The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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, its wholly-owned subsidiaries, ExOne Americas LLC (United States); ExOne GmbH (Germany); ExOne Property GmbH (Germany); ExOne KK (Japan); ExOne Italy S.r.l (Italy); ExOne Sweden AB (Sweden); and through September 2016, MWT—Gesellschaft für Industrielle Mikrowellentechnik mbH (Germany). Collectively, the consolidated group is referred to as the “Company”.
On September 15, 2016, the Company completed a transaction merging its MWT—Gesellschaft für Industrielle Mikrowellentechnik mbH (Germany) subsidiary with and into its ExOne GmbH (Germany) subsidiary. The purpose of this transaction was to further simplify the Company’s legal structure. There were no significant accounting or tax related impacts associated with the merger of these wholly owned subsidiaries.
The Company filed a registration statement on Form S-3
(No. 333-203353)
with the Securities and Exchange Commission (“SEC”) on April 10, 2015. The purpose of the Form S-3 was to register, among other securities, debt securities. Certain subsidiaries of the Company (other than any minor subsidiary) are co-registrants with the Company (“Subsidiary Guarantors”), and the registration statement registered guarantees of debt securities by one or more of the Subsidiary Guarantors. The Subsidiary Guarantors are 100% owned by the Company and any guarantees by the Subsidiary Guarantors will be full and unconditional.
Basis of Presentation
The 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, 2016 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, 2016, 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; income taxes (including the valuation allowance on certain deferred tax assets and liabilities for uncertain tax positions); equity-based compensation (including the valuation of certain equity-based compensation awards issued by the Company); and testing for impairment of long-lived assets (including the identification of asset groups by management, estimates of future cash flows of identified asset groups and fair value estimates used in connection with assessing the valuation of identified asset groups). 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.
Certain amounts relating to restricted cash ($330) and intangible assets – net ($668) in the accompanying condensed consolidated balance sheet at December 31, 2016, have been reclassified from prepaid expenses and other current assets and other noncurrent assets, respectively, to conform to current period presentation. Certain amounts relating to provision (recoveries) for slow-moving, obsolete and lower of cost or market inventories – net ($356) and amortization of debt issuance costs ($5) in the accompanying condensed statement of consolidated cash flows for the nine months ended September 30, 2016, have been reclassified from decrease in inventories and decrease in prepaid expenses and other assets, respectively, to conform to current period presentation.
Recently Adopted Accounting Guidance
On January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory.” This ASU modifies existing guidance and is intended to reduce diversity in practice with respect to the accounting for the income tax consequences of intra-entity transfers of assets. The ASU indicates that the former exception to income tax accounting that requires companies to defer the income tax effects of certain intercompany transactions would apply only to intercompany inventory transactions. That is, the exception no longer applies
6
to intercompany sales and transfers of other assets (
e.g.
, property and equipment or intangible assets). Under the former exception, income tax
expense associated with intra-entity profits in an intercompany sale or transfer of assets was eliminated from earnings. Instead, that cost was deferred and recorded on the balance sheet (
e.g.
, as a prepaid asset) until the assets left the consolidated gro
up. Similarly, the entity was prohibited from recognizing deferred tax assets for the increases in tax bases due to the intercompany sale or transfer. A modified retrospective basis of adoption was required for this ASU. As a result, a cumulative-effect ad
justment of approximately $408 has been recorded to accumulated deficit on January 1, 2017, in connection with this adoption. This cumulative-effect adjustment relates to the prepaid expense associated with intra-entity transfers of property and equipment
included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet at December 31, 2016.
On January 1, 2017, the Company adopted FASB ASU 2016-17, “Consolidation: Interests Held through Related Parties That Are under Common Control.” This ASU modifies former guidance with respect to how a decision maker that holds an indirect interest in a variable interest entity (“VIE”) through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker needs to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. The Company does not have significant involvement with entities subject to consolidation considerations impacted by VIE model factors addressed by this ASU. Management has determined that the adoption of this ASU did not have an impact on the condensed consolidated financial statements of the Company.
On January 1, 2017, the Company adopted FASB ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory.” This ASU requires inventories to be measured at the lower of cost and net realizable value, with net realizable value defined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation.
Management has determined that the adoption of this ASU did not have an impact on the condensed consolidated financial statements of the Company.
