xone-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021


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

For the transition period from to

Commission File No. 001-35806

The ExOne Company

(Exact name of registrant as specified in its charter)

Delaware

46-1684608

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

127 Industry Boulevard

North Huntingdon, Pennsylvania 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 Exchange Act:


Title of class	Trading symbol	Name of exchange on which registered
Common stock	XONE	The Nasdaq Stock Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

As of November 12, 2021, 22,401,254 shares of common stock, par value $0.01, were outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

The ExOne Company and Subsidiaries

Condensed Statement of Consolidated Operations and Comprehensive Loss (Unaudited)

(in thousands, except per-share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenue	$	19,043		$	17,399		$	50,846		$	41,881
Cost of sales		13,721			13,500			38,648			31,263
Gross profit		5,322			3,899			12,198			10,618
Operating expenses
Research and development		2,909			2,013			8,541			6,858
Selling, general and administrative		9,585			4,825			22,676			15,476
Gain from sale-leaseback of property and equipment		—			—			—			(1,462	)
		12,494			6,838			31,217			20,872
Loss from operations		(7,172	)		(2,939	)		(19,019	)		(10,254	)
Other (income) expense
Interest expense		2			54			169			171
Other (income) expense ̶ net		(48	)		314			63			319
Gain on extinguishment of the Paycheck Protection Program loan		(2,220	)		—			(2,220	)		—
		(2,266	)		368			(1,988	)		490
Loss before income taxes		(4,906	)		(3,307	)		(17,031	)		(10,744	)
Provision (benefit) for income taxes		1			(34	)		(410	)		200
Net loss	$	(4,907	)	$	(3,273	)	$	(16,621	)	$	(10,944	)
Net loss per common share:
Basic	$	(0.22	)	$	(0.19	)	$	(0.76	)	$	(0.65	)
Diluted	$	(0.22	)	$	(0.19	)	$	(0.76	)	$	(0.65	)
Comprehensive loss:
Net loss	$	(4,907	)	$	(3,273	)	$	(16,621	)	$	(10,944	)
Other comprehensive (loss) income:
Foreign currency translation adjustments		(465	)		856			(1,362	)		388
Comprehensive loss	$	(5,372	)	$	(2,417	)	$	(17,983	)	$	(10,556	)

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

The ExOne Company and Subsidiaries

Condensed Consolidated Balance Sheet (Unaudited)

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

	September 30,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	122,809		$	49,668
Restricted cash		1,870			508
Accounts receivable ̶ net		8,712			5,225
Current portion of net investment in sales-type leases ̶ net		241			229
Inventories ̶ net		25,078			20,562
Prepaid expenses and other current assets		6,313			4,451
Total current assets		165,023			80,643
Property and equipment, net of accumulated depreciation of $20,041 (2021) and $20,823 (2020)		22,815			21,300
Operating lease right-of-use assets		2,489			4,043
Net investment in sales-type leases ̶ net of current portion ̶ net		326			509
Other noncurrent assets		687			794
Total assets	$	191,340		$	107,289
Liabilities
Current liabilities:
Current portion of long-term debt	$	—		$	1,622
Current portion of operating lease liabilities		1,926			1,958
Accounts payable		7,657			4,501
Accrued expenses and other current liabilities		6,766			4,978
Current portion of contract liabilities		16,729			13,586
Total current liabilities		33,078			26,645
Long-term debt ̶ net of current portion		—			1,783
Operating lease liabilities ̶ net of current portion		563			2,085
Contract liabilities ̶ net of current portion		31			159
Other noncurrent liabilities		328			314
Total liabilities		34,000			30,986
Contingencies and commitments
Stockholders' equity
Common stock, $0.01 par value, 200,000,000 shares authorized, 22,179,243 (2021) and 20,009,157 (2020) shares issued and outstanding		222			200
Additional paid-in capital		317,111			218,113
Accumulated deficit		(148,493	)		(131,872	)
Accumulated other comprehensive loss		(11,500	)		(10,138	)
Total stockholders' equity		157,340			76,303
Total liabilities and stockholders' equity	$	191,340		$	107,289

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

The ExOne Company and Subsidiaries

Condensed Statement of Consolidated Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2021			2020
Operating activities
Net loss	$	(16,621	)	$	(10,944	)
Adjustments to reconcile net loss to net cash used for operations:
Depreciation and amortization		2,746			2,925
Equity-based compensation		1,108			828
Amortization of debt issuance costs		7			39
Recoveries for bad debts ̶ net		(38	)		(4	)
Provision for slow-moving, obsolete and lower of cost or net realizable value inventories ̶ net		378			335
Foreign exchange losses on intercompany transactions ̶ net		73			250
Gain from sale-leaseback of property and equipment		—			(1,462	)
Deferred income taxes		—			195
Gain on extinguishment of debt - net		(2,101	)		—
Changes in assets and liabilities, excluding effects of foreign currency translation adjustments:
(Increase) decrease in accounts receivable		(3,666	)		1,092
Decrease in net investment in sales-type leases		170			158
Increase in inventories		(7,226	)		(3,310	)
Increase in prepaid expenses and other assets		(173	)		(1,682	)
Increase (decrease) in accounts payable		3,303			(1,679	)
Increase in accrued expenses and other liabilities		624			396
Increase in contract liabilities		3,370			248
Net cash used for operating activities		(18,046	)		(12,615	)
Investing activities
Capital expenditures		(3,451	)		(772	)
Proceeds from sale of property and equipment		—			16,229
Net cash (used for) provided by investing activities		(3,451	)		15,457
Financing activities
Proceeds from borrowings on long-term debt		—			2,194
Payments on long-term debt		(1,226	)		(117	)
Proceeds from exercise of employee stock options		2,429			858
Proceeds from common stock offerings, net of issuance costs		95,288			27,699
Taxes related to the net share settlement of equity-based awards		(7	)		(15	)
Other		(24	)		(63	)
Net cash provided by financing activities		96,460			30,556
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(460	)		295
Net change in cash, cash equivalents, and restricted cash		74,503			33,693
Cash, cash equivalents, and restricted cash at beginning of period		50,176			6,243
Cash, cash equivalents, and restricted cash at end of period	$	124,679		$	39,936
Supplemental disclosure of noncash investing and financing activities
Transfer of internally developed 3D printing machines from inventories to property and equipment for internal use or leasing activities	$	2,943		$	1,434
Transfer of internally developed 3D printing machines from property and equipment to inventories for sale	$	1,333		$	2,771
Property and equipment included in accounts payable	$	246		$	113
Unsettled proceeds from exercise of employee stock options included in prepaid expenses and other current assets	$	31		$	—
At-the-market offering issuance costs included in accounts payable	$	—		$	147
At-the-market offering issuance costs included in accrued expense and other current liabilities	$	—		$	66

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

The ExOne Company and Subsidiaries

Condensed Statement of Changes in Consolidated Stockholders’ Equity (Unaudited)

(in thousands)

												Accumulated
						Additional						other			Total
	Common stock					paid-in			Accumulated			comprehensive			stockholders'
	Shares			$		capital			deficit			loss			equity
Balance at December 31, 2019		16,347		$	163	$	176,850		$	(116,948	)	$	(11,483	)	$	48,582
Net loss		—			—		—			(3,648	)		—			(3,648	)
Other comprehensive loss		—			—		—			—			(838	)		(838	)
Equity-based compensation		—			1		291			—			—			292
Common stock issued from equity incentive plan		39			—		—			—			—			—
Balance at March 31, 2020		16,386		$	164	$	177,141		$	(120,596	)	$	(12,321	)	$	44,388
Net loss		—			—		—			(4,023	)		—			(4,023	)
Other comprehensive income		—			—		—			—			370			370
Equity-based compensation		—			—		157			—			—			157
Exercise of employee stock options		73			1		540			—			—			541
Common stock issued from equity incentive plan		22			—		—			—			—			—
At-the-market offerings of common stock, net of issuance costs		383			4		3,094			—			—			3,098
Balance at June 30, 2020		16,864		$	169	$	180,932		$	(124,619	)	$	(11,951	)	$	44,531
Net loss		—			—		—			(3,273	)		—			(3,273	)
Other comprehensive income		—			—		—			—			856			856
Equity-based compensation		—			—		379			—			—			379
Exercise of employee stock options		44			—		317			—			—			317
Common stock issued from equity incentive plan		20			—		—			—			—			—
Tax withholding related to the net share settlement of equity-based awards		(1	)		—		(15	)		—			—			(15	)
At-the-market offerings of common stock, net of issuance costs		2,061			21		24,367			—			—			24,388
Balance at September 30, 2020		18,988		$	190	$	205,980		$	(127,892	)	$	(11,095	)	$	67,183

