01 to
Amendment No. 1 to Form S-1 Registration Statement
(#333-185933) filed on January 24, 2013.
First Amendment dated January 22, 2013, to the Amended
and Restated Exclusive Patent License Agreement dated
January 1, 2011 between Massachusetts Institute of
Technology and The Ex One Company, LLC.
Employment Agreement dated June 1, 2012 between the
Company and S. Kent Rockwell.*
Incorporated by reference to Exhibit 10.01.02 to
Amendment No. 1 to Form S-1 Registration Statement
(#333-185933) filed on January 24, 2013.
Incorporated by reference to Exhibit 10.2 to Form S-1
Registration Statement (#333-185933) filed on January 8,
2013.
Employment Agreement dated December 23, 2013 between
the Company and Rainer Hoechsmann.*
Incorporated by reference to Exhibit 10.1 to
Form 8-K (#001-35806) filed on December 23, 2013.
Managing Director Contract dated December 23, 2013
between the Company and Rainer Hoechsmann.*
Incorporated by reference to Exhibit 10.2 to
Form 8-K (#001-35806) filed on December 23, 2013.
Employment Agreement dated March 7, 2013 between the
Company and JoEllen Lyons Dillon.*
Incorporated by reference to Exhibit 10.17 to
Form 10-K (#001-35806) filed on March 29, 2013.
Letter dated March 10, 2015 from the Company to Hans J.
Sack.*
Incorporated by reference to Exhibit 10-.1 to Current
Report on Form 8-K (#001-35806) filed on March 13,
2015.
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.
10.8
2013 Equity Incentive Plan.*
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Exhibit
Number
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
21.1
23.1
31.1
31.2
32
101
Description
Method of Filing
Form of Restricted Stock Award Agreement under 2013
Equity Incentive Plan.*
Form of Award Agreements under 2013 Equity Incentive
Plan.*
Form of Stock Bonus Agreement under 2013 Equity
Incentive Plan.*
2015 ExOne Umbrella Annual Incentive Plan 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.
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.
Incorporated by reference to Exhibit 10.26 to Form 10-K
(#001-35806) for year ended December 31, 2013 filed on
March 20, 2014.
Incorporated by reference to Exhibit 10.13 to Form 10-K
(#001-35806) for year ended December 31, 2014 filed on
March 26, 2015.
Overdraft Facility dated September 18, 2015 between
Sparkasse and ExOne GmbH.
Incorporated by reference to Exhibit 10.2 to Form 8-K
(#001-35806) filed on October 27, 2015.
Credit Agreement dated October 23, 2015 among the
Company, ExOne Americas LLC, ExOne GmbH and RHI
Investments, LLC.
Leasing Contract, Agreement Concerning Use of Machine,
Sale and Leaseback Agreement dated November 21, 2012
between ExOne GmbH and Deutsche-Leasing für
Sparkassen und Mittelstand GmbH (translated from
German).
Incorporated by reference to Exhibit 10.1 to Form 8-K
(#001-35806) filed on October 27, 2015.
Incorporated by reference to Exhibit 10.16 to Amendment
No. 1 to Form S-1 Registration Statement (#333-185933)
filed on January 24, 2013.
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.
Statement of Work dated March 6, 2014 among the
Company, ExOne GmbH and proALPHA Consulting
GmbH.
At Market Issuance Sales Agreement dated January 8, 2016
among the Company, FBR Capital Markets & Co. and
MLV & Co. LLC.
Subscription Agreement dated January 10, 2016 among the
Company, Rockwell Forest Products, Inc. and S. Kent
Rockwell (solely for purposes of being bound by Section
4.5 thereof).
Incorporated by reference to Exhibit 1.1 to Form 8-K
(#001-35806) filed on March 11, 2014.
Incorporated by reference to Exhibit 10.1 to Form 8-K
(#001-35806) filed on January 11, 2016.
Incorporated by reference to Exhibit 10.1 to Form 8-K
(#001-35806) filed on January 11, 2016.
Subsidiaries of the Registrant.
Consent of Baker Tilly Virchow Krause, LLP.
Rule 13(a)-14(a) Certification of Principal Executive
Officer.
Rule 13(a)-14(a) Certification of Principal Financial
Officer.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Section 1350 Certification of Principal Executive Officer
and Principal Financial Officer.
Filed herewith.
Interactive Data File.
Filed herewith.
Each management contract and compensatory arrangement in which any director or any named executive officer participates has
been marked with an asterisk (*).
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You can obtain copies of these exhibits 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 this
Annual Report on Form 10-K on ExOne’s corporate website at www.exone.com. Stockholders may also obtain copies of exhibits
without charge by contacting the Chief Legal Officer and Corporate Secretary at (724) 863-9663. The Interactive Data File (XBRL)
exhibit is only available electronically.
Pursuant to the rules and regulations of the SEC, The ExOne Company has 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 (i) may have been qualified by
disclosures made to such other party or parties, (ii) 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 The ExOne Company’s
public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards
that are different from what may be viewed as material to investors. Accordingly, these representations and warranties may not
describe The ExOne Company’s actual state of affairs at the date hereof and should not be relied upon.
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STOCKHOLDER AND CORPORATE INFORMATION
Annual Meeting of
Stockholders
May 18, 2016
10:00am EDT
The ExOne Company
127 Industry Boulevard
North Huntingdon, PA 15642 USA
Common Stock
NASDAQ: XONE
Corporate Headquarters
127 Industry Boulevard
North Huntingdon, PA 15642 USA
+1 724 863 9663
Investor Relations
Brian Smith
Chief Financial Officer
+1 724 765 1310
brian.smith@exone.com
Karen Howard
Kei Advisors LLC
+1 716 843 3942
khoward@keiadvisors.com
Board of Directors
S. Kent Rockwell 1,2,3
Chairman
John Irvin 1,2
Director
Raymond J. Kilmer 1,2,3,5,6
Independent Director
Gregory F. Pashke 2
Independent Director Nominee
Victor Sellier 1,3,4,6
Independent Director
Lloyd A. Semple 1,2,5,6
Lead Independent Director
William Strome 1,2,3,4
Independent Director
Bonnie K. Wachtel 1,2,4,5
Independent Director
1 – Term expiring at 2016 Annual Meeting
2 – Nominated for election at 2016 Annual Meeting
3 – Strategic Oversight Committee
4 – Audit Committee
5 – Compensation Committee
6 – Nominating and Governance Committee
Brief bios for the directors are contained under the heading
“Proposal 1 – Election of Directors” in the Proxy Statement,
which has been furnished with this Annual Report.
Independent Registered
Public Accounting Firm
Baker Tilly Virchow Krause, LLP
Pittsburgh, Pennsylvania
Registrar / Transfer Agent
Please direct questions about lost
certificates, change of address and
changes in registered ownership to the Com-
pany’s transfer agent and registrar:
American Stock Transfer &
Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219 USA
+1 800 937 5449
Executive Offi cers
S. Kent Rockwell
Chief Executive Officer
Hans Sack
President
JoEllen Lyons Dillon
Executive Vice President, Chief Legal
Officer and Corporate Secretary
Rainer Hoechsmann
Chief Development Officer and
General Manager of ExOne GmbH
Rick Lucas
Chief Technology Officer
Brian Smith
Chief Financial Officer and Treasurer
Investor information is available on the
Company’s website: www.exone.com
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