Recently Issued Accounting Guidance
The Company considers the applicability and impact of all ASUs issued by the FASB. Recently issued
ASUs
not listed below were assessed and determined to be either not applicable or are currently expected to have no impact on the consolidated financial statements of the Company.
In May 2017, the FAS
B issued ASU 2017-09, “Compensation – Stock Compensation: Scope of Modification Accounting.” This ASU requires registrants to apply modification accounting unless three specific criteria are met. The three criteria are: the fair value of the award is the same before and after the modification, the vesting conditions are the same before and after the modification and the classification as a debt or equity award is the same before and after the modification. This ASU becomes effective for the Company on January 1, 2018, and is to be applied prospectively to new awards granted after adoption.
Early adoption is permitted.
Management is currently evaluating the potential impact of this ASU on the consolidated financial statements of the Company.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.” This ASU is intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. This ASU becomes effective for the Company on January 1, 2019. Early adoption is permitted. Management is currently evaluating the potential impact of this ASU on the consolidated financial statements of the Company.
In February 2016, the FASB issued ASU 2016-02, “Leases.” As a result of this ASU, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. As a result of this ASU, lessor accounting is largely unchanged and lessees will no longer be provided with a source of off-balance sheet financing. This ASU becomes effective for the Company on January 1, 2019. Early adoption is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the potential impact of this ASU on the consolidated financial statements of the Company.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” This ASU created a comprehensive framework for all entities in all industries to apply in the determination of when to recognize revenue, and, therefore, supersedes virtually all existing revenue recognition requirements and guidance. This framework is expected to provide a consistent and comparable methodology for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this principle, an entity should apply the following steps: identify the
7
contract(s) with a customer, identify the performance obligations in the contract(s), determine the transaction price, allocate the transaction price to the performance obligations in the contract(s), and recognize revenue when, or as
, the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of this guidance for the Company until January 1, 2019,
or January 1, 2018, in the event that the Company no longer qualifies as an EGC. Early adoption is permitted, but the Company may adopt the changes no earlier than January 1, 2017 (regardless of EGC status). Management is currently evaluating the potenti
al impact of these collective changes on the consolidated financial statements of the Company.
Note 2. Liquidity
On February 6, 2013, the Company commenced an initial public offering of 6,095,000 shares of its common stock at a price to the public of $18.00 per share, of which 5,483,333 shares of common stock were sold by the Company and 611,667 shares of common stock were sold by a selling stockholder (including consideration of the exercise of the underwriters’ over-allotment option). The Company received approximately $90,371 in unrestricted net proceeds in connection with this offering (net of underwriting commissions and offering costs).
On September 9, 2013, the Company commenced a secondary public offering of 3,054,400 shares of its common stock at a price to the public of $62.00 per share, of which 1,106,000 shares of common stock were sold by the Company and 1,948,400 shares of common stock were sold by selling stockholders (including consideration of the exercise of the underwriters’ over-allotment option). The Company received approximately $64,948 in unrestricted net proceeds in connection with this offering (net of underwriting commissions and offering costs).
On January 8, 2016, the Company announced that it had entered into an At Market Issuance Sales Agreement (“ATM”) with FBR Capital Markets & Co. (“FBR”) and MLV & Co. LLC (“MLV”) pursuant to which FBR and MLV agreed to act as distribution agents in the sale of up to $50,000 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”).
Both FBR and MLV were identified as related parties to the Company on the basis of significant influence in that a member of the Board of Directors of the Company also served as a member of the Board of Directors of FBR (which controlled MLV). The terms of the ATM were reviewed and approved by a sub-committee of the Board of Directors of the Company (which included each of the members of the Audit Committee of the Board of Directors except for the identified director who also held a position on the Board of Directors of FBR). This related party determination ended on June 1, 2017, when the identified director ceased serving as a member of the Board of Directors of FBR. Terms of the ATM require a 3.0% commission on the sale of common stock under the ATM and an initial reimbursement of certain legal expenses of $25. During the quarter ended March 31, 2016, the Company sold 91,940 shares of common stock under the ATM at a weighted average selling price of approximately $9.17 per share resulting in gross proceeds to the Company of approximately $843. Unrestricted net proceeds to the Company from the sale of common stock under the ATM during the quarter ended March 31, 2016 were approximately $595 (after deducting offering costs of approximately $248, including certain legal, accounting and administrative costs associated with the ATM, of which approximately $50 was paid to FBR or MLV relating to the aforementioned initial reimbursement of certain legal expenses and commissions on the sale of common stock under the ATM). There have been no sales of shares of common stock under the ATM during any periods subsequent to the quarter ended March 31, 2016.