Balance at December 31, 2020		20,009		$	200	$	218,113		$	(131,872	)	$	(10,138	)	$	76,303
Net loss		—			—		—			(6,140	)		—			(6,140	)
Other comprehensive loss		—			—		—			—			(1,120	)		(1,120	)
Equity-based compensation		—			—		282			—			—			282
Exercise of employee stock options		111			1		1,439									1,440
Common stock issued from equity incentive plan		37			—		—			—			—			—
Common stock offering, net of issuance costs		1,873			19		95,440			—			—			95,459
Balance at March 31, 2021		22,030		$	220	$	315,274		$	(138,012	)	$	(11,258	)	$	166,224
Net loss		—			—		—			(5,574	)		—			(5,574	)
Other comprehensive income		—			—		—			—			223			223
Equity-based compensation		—			—		376			—			—			376
Exercise of employee stock options		2			—		9			—			—			9
Common stock issued from equity incentive plan		1			—		—			—			—			—
Balance at June 30, 2021		22,033		$	220	$	315,659		$	(143,586	)	$	(11,035	)	$	161,258
Net loss		—			—		—			(4,907	)		—			(4,907	)
Other comprehensive loss		—			—		—			—			(465	)		(465	)
Equity-based compensation		—			1		449			—			—			450
Exercise of employee stock options		96			1		1,010			—			—			1,011
Common stock issued from equity incentive plan		50			—		—			—			—			—
Tax withholding related to the net share settlement of equity-based awards		—			—		(7	)		—			—			(7	)
Balance at September 30, 2021		22,179		$	222	$	317,111		$	(148,493	)	$	(11,500	)	$	157,340

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

The ExOne Company and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

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

Note 1. Basis of Presentation

Organization

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

Basis of Presentation

The condensed consolidated financial statements of the Company are unaudited. The condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the results of operations, financial position and cash flows of the Company. All material intercompany transactions and balances have been eliminated in consolidation. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The December 31, 2020 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). This Quarterly Report on Form 10-Q should be read in connection with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which includes all disclosures required by GAAP.

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

Merger Transaction

On August 11, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Desktop Metal, Inc., a Delaware corporation (“DM”), Texas Merger Sub I, Inc., a Delaware corporation and wholly-owned subsidiary of DM (“Merger Sub I”) and Texas Merger Sub II, LLC, a Delaware limited liability company and wholly-owned subsidiary of DM (“Merger Sub II”).

Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub I will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of DM (the “First Merger”) and immediately thereafter, the Company will merge with and into Merger Sub II, with Merger Sub II surviving the subsequent merger (the “Second Merger”, and, together with the First Merger, the “Mergers”).

Subject to the terms and conditions of the Merger Agreement, stockholders of the Company will receive, in exchange for each share of our common stock held immediately prior to the Mergers, (i) $8.50 in cash and (ii) a number of shares of DM common stock, equal to the Exchange Ratio (defined below).

The “Exchange Ratio” shall be determined based on DM’s 20-day average closing stock price three trading days prior to closing: (i) if the average closing DM stock price is greater than or equal to $9.70, then the Exchange Ratio shall be set at 1.7522; (ii) if the average closing DM stock price is less than or equal to $7.94, then the Exchange Ratio shall be set at 2.1416; (iii) if the average closing DM stock price is less than $9.70 but greater than $7.94, then the Exchange Ratio shall be equal to 1.9274 multiplied by the quotient of (x) $8.82 divided by (y) the average closing DM stock price.

On October 20, 2021, the Company and DM received clearance from the German Federal Ministry for Economic Affairs and Energy, a foreign investment regulatory authority, that the transactions contemplated by the Merger Agreement have been cleared pursuant to section 58a paragraph 1 of the German Foreign Trade and Payments Ordinance. Additionally, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired on October 28, 2021 at 11:59 p.m. Eastern Time. Accordingly, the Company and DM have now received all regulatory approvals required as a condition to consummate the Mergers.

On November 9, 2021, the Company held a special meeting of stockholders. At that special meeting, the ExOne stockholders voted to approve the Merger Agreement. Pursuant to the Merger Agreement, the proposed transaction may close as soon as three business days following the date of the special meeting of ExOne stockholders, subject to customary closing conditions.

During the three months and nine months ended September 30, 2021, the Company incurred expenses associated with the planned merger transaction of $3,376 and $3,477, respectively, all of which are included in selling, general and administrative expenses in the accompanying condensed statement of consolidated operations and comprehensive loss.

COVID-19

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

Recently Issued Accounting Guidance

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

In May 2021, the FASB issued ASU 2021-04, “Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”. This ASU clarifies the accounting treatment for freestanding equity-classified written call options that are modified or exchanged as part of or directly related to a modification or an exchange of existing debt. This ASU becomes effective for the Company on January 1, 2022. Early adoption is permitted. This guidance would only be applicable to the consolidated financial statements of the Company in the event that freestanding equity-classified written call options were modified or exchanged as a part of or directly related to the modification or exchange of existing debt. As no such transactions have occurred during the current year and no such transactions are anticipated, management determined that the adoption of this ASU will not have an impact on the consolidated financial statements of the Company.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2023. Management is currently evaluating the potential impact of these changes on the consolidated financial statements of the Company.

Note 2. Common Stock Offerings

In September 2020, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”) pursuant to which Canaccord agreed to act as sales agent in the sale of up to $25,000 in the aggregate of ExOne common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). In February 2021, the Company terminated the Equity Distribution Agreement. At the time of the termination of the Equity Distribution Agreement, the remaining maximum offering capacity was $9,269. The Company did not sell any shares of its common stock under the Equity Distribution Agreement during 2021 prior to its termination. There were no fees or penalties incurred by the Company in connection with the termination of the Equity Distribution Agreement.

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

As a result of this common stock offering, during February 2021, the Company sold 1,872,574 shares of its common stock and received net proceeds (after deducting underwriting discounts and commissions) of $95,725. The Company incurred expenses (other

than underwriting discounts and commissions) associated with the common stock offering of $266, all of which was recognized during the three months ended March 31, 2021.

The Company has not sold any shares of its common stock through common stock offerings subsequent to the February 2021 common stock offering.

Note 3. Accumulated Other Comprehensive Loss

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Foreign currency translation adjustments
Balance at beginning of period	$	(11,035	)	$	(11,951	)	$	(10,138	)	$	(11,483	)
Other comprehensive (loss) income		(465	)		856			(1,362	)		388
Balance at end of period	$	(11,500	)	$	(11,095	)	$	(11,500	)	$	(11,095	)

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

There were no tax impacts related to income tax rate changes and no amounts were reclassified to earnings for any of the periods presented.

Note 4. Loss Per Share

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

As the Company incurred a net loss during each of the three months and nine months ended September 30, 2021 and 2020, basic average common shares outstanding and diluted average common shares outstanding were the same because the effect of potential shares of common stock, including stock options (436,973 – 2021 and 654,617 – 2020) and unvested restricted stock issued (182,011 – 2021 and 199,391 – 2020), was anti-dilutive.

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net loss	$	(4,907	)	$	(3,273	)	$	(16,621	)	$	(10,944	)
Weighted average shares outstanding (basic and diluted)		22,096,704			17,596,076			21,727,561			16,812,806
Net loss per common share:
Basic	$	(0.22	)	$	(0.19	)	$	(0.76	)	$	(0.65	)
Diluted	$	(0.22	)	$	(0.19	)	$	(0.76	)	$	(0.65	)

Note 5. Revenue

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

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

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

the Company’s best estimate of stand-alone selling price for each distinct product or service in the contract, which is generally based on an observable price.

