(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 endedDecember 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 theSecurities 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 endedDecember 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., aDelaware 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 ofExOne's business, financial condition, results of operations and prospects generally, please refer to the Company's reports filed with theSEC , 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 theSEC onOctober 8, 2021 , definitive additional materials and other filings by the Company in connection with the proposed transaction and such other reports asExOne has filed or may file with theSEC 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 theSEC , 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 norExOne 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 17
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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 ourNorth Huntingdon, Pennsylvania facility for the period fromMarch 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 inMarch 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 atSeptember 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 DesignlabTM 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 OnAugust 11, 2021 , we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Desktop Metal, Inc., aDelaware corporation ("DM"),Texas Merger Sub I, Inc. , aDelaware corporation and wholly-owned subsidiary of DM ("Merger Sub I") andTexas Merger Sub II, LLC , aDelaware 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, withExOne 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). 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. OnOctober 20, 2021 , we and DM received clearance from theGerman 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 onOctober 28, 2021 at11:59 p.m. Eastern Time . Accordingly, we and DM have now received all regulatory approvals required as a condition to consummate the Mergers. OnNovember 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. 18 -------------------------------------------------------------------------------- During the three months and nine months endedSeptember 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 AtSeptember 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. AtDecember 31, 2020 , our backlog was approximately$39,400 and atSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedMarch 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 endedSeptember 30, 2021 was$19,043 , compared with revenue of$17,399 for the three months endedSeptember 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 endedSeptember 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 endedSeptember 30, 2021 versus 13 units sold during the three months endedSeptember 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 endedSeptember 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 19 -------------------------------------------------------------------------------- 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 endedSeptember 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 endedSeptember 30, 2021 , or 20.7%, resulted primarily from higher volumes (46 units sold during the nine months endedSeptember 30, 2021 versus 35 units sold during the nine months endedSeptember 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 endedSeptember 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 endedSeptember 30, 2021 was$13,721 , compared with cost of sales of$13,500 for the three months endedSeptember 30, 2020 , an increase of$221 , or 1.6%. Gross profit for the three months endedSeptember 30, 2021 was$5,322 , compared with gross profit of$3,899 for the three months endedSeptember 30, 2020 , an increase of$1,423 . Gross profit percentage was 27.9% for the three months endedSeptember 30, 2021 , compared with 22.4% for the three months endedSeptember 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 endedSeptember 30, 2021 was$38,648 , compared with cost of sales of$31,263 for the nine months endedSeptember 30, 2020 , an increase of$7,385 , or 23.6%. Gross profit for the nine months endedSeptember 30, 2021 was$12,198 , compared with gross profit of$10,618 for the nine months endedSeptember 30, 2020 , an increase of$1,580 . Gross profit percentage was 24.0% for the nine months endedSeptember 30, 2021 , compared with 25.4% for the nine months endedSeptember 30, 2020 . The increase in gross profit during the nine months endedSeptember 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 endedSeptember 30, 2021 were$2,909 , compared with research and development expenses of$2,013 for the three months endedSeptember 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 endedSeptember 30, 2021 were$8,541 , compared with research and development expenses of$6,858 for the nine months endedSeptember 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. 20
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Selling, General and Administrative
Selling, general and administrative expenses for the three months endedSeptember 30, 2021 were$9,585 , compared with selling, general and administrative expenses of$4,825 for the three months endedSeptember 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 endedSeptember 30, 2021 were$22,676 , compared with selling, general and administrative expenses of$15,476 for the nine months endedSeptember 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 endedSeptember 30, 2021 .
Interest Expense
Interest expense for the three months endedSeptember 30, 2021 was$2 , compared with interest expense of$54 for the three months endedSeptember 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 endedSeptember 30, 2020 and the absence of$18 in interest expense associated with the building note payable recognized during the three months endedSeptember 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 endedMarch 31, 2021 . Interest expense for the nine months endedSeptember 30, 2021 was$169 , compared with interest expense of$171 for the nine months endedSeptember 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 endedMarch 31, 2021 (Note 10) and the absence of interest expense associated with the building note payable following its extinguishment during the three months endedMarch 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 endedSeptember 30, 2020 . These decreases in interest expense were mostly offset by a$105 loss on the extinguishment of debt recognized during the nine months endedSeptember 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 endedSeptember 30, 2021 due to the extinguishment of the building note payable. Additionally, during the three months endedSeptember 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 endedSeptember 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 endedSeptember 30, 2021 was ($48 ), compared with other expense (income) - net of$314 for the three months endedSeptember 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 endedSeptember 30, 2021 was$63 , compared with other expense (income) - net of$319 for the nine months endedSeptember 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 endedSeptember 30, 2021 and 2020 was$1 and ($34 ), respectively. The (benefit) provision for income taxes for the nine months endedSeptember 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. 21 -------------------------------------------------------------------------------- The effective tax rate for the three months endedSeptember 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 endedSeptember 30, 2021 and 2020 was 2.4% (benefit on a loss) and 1.9% (provision on a loss), respectively.