On January 11, 2016, the Company announced that it had entered into a subscription agreement with Rockwell Forest Products, Inc. and S. Kent Rockwell for the registered direct offering and sale of 1,423,877 shares of ExOne common stock at a per share price of $9.13 (a $0.50 premium from the closing price on the close of business on January 8, 2016). Both Rockwell Forest Products, Inc. and S. Kent Rockwell were identified as related parties to the Company as S. Kent Rockwell served as Chairman and CEO of the Company and was the controlling shareholder of Rockwell Forest Products, Inc. at the time of the transaction. The terms of this transaction were reviewed and approved by a sub-committee of independent members of the Board of Directors of the Company (which included each of the members of the Audit Committee of the Board of Directors). The sub-committee of independent members of the Board of Directors of the Company were advised on the transaction by an independent financial advisor and independent legal counsel. Concurrent with the approval of this sale of common stock under the terms identified, a separate sub-committee of independent members of the Board of Directors of the Company approved the termination of the Company’s revolving credit facility with RHI Investments, LLC. Following completion of the registered direct offering on January 13, 2016, the Company received gross proceeds of approximately $13,000. Unrestricted net proceeds to the Company from the sale of common stock in the registered direct offering were approximately $12,447 (after deducting offering costs of approximately $553).
The Company has incurred a net loss in each of its annual periods since its inception. As shown in the accompanying condensed statement of consolidated operations and comprehensive loss, the Company incurred a net loss of approximately $4,863 and $18,057 for the quarter and nine months ended September 30, 2017, respectively. As noted above, the Company has received cumulative unrestricted net proceeds from the sale of its common stock of approximately $168,361 to fund its operations. At September 30, 2017, the Company had approximately $17,706 in unrestricted cash and cash equivalents.
Management believes that the Company’s existing capital resources will be sufficient to support the Company’s operating plan. If management anticipates that the Company’s actual results will differ from its operating plan, management believes it has sufficient capabilities to enact cost savings measures to preserve capital. Further, the Company may seek to raise additional capital to support its growth through additional debt, equity or other alternatives (including asset sales) or a combination thereof.
8
Note 3. Accumulated Other Comprehensive Loss
The following table summarizes changes in the components of accumulated other comprehensive loss:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Foreign currency translation adjustments
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
(11,216
|
)
|
|
$
|
(11,736
|
)
|
|
$
|
(14,735
|
)
|
|
$
|
(13,535
|
)
|
Other comprehensive income
|
|
|
1,194
|
|
|
|
489
|
|
|
|
4,713
|
|
|
|
2,288
|
|
Balance at end of period
|
|
$
|
(10,022
|
)
|
|
$
|
(11,247
|
)
|
|
$
|
(10,022
|
)
|
|
$
|
(11,247
|
)
|
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 either of the periods presented.
Note 4. Loss Per Share
The Company presents basic and diluted loss per common share amounts. Basic loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the applicable period. Diluted loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares and common equivalent shares outstanding during the applicable period.
As the Company incurred a net loss during each of the quarters and nine months ended September 30, 2017 and 2016, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock, including stock options (696,137 – 2017 and 317,637 – 2016) and unvested restricted stock issued (67,505 – 2017 and 112,504 – 2016), was anti-dilutive.
The information used to compute basic and diluted loss per common share was as follows:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net loss
|
|
$
|
(4,863
|
)
|
|
$
|
(3,611
|
)
|
|
$
|
(18,057
|
)
|
|
$
|
(12,030
|
)
|
Weighted average shares outstanding (basic and diluted)
|
|
|
16,069,453
|
|
|
|
15,997,146
|
|
|
|
16,048,257
|
|
|
|
15,912,628
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.30
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(1.13
|
)
|
|
$
|
(0.76
|
)
|
Diluted
|
|
$
|
(0.30
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(1.13
|
)
|
|
$
|
(0.76
|
)
|
Note 5. Restructuring
On January 26, 2017, the Company committed to a plan to consolidate certain of its three-dimensional (“3D”) printing operations from its North Las Vegas, Nevada facility into its Troy, Michigan and Houston, Texas facilities and exit its non-core specialty machining operations in its Chesterfield, Michigan facility. These actions were taken as a result of t
he accelerating adoption rate of the Company’s sand printing technology in North America which has resulted in a refocus of the Company’s operational strategy.