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

The Company’s revenue from service arrangements includes deferred maintenance contracts and extended warranties that can be purchased at the customer’s option. The Company generally provides a standard one-year warranty on the Company’s 3D printing machines, which is considered an assurance type warranty, and not considered a separate performance obligation (Note 8). Revenue associated with deferred maintenance contracts is generally recognized at a point in time when the related services are performed where sufficient historical evidence indicates that the costs of performing the related services under the contract are not incurred on a straight-line basis, with such revenue recognized in proportion to the costs expected to be incurred. Revenue associated with extended warranties is generally recognized over time on a straight-line basis over the related contract period.

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

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
3D printing machines	$	10,792	$	10,488	$	26,200	$	21,703
3D printed and other products, materials and services		8,251		6,911		24,646		20,178
	$	19,043	$	17,399	$	50,846	$	41,881

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

For the nine months ended September 30, 2021, the Company recognized revenue of $9,361 related to contract liabilities at January 1, 2021. There were no other significant changes in contract liabilities during the nine months ended September 30, 2021. Contract assets were not significant during the nine months ended September 30, 2021.

As of September 30, 2021, the Company had approximately $57,300 of remaining performance obligations (including contract liabilities), which is also referred to as backlog, of which approximately $50,700 is expected to be fulfilled during the next twelve months notwithstanding uncertainty related to the impact of COVID-19 (Note 1) including, but not limited to, international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers.

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

Accounts receivable and net investment in sales-type leases are reported at their net realizable value. The Company carries its investment in sales-type leases based on discounting the minimum lease payments by the interest rate implicit in the lease, less an allowance for doubtful accounts. The Company’s estimate of the allowance for doubtful accounts related to accounts receivable and net investment in sales-type leases is based on the Company’s evaluation of customer accounts with past-due outstanding balances or

specific accounts for which it has information that the customer may be unable to meet its financial obligations. Based upon review of these accounts, and management’s analysis and judgment, the Company records a specific allowance for that customer’s accounts receivable or net investment in sales-type lease balance to reduce the outstanding balance to the amount expected to be collected. The allowance is re-evaluated and adjusted periodically as additional information is received that impacts the allowance amount reserved. At September 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $529 and $576, respectively. During the three months ended September 30, 2021 and 2020, the Company recorded net provision for bad debts of $15 and $15, respectively. During the nine months ended September 30, 2021 and 2020, the Company recorded net recoveries for bad debts of $38 and $4, respectively.

Note 6. Cash, Cash Equivalents, and Restricted Cash

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

	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	122,809	$	49,668
Restricted cash		1,870		508
Cash, cash equivalents, and restricted cash	$	124,679	$	50,176

Restricted cash at September 30, 2021 included $1,270 of cash collateral required by a German bank for short-term financial guarantees and letters of credit issued by ExOne GmbH in connection with certain commercial transactions requiring security (Note 9) and $600 of cash collateral required by a United States bank to offset certain short-term, unsecured lending commitments associated with the Company’s corporate credit card program

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

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

Note 7. Inventories

Inventories consisted of the following as of the dates indicated:

	September 30,		December 31,
	2021		2020
Raw materials and components	$	14,728	$	9,436
Work in process		5,481		4,797
Finished goods		4,869		6,329
	$	25,078	$	20,562

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

At September 30, 2021 and December 31, 2020, the allowance for slow-moving and obsolete inventories was $2,870 and $2,678, respectively, and has been reflected as a reduction to inventories (principally raw materials and components). The following table summarizes changes in the allowance for slow-moving and obsolete inventories for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Balance at beginning of period	$	2,813		$	2,493		$	2,678		$	3,443
Provision for slow-moving and obsolete inventories ̶ net		160			30			378			130
Reductions for sale, consumption or scrap of previously reserved amounts		(42	)		(55	)		(50	)		(1,110	)
Foreign currency translation adjustments		(61	)		94			(136	)		99
Balance at end of period	$	2,870		$	2,562		$	2,870		$	2,562

Reductions for sale, consumption or scrap of previously reserved amounts for the nine months ended September 30, 2020 consisted principally of certain raw material and component inventories associated with the Company’s former Exerial 3D printing platform,

which were disposed of during the period. There was no significant benefit or charge recorded during the nine months ended September 30, 2020 in connection with the related disposals.

During the nine months ended September 30, 2020, the Company recorded a charge of $205 to cost of sales in the accompanying condensed statement of consolidated operations and comprehensive loss associated with certain inventories for which cost was determined to exceed net realizable value.

Note 8. Product Warranty Reserves

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

At September 30, 2021 and December 31, 2020, the product warranty reserves balance was $1,011 and $1,335, respectively, and has been reflected in accrued expense and other current liabilities in the accompanying condensed consolidated balance sheet. The following table summarizes changes in the product warranty reserves balance for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Balance at beginning of period	$	1,100		$	603		$	1,335		$	866
Provisions for new issuances		422			391			1,313			854
Payments		(373	)		(561	)		(1,769	)		(1,406	)
Reserve adjustments		(126	)		607			167			728
Foreign currency translation adjustments		(12	)		25			(35	)		23
Balance at end of period	$	1,011		$	1,065		$	1,011		$	1,065

Note 9. Contingencies and Commitments

Contingencies

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

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

Commitments

In the normal course of its operations, ExOne GmbH issues short-term financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security through a credit facility with a German bank. The credit facility provides a capacity amount of $4,057 (€3,500) for the issuance of financial guarantees and letters of credit for commercial transactions requiring security. The credit facility does not require cash collateral for the issuance of financial guarantees and letters of credit for commercial transactions requiring security for amounts up to $1,159 (€1,000). Amounts in excess of $1,159 (€1,000) require cash collateral under the credit facility.

At September 30, 2021, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the credit facility were $2,429 (€2,096), with expiration dates ranging from November 2021 through March 2023. At September 30, 2021, cash collateral of $1,270 (€1,096) was required for financial guarantees and letters of credit issued under the credit facility (included in restricted cash in the accompanying condensed consolidated balance sheet). At December 31, 2020, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the amended credit facility were $928 (€756). At December 31, 2020, no cash collateral was required for financial guarantees and letters of credit issued under the credit facility.

Note 10. Related Party Revolving Credit Facility

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

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

Under the terms of the amended credit facility, the Company could make prepayments against outstanding borrowings, reduce the credit commitment or terminate the credit commitment at any time without penalty.

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

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

During the three months ended March 31, 2021, the Company recorded interest expense related to the credit facility of $129, comprised of the aforementioned $105 loss on extinguishment of debt, $18 associated with the commitment fee on the unused portion of the revolving credit facility and $6 associated with the amortization of debt issuance costs.

As the credit facility was terminated in March 2021, there was no interest expense related to the credit facility recognized subsequent to the three months ended March 31, 2021. There were no borrowings under the credit facility during 2021 prior to its termination.

During the three months and nine months ended September 30, 2020, the Company recorded interest expense related to the credit facility of $34 and $113, respectively. Included in interest expense for the three months and nine months ended September 30, 2020 was $8 and $35, respectively, associated with amortization of debt issuance costs, and $26 and $78, respectively, associated with the commitment fee on the unused portion of the revolving credit facility.

There were no borrowings under the credit facility during the three or nine months ended September 30, 2020.

Note 11. Long-Term Debt

Long-term debt consisted of the following as of the dates indicated:

	September 30, 2021						December 31, 2020
	Principal		Unamortized Debt Issuance Costs		Net		Principal			Unamortized Debt Issuance Costs			Net
Paycheck Protection Program loan	$	—	$	—	$	—	$	2,194		$	—		$	2,194
Building note payable		—		—		—		1,226			(15	)		1,211
Less: Amount due within one year		—		—		—		(1,626	)		4			(1,622	)
	$	—	$	—	$	—	$	1,794		$	(11	)	$	1,783

Paycheck Protection Program Loan

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

the PPP, the Loan, or a portion thereof, could be forgiven if Loan proceeds were used for qualifying expenses as described in the CARES Act, such as payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent and utilities. The Company used all of the Loan proceeds for qualifying expenses.