For the three months ended
For the nine months endedSeptember 30, 2021 , the effective tax rate differed fromthe 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 inJapan . During the three months endedMarch 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 endedSeptember 30, 2021 , respectively. AtSeptember 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. InSeptember 2020 , we entered into an Equity Distribution Agreement withCanaccord 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"). InFebruary 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. InFebruary 2021 , following the termination of the Equity Distribution Agreement, we entered into an underwriting agreement withStifel, 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. 22
-------------------------------------------------------------------------------- As a result of this common stock offering, duringFebruary 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 endedMarch 31, 2021 .
We have not sold any shares of our common stock through common stock offerings
subsequent to the
Related Party Revolving Credit Facility
OnMarch 12, 2018 , we and ourExOne Americas LLC andExOne GmbH subsidiaries, as guarantors (collectively, the "Loan Parties"), entered into a Credit Agreement and related ancillary agreements withLBM Holdings, LLC ("LBM"), a company controlled byS. 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 (throughMarch 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. OnFebruary 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 untilMarch 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 ofExOne GmbH no longer served as collateral for borrowings under the amended revolving credit facility.
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.
OnMarch 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 endedMarch 31, 2021 . As the credit facility was terminated inMarch 2021 , we did not recognize any interest expense related to the credit facility recognized subsequent to the three months endedMarch 31, 2021 . There were no borrowings under the credit facility during 2021 prior to its termination.
Paycheck Protection Program
OnApril 18, 2020 , we entered into an unsecured promissory note (the "Note") with an unrelatedUnited 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 theUnited 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 onApril 18, 2022 (the "Maturity Date"). Under the terms of the Note, principal and interest payments on the Loan were deferred untilNovember 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, inJune 2020 , the Paycheck Protection Program Flexibility Act of 2020 was enacted, which extended the deferral of principal and interest payments on the Loan fromNovember 2020 toAugust 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. DuringJune 2021 , we submitted an application to the SBA requesting full forgiveness of the Loan. OnJuly 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 endedSeptember 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 OnMay 21, 2012 , we entered into a building note payable with an unrelatedUnited States bank. Terms of the building note payable included monthly payments of$18 , including interest at 4.00% throughMay 2017 , and subsequently, monthly payments of$19 23
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including interest at the monthly average yield on
OnFebruary 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 endedMarch 31, 2021 , we recognized a loss on the extinguishment of debt of$14 (included in interest expense in the accompanying condensed statement of consolidated operations and comprehensive loss), which represented the write-off of unamortized debt issuance costs.
As the building note payable was terminated in
Cash Flows
The following table summarizes the significant components of cash flows for the periods indicated, and our cash, cash equivalents, and restricted cash balances at the end of each of the periods indicated: Nine Months Ended September 30, 2021 2020 Net cash used for operating activities$ (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 endedSeptember 30, 2021 was$18,046 , compared with net cash used for operating activities of$12,615 for the nine months endedSeptember 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
Activity for both periods included cash outflows for capital expenditures (consistent with our operating plans).
For the nine months endedSeptember 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 endedSeptember 30, 2021 was$96,460 , compared with net cash provided by financing activities of$30,556 for the nine months endedSeptember 30, 2020 . For the nine months endedSeptember 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
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borrowings on long-term debt associated with our PPP Loan (further discussed
above) and
Financial Condition
The following summarizes the material changes in our financial condition from
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 aUnited 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
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 inGermany andJapan . 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
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
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
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. AtSeptember 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 fromNovember 2021 throughMarch 2023 . AtDecember 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. AtDecember 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 byExOne 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
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