As a result of these actions, during the quarter ended March 31, 2017, the Company recorded charges of approximately $984, including approximately $110 associated with involuntary employee terminations, approximately $7 associated with other exit costs and approximately $867 associated with asset impairments. Charges associated with involuntary employee terminations and other exit costs were recorded to cost of sales in the accompanying condensed statement of operations and comprehensive loss. Charges associated with asset impairments were split between cost of sales ($598), as a component of depreciation expense, and selling, general and administrative expenses ($269), as a component of amortization expense, in the accompanying condensed statement of operations and comprehensive loss. During the quarter ended June 30, 2017, the Company recorded a charge of approximately $32 associated with an additional involuntary employee termination which required a service commitment through April 2017. This charge was recorded to cost of sales in the accompanying condensed statement of operations and comprehensive loss. There have been no additional charges recorded associated with this plan in subsequent periods.
There are no additional charges expected to be incurred associated with this plan in future periods.
The Company has settled all amounts associated with involuntary employee terminations and other exit costs.
Charges associated with asset impairments relate principally to the Company’s plan to exit its non-core specialty machining operations in its Chesterfield, Michigan facility. On April 21, 2017, the Company sold to a third party certain assets associated with these operations including inventories (approximately $79), property and equipment (approximately $2,475) and other contractual
9
rights (approximately $269). Total gross proceeds from the sale of these assets were approximately $2,050. After deducting costs directly attributable to the
sale of these assets (approximately $128), the Company recorded an impairment loss during the quarter ended March 31, 2017, of approximately $859 split between property and equipment ($590) and intangible assets ($269) based on the excess of the carrying v
alue over the estimated fair value of the related assets at March 31, 2017, and a loss on disposal (recorded to cost of sales in the accompanying condensed statement of operations and comprehensive loss) during the quarter ended June 30, 2017, of approxima
tely $42. Additionally, the Company recorded an impairment loss during the quarter ended March 31, 2017, of approximately $8 associated with certain property and equipment which was abandoned in connection with the Company’s exit of its North Las Vegas, Ne
vada facility.
Separate from the transaction described above, on May 9, 2017, the Company sold to a third party certain property and equipment (principally land and building) associated with its North Las Vegas, Nevada facility. Total gross proceeds from the sale of these assets were approximately $1,950. After deducting costs directly attributable to the sale of these assets (approximately $137), the Company recorded a gain on disposal (recorded to cost of sales in the accompanying condensed statement of operations and comprehensive loss) during the quarter ended June 30, 2017, of approximately $347.
In April 2016, the Company committed to a plan to consolidate certain of its 3D printing operations in its Auburn, Washington facility into its North Las Vegas, Nevada facility and reorganize certain of its corporate departments as part of its 2016 operating plan. As a result of these actions, during the quarter ended June 30, 2016, the Company incurred a net charge of approximately $170 including, $57 associated with involuntary employee terminations and $113 associated with the disposal of certain property and equipment related to the Auburn, Washington facility which was either sold or abandoned. This net charge was split between cost of sales ($129), research and development ($2) and selling, general and administrative expenses ($39) in the accompanying statement of consolidated operations and comprehensive loss. In addition to the net charge incurred by the Company in connection with this plan, the Company also has an operating lease commitment for the Auburn, Washington facility with a lease term through December 2018. At the time of closure of this facility, the Company was able to secure a firmly committed sublease arrangement with a third party which fully offsets its remaining contractual operating lease liability.
There have been no additional charges recorded associated with this plan in subsequent periods.
There are no additional charges expected to be incurred associated with this plan in future periods. The Company has settled all amounts associated with involuntary employee terminations.
Note 6. Impairment
During the quarter ended September 30, 2017, as a result of continued operating losses and cash flow deficiencies, the Company identified a triggering event requiring a test for the recoverability of long-lived assets held for use at the asset group level. Assessing the recoverability of long-lived assets held for use requires significant judgments and estimates by management.