During June 2021, the Company submitted an application to the SBA requesting full forgiveness of the Loan. On July 8, 2021, the Company received notice from the SBA that the Loan had been forgiven in full, including forgiveness of all interest accrued to date. This formal notice from the SBA legally released the Company of any obligations under the Loan. As a result, the Company recognized a gain on extinguishment of the PPP loan of $2,220 during the three months ended September 30, 2021. The total gain on extinguishment of debt of $2,220 was comprised of $2,194 related to the forgiveness of principal and $26 related to the forgiveness of accrued interest.

Building Note Payable

On May 21, 2012, the Company entered into a building note payable with an unrelated United States bank. Terms of the building note payable included monthly payments of $18, including interest at 4.00% through May 2017, and subsequently, monthly payments of $19 including interest at the monthly average yield on United States Treasury Securities plus 3.25% for the remainder of the term through May 2027.

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

As the building note payable was terminated in February 2021, there was no interest expense related to the building note payable recognized subsequent to the three months ended March 31, 2021.

Note 12. Income Taxes

The provision (benefit) for income taxes for the three months ended September 30, 2021 and 2020 was $1 and ($34), respectively. The (benefit) provision for income taxes for the nine months ended September 30, 2021 and 2020 was ($410) and $200, respectively. The Company has completed a discrete period computation of its provision (benefit) for income taxes for each of the periods presented. The discrete period computation was required as a result of jurisdictions with losses before income taxes for which no tax benefit can be recognized and an inability to generate reliable estimates for results in certain jurisdictions as a result of inconsistencies in generating net operating profits (losses) in those jurisdictions.

The effective tax rate for the three months ended September 30, 2021 and 2020 was 0.0% (provision on a loss) and 1.0% (benefit on a loss), respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020 was 2.4% (benefit on a loss) and 1.9% (provision on a loss), respectively.

For the three months ended September 30, 2021 and the three months and nine months ended September 30, 2020, the effective tax rate differed from the United States federal statutory tax rate of 21.0% primarily due to net changes in valuation allowances for the period.

For the nine months ended September 30, 2021, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to net changes in valuation allowances for the period and recognition of a discrete income tax benefit of $412 related to the carryback of net operating losses in Japan. During the three months ended March 31, 2021, the Company received confirmation from Japanese tax authorities that ExOne KK met the definition of a small or medium-sized enterprise (SME) under Japanese tax regulations, eliminating certain restrictions on the use of net operating losses to offset taxable income. ExOne KK filed amended tax returns related to tax years 2016 through 2019 to carryback net operating losses, resulting in total tax refunds of $412.

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

Note 13. Equity-Based Compensation

On January 24, 2013, the Board adopted the 2013 Equity Incentive Plan (the “Plan”). In connection with the adoption of the Plan, 500,000 shares of common stock were reserved for issuance pursuant to the Plan, with automatic increases in such reserve available each year annually on January 1 from 2014 through 2023 equal to the lesser of 3.0% of the total outstanding shares of common stock as of December 31 of the immediately preceding year, or a number of shares of common stock determined by the Board, provided that the maximum number of shares authorized under the Plan could not exceed 1,992,241 shares, subject to certain adjustments. The maximum number of shares authorized under the Plan was reached on January 1, 2017. At September 30, 2021, 412,404 shares remained available for future issuance under the Plan.

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

On February 5, 2020, the Compensation Committee of the Board adopted the 2020 Annual Incentive Program (the “2020 Program”) as a subplan under the Plan. The 2020 Program provided an opportunity for performance-based compensation to senior executive officers of the Company, among others. The target annual incentive for each 2020 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2020 Program. During the three months and nine months ended September 30, 2020, the Company recorded no equity-based compensation expense based on the estimated outcome of the defined financial goals for 2020 under the 2020 Program.

On February 2, 2021, the Compensation Committee of the Board adopted the 2021 Annual Incentive Program (the “2021 Program”) as a subplan under the Plan. The 2021 Program provided an opportunity for performance-based compensation to senior executive officers of the Company, among others. The target annual incentive for each 2021 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial and/or individual performance goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2021 Program. During the three months and nine months ended September 30, 2021, the Company recorded $24 and $69, respectively, in equity-based compensation expense based on the estimated outcome of the defined financial and individual goals for 2021 under the 2021 Program.

On February 2, 2021, the Compensation Committee of the Board adopted the 2021 Executive Stock Performance Program (the “ESPP”) as a subplan under the Plan. The ESPP provided an opportunity for senior executive officers of the Company to earn performance-based compensation based on the performance of the Company’s common stock over a one-year period ending December 31, 2021. During the three months and nine months ended September 30, 2021, the Company recorded $21 and $56, respectively, in equity-based compensation expense based on the estimated fair value of the equity-based compensation awards expected to be granted under the ESPP.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Equity-based compensation expense recognized:
Stock options	$	57	$	127	$	242	$	316
Restricted stock		338		244		697		490
Other^(a)		55		8		169		22
Total equity-based compensation expense before income taxes		450		379		1,108		828
Benefit for income taxes^(b)		—		—		—		—
Total equity-based compensation expense net of income taxes	$	450	$	379	$	1,108	$	828

(a)

For both the three months and nine months ended September 30, 2021, Other represents expense associated with the 2021 Program, the ESPP, and certain employee contractual amounts to be settled in equity. For the nine months ended September 30, 2021, Other also includes expense associated with unrestricted stock issued to a non-employee director. For each of the 2020 periods, Other represents expense associated with certain employee contractual amounts to be settled in equity.

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

At September 30, 2021, total future compensation expense related to unvested awards yet to be recognized by the Company was $137 for stock options and $2,460 for restricted stock. Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of 0.9 years.

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

	Nine Months Ended
	September 30,
	2021	2020
Weighted average fair value per stock option	$19.04	$5.11 - $6.20
Volatility	71.1%	58.0% - 58.6%
Average risk-free interest rate	0.5%	0.2%
Dividend yield	0.0%	0.0%
Expected term (years)	3.5	3.5

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

The activity for stock options was as follows for the periods indicated:

	Nine Months Ended September 30,
	2021							2020
	Number of Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Number of Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding at beginning of period		641,232		$	9.80	$	4.74		854,259		$	9.34	$	4.49
Stock options granted		4,500		$	38.22	$	19.04		25,022		$	14.40	$	5.99
Stock options exercised		(208,259	)	$	11.81	$	6.45		(117,854	)	$	7.28	$	3.12
Stock options forfeited		(500	)	$	7.11	$	2.77		(79,936	)	$	7.85	$	3.41
Stock options expired		—		$	—	$	—		(26,874	)	$	12.02	$	6.78
Outstanding at end of period		436,973		$	9.14	$	4.07		654,617		$	9.81	$	4.75
Exercisable at end of period		409,591		$	8.81	$	3.92		506,295		$	10.46	$	5.27
Expected to vest at end of period		27,382		$	14.05	$	6.29		148,322		$	7.62	$	3.01

At September 30, 2021, intrinsic value associated with stock options exercisable and expected to vest was $5,966 and $322, respectively. The weighted average remaining contractual term of stock options exercisable and expected to vest at September 30, 2021, was 2.3 years and 3.6 years, respectively. Stock options with an aggregate intrinsic value of $5,906 were exercised by employees during the nine months ended September 30, 2021, resulting in proceeds to the Company from the exercise of stock options of $2,460. Stock options with an aggregate intrinsic value of $1,096 were exercised by employees during the nine months ended September 30, 2020, resulting in proceeds to the Company from the exercise of stock options of $858. The Company recorded no income tax benefit related to these exercises.

The activity for restricted stock was as follows for the periods indicated:

	Nine Months Ended September 30,
	2021					2020
	Shares of Restricted Stock			Weighted Average Grant Date Fair Value		Shares of Restricted Stock			Weighted Average Grant Date Fair Value
Outstanding at beginning of period		188,891		$	9.52		66,513		$	8.76
Restricted stock granted		81,083		$	22.12		209,891		$	9.58
Restricted stock vested		(87,963	)	$	8.84		(77,013	)	$	8.94
Restricted stock forfeited		—		$	—		—		$	—
Outstanding at end of period		182,011		$	15.47		199,391		$	9.55
Restricted stock expected to vest at end of period		182,011		$	15.47		199,391		$	9.55

Restricted stock that vested during the nine months ended September 30, 2021 and 2020, had a fair value of $2,424 and $635, respectively.

Participants have the option to elect net settlement for restricted stock awards. Under net settlement, the Company withholds shares of stock that would otherwise be delivered to the employee and remits cash equal to the fair value of shares withheld to the taxing authority to satisfy tax withholding obligations. During the nine months ended September 30, 2021 and 2020, the Company withheld shares with a fair value of $7 and $15, respectively, related to the net settlement of restricted stock awards.

Note 14. Concentration of Credit Risk

During the three months and nine months ended September 30, 2021 and 2020, the Company conducted a significant portion of its business with a limited number of customers, though not necessarily the same customers for each respective period. For the three months ended September 30, 2021 and 2020, the Company’s five most significant customers represented 33.3% and 39.5% of total revenue, respectively. For the nine months ended September 30, 2021 and 2020, the Company’s five most significant customers represented 18.7% and 20.0% of total revenue, respectively. At September 30, 2021 and December 31, 2020, accounts receivable from the Company’s five most significant customers were $3,175 and $1,633, respectively.

Note 15. Other (Income) Expense – Net

Other (income) expense – net consisted of the following for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Interest income	$	(8	)	$	(4	)	$	(14	)	$	(19	)
Foreign currency (gains) losses - net		(36	)		299			112			262
Other – net		(4	)		19			(35	)		76
	$	(48	)	$	314		$	63		$	319

Note 16. Subsequent Events

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

Item 2. 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 together with our unaudited condensed consolidated financial statements and related notes thereto set forth in this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the year ended December 31, 2020.

This Quarterly Report on Form 10-Q 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, 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 the risk factors previously disclosed in our filings with the Securities and Exchange Commission (the “SEC”), including the items described under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, the following factors, among others, could cause results to differ materially from forward-looking statements or historical performance: the severity and duration of world health events, including the COVID-19 outbreak and the related economic repercussions and operational challenges; the ability of Desktop Metal, Inc., a Delaware corporate (“DM”) and us to consummate the proposed transaction (the planned merger transaction with DM further described in the “Merger Transaction” section below) in a timely manner or at all, including the ability to secure regulatory approvals; impact to our business if the transaction is not consummated; successful integration of DM’s and our businesses and realization of synergies and benefits; the ability of DM to implement business plans, forecasts and other expectations following the completion of the transaction; risk that actual performance and financial results following completion of the transaction differ from projected performance and results; business disruption following the transaction; our ability to consistently generate operating profits; fluctuations in our revenues and operating results; our competitive environment and its competitive position; our ability to enhance our current 3D printing machines and technology and to develop and introduce new 3D printing machines; our ability to qualify more industrial materials in which it can print; demand for our products; the availability of skilled personnel; the impact of loss of key management; the impact of customer specific terms in machine sale agreements in determining the period in which we recognize revenue; risks related to global operations including effects of foreign currency and COVID-19; dependency on certain critical suppliers; nature or impact of alliances and strategic investments; reliance on critical information technology systems; the effect of litigation, contingencies and warranty claims; liabilities under laws and regulations protecting the environment; the impact of governmental laws and regulations; operating hazards, cyberattacks, war, terrorism and cancellation or unavailability of insurance coverage; the impact of disruption of our manufacturing facilities or ExOne Adoption Centers; the adequacy of our protection of our intellectual property; expectations regarding demand for our industrial products, and other matters with regard to outlook; and other factors beyond our control, including the impact of COVID-19. For additional information about other risks and uncertainties that could cause actual results of the proposed transaction to differ materially from those described in the forward-looking statements in this communication of ExOne’s business, financial condition, results of operations and prospects generally, please refer to the Company’s reports filed with the SEC, including without limitation the “Risk Factors” and/or other information included in the Company’s proxy statement on Schedule 14A relating to the proposed transaction filed with the SEC on October 8, 2021, definitive additional materials and other filings by the Company in connection with the proposed transaction and such other reports as ExOne has filed or may file with the SEC from time to time. For additional information about risks and uncertainties that may cause actual results of the proposed transaction to differ materially from those described, please refer to DM’s reports filed with the SEC, including without limitation the “Risk Factors” and/or other information included in such reports. While the list of factors presented here is, and the list of factors presented in the proxy statement/prospectus will be considered representative, no such list should be considered to be a complete statement of all risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Except as required by applicable law, neither DM nor ExOne will update any forward-looking statements to reflect new information, future events, changed circumstances or otherwise.

Overview

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

industry-leading volumetric output (as measured by build box size and printing speed), uniquely position us to serve the needs of industrial customers.

Outlook

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

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

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

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

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

Our operating results continue to be impacted by a prolonged downturn in global manufacturing trends as a result of COVID-19 which has influenced the capital expenditure investments of our customers. Despite these headwinds, we ended the third quarter of 2021 with a backlog balance of approximately $57,300. We expect the combination of our backlog at September 30, 2021 and an acceleration in market adoption of our binder jetting technology, including our latest printer platforms (our X1 25Pro, X1 160Pro and InnoventPro^® for metal applications, our S-Max Pro for sand applications, and the office-friendly ExOne Metal Designlab^TM printer for metal or ceramic parts), to provide the basis for our operating stability and growth for the remainder of 2021 and into 2022 despite continuing negative macroeconomic trends for global manufacturing, including the impact of COVID-19.

Merger Transaction

On August 11, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Desktop Metal, Inc., a Delaware corporation (“DM”), Texas Merger Sub I, Inc., a Delaware corporation and wholly-owned subsidiary of DM (“Merger Sub I”) and Texas Merger Sub II, LLC, a Delaware limited liability company and wholly-owned subsidiary of DM (“Merger Sub II”).

Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub I will merge with and into us, with ExOne surviving the merger as a wholly owned subsidiary of DM (the “First Merger”) and immediately thereafter, we will merge with and into Merger Sub II, with Merger Sub II surviving the subsequent merger (the “Second Merger”, and, together with the First Merger, the “Mergers”).

Subject to the terms and conditions of the Merger Agreement, our stockholders will receive, in exchange for each share of our common stock held immediately prior to the Mergers, (i) $8.50 in cash and (ii) a number of shares of DM common stock, equal to the Exchange Ratio (defined below).

On October 20, 2021, we and DM received clearance from the German Federal Ministry for Economic Affairs and Energy, a foreign investment regulatory authority, that the transactions contemplated by the Merger Agreement have been cleared pursuant to section 58a paragraph 1 of the German Foreign Trade and Payments Ordinance. Additionally, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired on October 28, 2021 at 11:59 p.m. Eastern Time. Accordingly, we and DM have now received all regulatory approvals required as a condition to consummate the Mergers.

On November 9, 2021, we held a special meeting of stockholders. At that special meeting, our stockholders voted to approve the Merger Agreement. Pursuant to the Merger Agreement, the proposed transaction may close as soon as three business days following the date of the special meeting of our stockholders, subject to customary closing conditions.

During the three months and nine months ended September 30, 2021, we incurred expenses associated with the planned merger transaction of $3,376 and $3,477, respectively, all of which are included in selling, general and administrative expenses in the accompany condensed statement of consolidated operations and comprehensive loss.

Backlog

At September 30, 2021, our backlog was approximately $57,300 of which approximately $50,700 is expected to be fulfilled during the next twelve months notwithstanding uncertainty related to the impact of COVID-19 (further discussed above) including, but not limited to, domestic and international shipping and travel restrictions brought about by COVID-19, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. At December 31, 2020, our backlog was approximately $39,400 and at September 30, 2020 our backlog was approximately $42,600.