For purposes of testing long-lived assets for recoverability, the Company operates as three separate asset groups: United States, Europe and Japan. In assessing the recoverability of long-lived assets held for use, the Company determined the carrying amount of long-lived assets held for use to be in excess of the estimated future undiscounted net cash flows of the related assets. The Company proceeded to determine the fair value of its long-lived assets held for use, principally through use of the market approach. The Company’s use of the market approach included consideration of market transactions for comparable assets. Management concluded that the fair value of long-lived assets held for use exceeded their carrying value and as such no impairment loss was recorded
.
A
significant decrease in the market price of a long-lived asset, adverse change in the use or condition of a long-lived asset, adverse change in the business climate or legal or regulatory factors impacting a long-lived asset and continued operating losses and cash flow deficiencies associated with a long-lived asset, among other indicators, could cause a future assessment to be performed which may result in an impairment of long-lived assets held for use, resulting in a material adverse effect on the financial position and results of operations of the Company.
Note 7. 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:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash and cash equivalents
|
|
$
|
17,706
|
|
|
$
|
27,825
|
|
Restricted cash
|
|
|
1,098
|
|
|
|
330
|
|
Cash, cash equivalents, and restricted cash shown in the
condensed statement of consolidated cash flows
|
|
$
|
18,804
|
|
|
$
|
28,155
|
|
10
Restricted cash at September 30, 2017 includes approximately $768
associated with cash collateral required by a German bank for a financial guarantee issued by ExOne GmbH in connection with a commercial transaction requiring security. Restricted cash at both September 30, 2017 and December 31, 2016 includes approximatel
y $330 associated with 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 are considered legally restricte
d by the Company.
Note 8. Inventories
Inventories consist of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Raw materials and components
|
|
$
|
7,306
|
|
|
$
|
7,429
|
|
Work in process
|
|
|
6,253
|
|
|
|
5,166
|
|
Finished goods
|
|
|
3,084
|
|
|
|
3,243
|
|
|
|
$
|
16,643
|
|
|
$
|
15,838
|
|
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, 2017 and December 31, 2016, the allowance for slow-moving and obsolete inventories was approximately $3,364 and $1,517, respectively, and has been reflected as a reduction to inventories (principally raw materials and components). Included in the allowance for slow-moving and obsolete inventories at September 30, 2017, is approximately $1,631 related to certain raw material and component inventories associated with the Company’s Exerial 3D printing machine platform (see further discussion below).
During the quarter ended June 30, 2017, the Company recorded a charge of approximately $1,460 to cost of sales in the accompanying condensed statement of consolidated operations and comprehensive loss attributable to certain raw material and component inventories (principally machine frames and other fabricated components) associated with the Company’s Exerial 3D printing machine platform based on decisions made by the Company during the period related to certain design changes and improvements to the underlying platform (rendering certain elements of the previous design obsolete).
During the quarter ended June 30, 2016, the Company recorded a credit of approximately $507 to cost of sales in the accompanying condensed statement of consolidated operations and comprehensive loss attributable to the reversal of a previously recorded reserve for certain inventories associated with the Company’s laser micromachining product line which was discontinued at the end of 2014, based on the sale of such laser micromachining inventories during the period.
During the quarter and nine months ended September 30, 2017, the Company recorded a (credit) charge of approximately ($11) and $116, respectively, to cost of sales in the accompanying condensed statement of consolidated operations and comprehensive loss associated with certain work in process inventories for which cost was determined to exceed net realizable value. There were no such credits or charges recorded by the Company during the quarter or nine months ended September 30, 2016.
Note 9. Product Warranty Reserves
Substantially all of the Company’s 3D printing machines are covered by a standard twelve month warranty. Generally, at the time of sale, a liability is recorded (with an offset to cost of sales) based upon the expected cost of replacement parts and labor to be incurred over the life of the standard warranty. Expected cost is estimated using historical experience for similar products. The Company periodically assesses the adequacy of the product warranty reserves based on changes in these factors and records any necessary adjustments if actual experience indicates that adjustments are necessary. Future claims experience could be materially different from prior results because of the introduction of new, more complex products, a change in the Company’s warranty policy in response to industry trends, competition or other external forces, or manufacturing changes that could impact product quality. In the event that the Company determines that its current or future product repair and replacement costs exceed estimates, an adjustment to these reserves would be charged to cost of sales in the period such a determination is made.