Seasonality

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

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

Results of Operations

Net Loss

Net loss for the three months ended September 30, 2021 was $4,907, or $0.22 per basic and diluted share, compared with a net loss of $3,273, or $0.19 per basic and diluted share, for the three months ended September 30, 2020. The increase in our net loss was primarily due to increases in both selling, general and administrative expenses and research and development expenses (further described below), partially offset by a $2,220 gain on the extinguishment of the Paycheck Protection Program (the “PPP”) loan and increases in gross margin (further described below).

Net loss for the nine months ended September 30, 2021 was $16,621, or $0.76 per basic and diluted share, compared with a net loss of $10,944, or $0.65 per basic and diluted share, for the nine months ended September 30, 2020. The increase in our net loss was primarily due to increases in both selling, general and administrative expenses and research and development expenses (further described below) and the absence of a gain of $1,462 recognized during the three months ended March 31, 2020 associated with the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany. Partially offsetting these increases in net loss was a $2,220 gain on the extinguishment of the PPP loan and increases in gross margin (further described below).

Revenue

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021				2020				2021				2020
3D printing machines	$	10,792	56.7	%	$	10,488	60.3	%	$	26,200	51.5	%	$	21,703	51.8	%
3D printed and other products, materials and services		8,251	43.3	%		6,911	39.7	%		24,646	48.5	%		20,178	48.2	%
	$	19,043	100.0	%	$	17,399	100.0	%	$	50,846	100.0	%	$	41,881	100.0	%

Revenue for the three months ended September 30, 2021 was $19,043, compared with revenue of $17,399 for the three months ended September 30, 2020, an increase of $1,644, or 9.4%. The increase in revenue resulted from an increase in revenue attributable to both of our product groups.

The increase in revenue from 3D printing machines of $304 for the three months ended September 30, 2021, or 2.9%, as compared to the same period in the prior year, resulted primarily from higher volumes (21 units sold during the three months ended September 30, 2021 versus 13 units sold during the three months ended September 30, 2020), partially offset by an unfavorable mix of machines sold.

The increase in revenue from 3D printed and other products, materials and services for the three months ended September 30, 2021 of $1,340, or 19.4%, resulted primarily from an increase of $680 associated with funded research and development arrangements primarily related to work performed in connection with two larger government projects and an automotive project, an increase of $463

in consumable materials and aftermarket revenues based on growth in our global installed base of 3D printing machines and an increase of $383 in sand EAC revenues based on higher customer demand for indirect printed products. Offsetting these increases was a reduction of revenue of $282 from our global metal EACs based on lower customer demand for direct printed products.

Revenue for the nine months ended September 30, 2021 was $50,846, compared with revenue of $41,881 for the same period in the prior year, an increase of $8,965, or 21.4%. The increase in revenue resulted from an increase in revenue attributable to both of our product groups.

The increase in revenue from 3D printing machines of $4,497 for the nine months ended September 30, 2021, or 20.7%, resulted primarily from higher volumes (46 units sold during the nine months ended September 30, 2021 versus 35 units sold during the nine months ended September 30, 2020), partially offset by an unfavorable mix of machines sold.

The increase in revenue from 3D printed and other products, materials and services of $4,468 for the nine months ended September 30, 2021, or 22.1%, resulted primarily from an increase of $2,734 in consumable materials and aftermarket revenues based on growth in our global installed base of 3D printing machines and an increase of $2,005 associated with funded research and development arrangements (related to work performed on multiple government and commercial projects). Offsetting these increases were reductions in revenue of $490 from our global EACs (primarily driven by reductions in revenue at the metal EACs) based on lower customer demand for printed products.

Revenue for both product groups was negatively impacted by COVID-19, including disruptions to domestic and international shipping and travel (which caused delays in the timing of delivery and installation of 3D printing machines, driving corresponding delays in revenue recognition) in addition to negative macroeconomic effects on global manufacturing.

Cost of Sales and Gross Profit

Cost of sales for the three months ended September 30, 2021 was $13,721, compared with cost of sales of $13,500 for the three months ended September 30, 2020, an increase of $221, or 1.6%. Gross profit for the three months ended September 30, 2021 was $5,322, compared with gross profit of $3,899 for the three months ended September 30, 2020, an increase of $1,423. Gross profit percentage was 27.9% for the three months ended September 30, 2021, compared with 22.4% for the three months ended September 30, 2020.

The increase in gross profit was primarily due to higher revenue volumes, favorable product warranty experience and higher contribution margin from 3D printing machine sales based on the mix of machines sold, partially offset by higher overhead costs, including higher productive workforce costs due to increased headcount, and the continued impact of operating inefficiencies and challenges driven by the COVID-19 operating environment, resulting in higher input costs.

Cost of sales for the nine months ended September 30, 2021 was $38,648, compared with cost of sales of $31,263 for the nine months ended September 30, 2020, an increase of $7,385, or 23.6%. Gross profit for the nine months ended September 30, 2021 was $12,198, compared with gross profit of $10,618 for the nine months ended September 30, 2020, an increase of $1,580. Gross profit percentage was 24.0% for the nine months ended September 30, 2021, compared with 25.4% for the nine months ended September 30, 2020.

The increase in gross profit during the nine months ended September 30, 2021 was primarily due to higher revenue volumes and favorable product warranty experience, partially offset by higher overhead costs, including higher productive workforce costs due to increased headcount, and the continued impact of operating inefficiencies and challenges driven by the COVID-19 operating environment, resulting in higher input costs.

Research and Development

Research and development expenses for the three months ended September 30, 2021 were $2,909, compared with research and development expenses of $2,013 for the three months ended September 30, 2020, an increase of $896, or 44.5%. The increase in research and development expenses was primarily due to an increase of $376 in material-related costs incurred associated with systems and materials development of binder jetting technology and an increase of $369 in employee-related costs, principally due to headcount increases.

Research and development expenses for the nine months ended September 30, 2021 were $8,541, compared with research and development expenses of $6,858 for the nine months ended September 30, 2020, an increase of $1,683, or 24.5%. The increase in research and development expenses was primarily due to an increase of $952 in material-related costs incurred associated with systems and materials development of binder jetting technology and an increase of $819 in employee-related costs, principally due to headcount increases.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended September 30, 2021 were $9,585, compared with selling, general and administrative expenses of $4,825 for the three months ended September 30, 2020, an increase of $4,760, or 98.7%. The increase in selling, general and administrative expenses was primarily due an increase of $3,431 in consulting and professional fees (principally due to $3,376 in expenses related to the planned merger transaction), an increase in employee-related costs of $949 due to investments in our commercial infrastructure, an increase of $148 in sales promotion and trade show expenses, and an increase of $107 in travel-related expenses.

Selling, general and administrative expenses for the nine months ended September 30, 2021 were $22,676, compared with selling, general and administrative expenses of $15,476 for the nine months ended September 30, 2020, an increase of $7,200, or 46.5%. The increase in selling, general and administrative expenses was primarily due to an increase of $4,197 in consulting and professional fees (principally due to $3,477 in expenses related to the planned merger transaction), an increase in employee-related costs of $1,239 due to investments in our commercial infrastructure, and an increase in commissions of $468 based on higher revenues. There was also an increase of $434 in sales promotion and trade show expenses, a $267 increase in equity-based compensation expense, and a $251 increase in insurance expense due to increased coverage and higher premiums for the nine months ended September 30, 2021.

Interest Expense

Interest expense for the three months ended September 30, 2021 was $2, compared with interest expense of $54 for the three months ended September 30, 2020, a decrease of $52, or 96.3%. The decrease in interest expense was primarily due to the absence of $34 in interest expense associated with the related party revolving credit facility recognized during the three months ended September 30, 2020 and the absence of $18 in interest expense associated with the building note payable recognized during the three months ended September 30, 2020. The related party revolving credit facility was terminated (Note 10) and the building note payable was extinguished (Note 11) during the three months ended March 31, 2021.

Interest expense for the nine months ended September 30, 2021 was $169, compared with interest expense of $171 for the nine months ended September 30, 2020, a decrease of $2, or 1.2%. The decrease in interest expense was primarily due to the absence of interest expense associated with the related party revolving credit facility following its termination during the three months ended March 31, 2021 (Note 10) and the absence of interest expense associated with the building note payable following its extinguishment during the three months ended March 31, 2021 (Note 11). We recognized interest expense of $113 associated with the related party revolving credit facility and $55 of interest expense associated with the building note payable during the nine months ended September 30, 2020. These decreases in interest expense were mostly offset by a $105 loss on the extinguishment of debt recognized during the nine months ended September 30, 2021 due to the termination of the related party revolving credit facility and a $14 loss on extinguishment of debt recognized during the nine months ended September 30, 2021 due to the extinguishment of the building note payable.

Additionally, during the three months ended September 30, 2021, the Company received notice of full forgiveness of the PPP loan. As a result, the Company recognized a gain on extinguishment of the PPP loan of $2,220 during the three months ended September 30, 2021 (Note 11). The total gain on extinguishment of debt of $2,220 was comprised of $2,194 related to the forgiveness of principal and $26 related to the forgiveness of accrued interest.

Other (Income) Expense – Net

Other (income) expense – net for the three months ended September 30, 2021 was ($48), compared with other expense (income) – net of $314 for the three months ended September 30, 2020. The change of $362 was principally due to favorable foreign exchange rate changes and the related impact on certain intercompany transactions between subsidiaries for which settlement has occurred or is planned.

Other expense (income) – net for the nine months ended September 30, 2021 was $63, compared with other expense (income) – net of $319 for the nine months ended September 30, 2020. The decrease of $256 was principally due to favorable foreign exchange rate changes and the related impact on certain intercompany transactions between subsidiaries for which settlement has occurred or is planned.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes for the three months ended September 30, 2021 and 2020 was $1 and ($34), respectively. The (benefit) provision for income taxes for the nine months ended September 30, 2021 and 2020 was ($410) and $200, respectively. We have completed a discrete period computation of our provision (benefit) for income taxes for each of the periods presented. The discrete period computation was required as a result of jurisdictions with losses before income taxes for which no tax benefit can be recognized and an inability to generate reliable estimates for results in certain jurisdictions as a result of inconsistencies in generating net operating profits (losses) in those jurisdictions.

For the nine months ended September 30, 2021, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to net changes in valuation allowances for the period and recognition of a discrete income tax benefit of $412 related to the carryback of net operating losses in Japan. During the three months ended March 31, 2021, we received confirmation from Japanese tax authorities that ExOne KK met the definition of a small or medium-sized enterprise (SME) under Japanese tax regulations, eliminating certain restrictions on the use of net operating losses to offset taxable income. ExOne KK filed amended tax returns related to tax years 2016 through 2019 to carryback net operating losses, resulting in total tax refunds of $412.

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

Impact of Inflation

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

Liquidity and Capital Resources

We have incurred a net loss in each of our annual periods since our inception. We incurred a net loss of $4,907 and $16,621 for the three months and nine months ended September 30, 2021, respectively. At September 30, 2021, we had $122,809 in unrestricted cash and cash equivalents.

Common Stock Offerings

Since our inception we have received cumulative unrestricted net proceeds from the sale of our common stock (through our initial public offering and subsequent public offerings, including at-the-market offerings) of $303,255 to fund our operations.

In September 2020, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”) pursuant to which Canaccord agreed to act as sales agent in the sale of up to $25,000 in the aggregate of our common stock in “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). In February 2021, we terminated the Equity Distribution Agreement. At the time of the termination of the Equity Distribution Agreement, the remaining maximum offering capacity was $9,269. We did not sell any shares of our common stock under the Equity Distribution Agreement during 2021 prior to its termination. There were no fees or penalties incurred by us in connection with the termination of the Equity Distribution Agreement.

In February 2021, following the termination of the Equity Distribution Agreement, we entered into an underwriting agreement with Stifel, Nicolaus & Company, Incorporated, Canaccord and certain other underwriters pursuant to which we agreed to issue and sell up to 1,666,667 shares of our common stock at a public offering price of $54.00 per share. Under the agreement, we agreed to pay underwriting discounts and commissions of $2.835 per share, as well as reimburse the underwriters for certain expenses. In addition, we granted the underwriters a 30-day option to purchase up to an additional 205,907 shares of our common stock at the public offering price, less underwriting discounts and commissions. The underwriters exercised their option to purchase 205,907 shares of our stock in-full.

As a result of this common stock offering, during February 2021, we sold 1,872,574 shares of our common stock and received net proceeds (after deducting underwriting discounts and commissions) of $95,725. We incurred expenses (other than underwriting discounts and commissions) associated with the common stock offering of $266, all of which was recognized during the three months ended March 31, 2021.

We have not sold any shares of our common stock through common stock offerings subsequent to the February 2021 common stock offering.

Related Party Revolving Credit Facility

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

Under the terms of the amended credit facility, we could make prepayments against outstanding borrowings, reduce the credit commitment or terminate the credit commitment at any time without penalty.

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

As the credit facility was terminated in March 2021, we did not recognize any interest expense related to the credit facility recognized subsequent to the three months ended March 31, 2021. There were no borrowings under the credit facility during 2021 prior to its termination.

Paycheck Protection Program

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

Pursuant to the terms of the Note, the Loan bore interest at a rate of 1.00% per annum and matured on April 18, 2022 (the “Maturity Date”). Under the terms of the Note, principal and interest payments on the Loan were deferred until November 18, 2020, at which time equal installments of principal and interest would have been due and payable monthly through the Maturity Date. Subsequent to us entering into the Note, in June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which extended the deferral of principal and interest payments on the Loan from November 2020 to August 2021. Pursuant to the terms of the PPP, the Loan, or a portion thereof, could be forgiven if Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent and utilities. We used all of the Loan proceeds for qualifying expenses.

During June 2021, we submitted an application to the SBA requesting full forgiveness of the Loan. On July 8, 2021, we received notice from the SBA that the Loan had been forgiven in full, including forgiveness of all interest accrued to date. This formal notice from the SBA legally released us of any obligations under the Loan. As a result, we recognized a gain on extinguishment of the PPP loan of $2,220 during the three months ended September 30, 2021. The total gain on extinguishment of debt of $2,220 was comprised of $2,194 related to the forgiveness of principal and $26 related to the forgiveness of accrued interest.

Building Note Payable

On May 21, 2012, we entered into a building note payable with an unrelated United States bank. Terms of the building note payable included monthly payments of $18, including interest at 4.00% through May 2017, and subsequently, monthly payments of $19

including interest at the monthly average yield on United States Treasury Securities plus 3.25% for the remainder of the term through May 2027.

On February 26, 2021, we extinguished our building note payable in-full through cash payment of $1,199. We did not incur any prepayment penalties related to the extinguishment of the building note payable in advance of the maturity date (May 2027). At the extinguishment date, the net carrying amount of the building note payable was $1,185. As a result, during the three months ended March 31, 2021, we recognized a loss on the extinguishment of debt of $14 (included in interest expense in the accompanying condensed statement of consolidated operations and comprehensive loss), which represented the write-off of unamortized debt issuance costs.

As the building note payable was terminated in February 2021, we did not recognize any interest expense related to the building note payable subsequent to the three months ended March 31, 2021.