The following table summarizes changes in product warranty reserves (such amounts reflected in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet for each respective period):
11
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
1,075
|
|
|
$
|
992
|
|
|
$
|
1,115
|
|
|
$
|
1,308
|
|
Provisions for new issuances
|
|
|
243
|
|
|
|
403
|
|
|
|
763
|
|
|
|
699
|
|
Payments
|
|
|
(174
|
)
|
|
|
(146
|
)
|
|
|
(427
|
)
|
|
|
(648
|
)
|
Reserve adjustments
|
|
|
(100
|
)
|
|
|
(89
|
)
|
|
|
(466
|
)
|
|
|
(235
|
)
|
Foreign currency translation adjustments
|
|
|
14
|
|
|
|
4
|
|
|
|
73
|
|
|
|
40
|
|
Balance at end of period
|
|
$
|
1,058
|
|
|
$
|
1,164
|
|
|
$
|
1,058
|
|
|
$
|
1,164
|
|
Note 10. Contingencies and Commitments
Contingencies
On July 1, 2017, the Company (through its ExOne GmbH subsidiary) entered into a Settlement Agreement with Kocel Foundry Limited (also known as Kocel CSR Casting Company, Limited) and Kocel Group (Hong Kong) Limited (collectively, “Kocel”) relating to settlement of the arbitration case (no. 100019-2017) administered by the Swiss Chambers’ Arbitration Institution Notice of Arbitration, as filed by the Company on January 25, 2017. Among other things, the Settlement Agreement provided for a cash payment from ExOne GmbH to Kocel of approximately $811 and a settlement and release of claims related to a sales agreement between the parties for certain 3D printing machines and related equipment (the “Sales Agreement”).
Based on the terms of the Settlement Agreement, including the final acceptance by Kocel of the 3D printing machines and related equipment, and relief from further obligation, liability or warranty for both parties (excluding certain intellectual property considerations), the Company recorded revenue of approximately $2,762 associated with the Sales Agreement (net of the cash payment made by ExOne GmbH to Kocel, such payment made on July 5, 2017) and the related cost of sales, during the quarter ending September 30, 2017.
The Company and its subsidiaries are subject to various litigation, claims, and proceedings which have been or may be instituted or asserted from time to time in the ordinary course of business. Other than the matter further described above, 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 financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security. ExOne GmbH maintains a credit facility agreement with a German bank which provides for various short-term financings in the form of overdraft credit, financial guarantees, letters of credit and collateral security for commercial transactions for approximately $1,500 (€1,300). In addition, ExOne GmbH may use the credit facility agreement for short-term, fixed-rate loans in minimum increments of approximately $100 (€100) with minimum terms of at least thirty days. The overdraft credit interest rate is fixed at 10.2% while the interest rate associated with commercial transactions requiring security (financial guarantees, letters of credit or collateral security) is fixed at 1.75%. The credit facility agreement has an indefinite term and is subject to cancellation by either party at any time upon repayment of amounts outstanding or expiration of commercial transactions requiring security. There is no commitment fee associated with the credit facility agreement. There are no negative covenants associated with the credit facility agreement. The credit facility agreement has been guaranteed by the Company. At September 30, 2017 and December 31, 2016, there were no outstanding borrowings in the form of overdraft credit or short-term loans under the credit facility agreement. At September 30, 2017, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the credit facility agreement were approximately $865 (€732). Included in the total outstanding financial guarantees and letters of credit issued by ExOne GmbH are approximately $584 (€494) with expiration dates ranging from
October
2017 through July 2018 and approximately $281 (€238) which have no expiration date. At December 31, 2016, total outstanding guarantees and letters of credit issued by ExOne GmbH under the credit facility agreement were approximately $400 (€380).
In addition to amounts issued by ExOne GmbH under the credit facility agreement, during the quarter ended March 31, 2017, ExOne GmbH entered into separate agreements with the same German bank for additional capacity for financial guarantees and letters of credit associated with certain commercial transactions requiring security. Terms of the separate agreements are substantially similar to those of the existing credit security agreement except that the German bank required cash collateral to be posted by ExOne GmbH in connection with any related issuance. At September 30, 2017, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under these separate agreements were approximately $768 (€650) which expired in October 2017.