Cash Flows

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

	Nine Months Ended
	September 30,
	2021			2020
Net cash used for operating activities	$	(18,046	)	$	(12,615	)
Net cash (used for) provided by investing activities		(3,451	)		15,457
Net cash provided by financing activities		96,460			30,556
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(460	)		295
Net change in cash, cash equivalents, and restricted cash	$	74,503		$	33,693

	September 30, 2021			December 31, 2020
Cash and cash equivalents	$	122,809		$	49,668
Restricted cash		1,870			508
Cash, cash equivalents, and restricted cash	$	124,679		$	50,176

Operating Activities

Net cash used for operating activities for the nine months ended September 30, 2021 was $18,046, compared with net cash used for operating activities of $12,615 for the nine months ended September 30, 2020. The increase in net cash outflows of $5,431 was due principally to an increase in our net loss, net of noncash items, a decrease in net cash inflows from customers (principally due to the timing of cash collections on 3D printing machine sales) and an increase in net cash outflows related to inventories. Partially offsetting these increases in net cash outflows was an increase in net cash inflows related to the timing of payments to our suppliers and vendors for our production and operating expenses.

Investing Activities

Net cash used for investing activities for the nine months ended September 30, 2021 was $3,451, compared with net cash provided by investing activities of $15,457 for the nine months ended September 30, 2020.

Activity for both periods included cash outflows for capital expenditures (consistent with our operating plans).

For the nine months ended September 30, 2020, net cash provided by investing activities included $16,229 in proceeds from the sale of property and equipment, including the sale-leaseback of our European headquarters and operating facility in Gersthofen, Germany.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2021 was $96,460, compared with net cash provided by financing activities of $30,556 for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, net cash provided by financing activities primarily included cash inflows of $95,288 in proceeds from our common stock offerings, net of issuance costs (further discussed above) and $2,429 in proceeds from the exercise of stock options by employees, partially offset by $1,226 in cash outflows associated with the extinguishment of the building note payable (further discussed above).

For the nine months ended September 30, 2020, net cash provided by financing activities included cash inflows of $27,699 in proceeds from at-the-market offerings of common stock, net of issuance costs (further discussed above), $2,194 in proceeds from

borrowings on long-term debt associated with our PPP Loan (further discussed above) and $858 in proceeds from the exercise of stock options by employees.

Financial Condition

The following summarizes the material changes in our financial condition from December 31, 2020 to September 30, 2021:

Restricted cash increased by $1,362 due to an increase in financial guarantees and letters of credit issued through our credit facility with a German bank, resulting in an increase of $1,270 in required cash collateral associated with those financial guarantees and letters of credit, and due to $92 in additional cash collateral required by a United States bank related to our corporate credit card program.

Accounts receivable increased by $3,487 based on the timing of cash payments by customers (principally the timing of cash collections on 3D printing machine sales).

Inventories increased by $4,516 due to increases in raw material inventories and work in process inventories consistent with our growth in backlog.

Prepaid expenses and other current assets increased by $1,862, primarily due to increases in prepayments to suppliers for 3D printing machine components and subassemblies and increases in prepaid insurance (primarily due to increased coverage and higher premiums).

Property and equipment – net increased by $1,515, mostly due to capital expenditures of $3,201 and net transfers of 3D printing machines from inventory to property and equipment of $1,610, partially offset by a decrease due to depreciation expense of $2,720 recognized during the period. The remaining decrease was primarily due to the effect of changes in foreign exchange rates on property and equipment balances recorded in Germany and Japan.

Operating lease right-of-use assets decreased by $1,554, principally due to the amortization of the right-of-use asset associated with the lease for our European headquarters and operating facility in Gersthofen, Germany during the period.

Accounts payable increased by $3,156 due to the timing of payments to our suppliers and vendors for our production and operating expenses.

Accrued expenses and other current liabilities increased by $1,788, principally due to an increase of $1,668 in accrued professional services fees (primarily the accrual of expenses incurred in connection with the planned merger transaction).

Operating lease liabilities decreased by $1,554, principally due to payments made under the lease agreement for our European headquarters and operating facility in Gersthofen, Germany during the period.

Contract liabilities increased $3,015 based on the timing of cash payments by customers (principally the timing of cash collections on 3D printing machine sales consistent with growth in our backlog). Contract liabilities have also been impacted as a result of disruptions in delivery and installation of our 3D printing machines as a result of COVID-19.

Off Balance Sheet Arrangements

At September 30, 2021, total outstanding financial guarantees and letters of credit issued by us were $2,522 (€2,176), of which $2,429 (€2,096) were issued through the credit facility with a German bank. Cash collateral of $1,270 (€1,096) was required for financial guarantees and letters of credit issued under the credit facility. The outstanding financial guarantees and letters of credit include expiration dates ranging from November 2021 through March 2023.

At December 31, 2020, total outstanding financial guarantees and letters of credit issued by us were $1,026 (€836), of which $928 (€756) were issued through the credit facility with a German bank. At December 31, 2020, no cash collateral was required for financial guarantees and letters of credits issued under the credit facility.

For further discussion related to financial guarantees and letters of credit issued by ExOne GmbH, refer to Note 9 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Recently Issued and Adopted Accounting Guidance

Refer to Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Refer to Note 1 to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021. These controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021.

Change in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

There have been no material changes from the risk factors described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020, other than as follows:

On August 11, 2021, we entered into a Merger Agreement with DM. See Part I, Item 1. Notes to Condensed Consolidated Financial Statements - Note 1. Basis of Presentation of this report. There have been no material changes from the risk factors described in the proxy statement on Schedule 14A relating to the Mergers filed with the SEC on October 8, 2021 other than receiving clearance from the German Federal Ministry for Economic Affairs and Energy on October 20, 2021, the expiration of the HSR waiting period on October 28, 2021 and the approval of the Mergers by our stockholders on November 9, 2021.

Item 2. Issuer Purchases of Equity Securities.

Under the 2013 Equity Incentive Plan (the “Plan”), the Compensation Committee of the Board may require or permit participants under the Plan to elect net settlement upon the vesting of restricted stock awards under the Plan in order to satisfy the related tax withholding obligations. Under net settlement, we withhold from the shares that would otherwise be delivered to the participant such number of shares of our common stock having an aggregate fair market value equal to the tax withholding obligation. When we withhold these shares, we are required to remit to the appropriate taxing authorities the aggregate fair market value of the shares withheld, which could be deemed a purchase of the common shares by us on the date of withholding.

A summary of our deemed repurchases of shares of our common stock to satisfy tax withholding obligations related to the vesting of restricted stock, as described above, during the three months ended September 30, 2021 is as follows:

Period	Total number of shares purchased (a)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (a)		Maximum number (or approximate dollar value) of shares that may be purchased under the plans or programs (a)
July 1, 2021 - July 31, 2021		—	$	—		—	$	—
August 1, 2021 - August 31, 2021		412		18.15		—		—
September 1, 2021 - September 30, 2021		—		—		—		—
		412	$	18.15		—	$	—

(a)

All of our repurchases of shares of our common stock during the three months ended September 30, 2021 were in connection with the net settlement of vested restricted stock awards. The Company did not have any publicly announced plans or programs to purchase our common stock during the three months ended September 30, 2021.

Item 6. Exhibits.

(a)(3) Exhibits

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

EXHIBIT INDEX

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

Exhibit Number	Description	Method of Filing

2.1*	Agreement and Plan of Merger, dated as of August 11, 2021, by and among DM, Merger Sub I, Merger Sub II and the Company.	Incorporated by reference to Exhibit 2.1 of Form 8-K (#001-35806) filed on August 12, 2021.

3.1	Amended and Restated Bylaws.	Incorporated by reference to Exhibit 3.1 of Form 8-K (#001-35806) filed on August 12, 2021.

10.1	Change of Control Severance Plan, as amended August 8, 2018 and September 13, 2021.**	Filed herewith.

10.2	Form of Retention Bonus Award.**	Filed herewith.

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

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

32	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.	Filed herewith.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	Filed herewith.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.	Filed herewith.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith.

104	Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.	Filed herewith.

* Certain exhibits and schedules to this Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to provide to the Securities and Exchange Commission copies of such documents upon request; provided, however, that the Company reserves the right to request confidential treatment for portions of any such documents.

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

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	The ExOne Company

	By:		/s/ John F. Hartner
			John F. Hartner
			Chief Executive Officer
			(Principal Executive Officer)

	Date:		November 12, 2021

	By:		/s/ Douglas D. Zemba
			Douglas D. Zemba
			Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

	Date:		November 12, 2021