Note 11. Income Taxes
The provision for income taxes for the quarters ended September 30, 2017 and 2016 was $14 and $25, respectively. The provision for income taxes for the nine months ended September 30, 2017 and 2016 was $23 and $43, respectively. The Company has completed a discrete period computation of its provision for income taxes for each of the periods presented. Discrete period computation is 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.
12
The effective tax rate for the quarters ended September 30, 2017 and 2016 was 0.3% (provi
sion on a loss) and 0.7% (provision on a loss), respectively. The effective tax rate for the nine months ended September 30, 2017 and 2016 was 0.1% (provision on a loss) and 0.4% (provision on a loss), respectively. The effective tax rate differs from the
United States federal statutory rate of 34.0% for each of the periods presented primarily due to net changes in valuation allowances for the periods.
The Company has provided a valuation allowance for its net deferred tax assets as a result of the Company not generating consistent net operating profits in jurisdictions in which it operates. As such, any benefit from deferred taxes in any of the periods presented has been fully offset by changes in the valuation allowance for net deferred tax assets. The Company continues to assess its future taxable income by jurisdiction based on recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that the Company may be able to enact in future periods, the impact of potential operating changes on the business and forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that the Company is able to reach the conclusion that its net deferred tax assets are realizable based on any combination of the above factors in a single, or in multiple, taxing jurisdictions, a reversal of the related portion of the Company’s existing valuation allowances may occur.
The Company has a liability for uncertain tax positions related to certain capitalized expenses and intercompany transactions. At September 30, 2017 and December 31, 2016, the liability for uncertain tax positions was approximately $846 and $754, respectively, and is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet. At September 30, 2017 and December 31, 2016, the Company had an additional liability for uncertain tax positions related to its ExOne GmbH (Germany) subsidiary of approximately $304 and $232, respectively, which were fully offset against net operating loss carryforwards. At September 30, 2017 and December 31, 2016, the Company had an additional liability for uncertain tax positions related to its ExOne KK (Japan) subsidiary of approximately $554 and $416, respectively, which were fully offset against net operating loss carryforwards.
In July 2017, local taxing authorities in Japan completed their examination of the Company’s ExOne KK (2014-2016) subsidiary, resulting in an income tax obligation of approximately $5, which was reflected in the provision for income taxes in the accompanying condensed statement of consolidated operations during the quarter ended June 30, 2017. At September 30, 2017, the Company’s ExOne GmbH (2010-2013) and ExOne Property GmbH (2013) subsidiaries were under examination by local taxing authorities. The Company is unable to reasonably predict an outcome related to this examination, the result of which may be material in a future period to the financial position, results from operations and cash flows of the Company.
Note 12. Equity-Based Compensation
On January 24, 2013, the Board of Directors of the Company adopted the 2013 Equity Incentive Plan (the “Plan”). In connection with the adoption of the Plan, 500,000 shares of common stock were reserved for issuance pursuant to the Plan, with automatic increases in such reserve available each year annually on January 1 from 2014 through 2023 equal to the lesser of 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 of Directors, provided that the maximum number of shares authorized under the Plan will not exceed 1,992,241 shares, subject to certain adjustments.
Stock options and restricted stock issued by the Company 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 stock options and restricted stock issued by the Company vest immediately upon issuance. Stock options issued by the Company have a contractual life which expires 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
.
The following table summarizes the total equity-based compensation expense recognized for awards issued under the Plan:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Equity-based compensation expense recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
$
|
768
|
|
|
$
|
347
|
|
|
$
|
1,244
|
|
|
$
|
490
|
|
Restricted stock
|
|
|
440
|
|
|
|
203
|
|
|
|
799
|
|
|
|
614
|
|
Total equity-based compensation expense before income taxes
|
|
|
1,208
|
|
|
|
550
|
|
|
|
2,043
|
|
|
|
1,104
|
|
Benefit for income taxes*
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total equity-based compensation expense net of income taxes
|
|
$
|
1,208
|
|
|
$
|
550
|
|
|
$
|
2,043
|
|
|
$
|
1,104
|
|
*
|
The benefit for income taxes from equity-based compensation for each of the periods presented has been determined to be $0 based on valuation allowances against net deferred tax assets.
|
At September 30, 2017, total future compensation expense related to unvested awards yet to be recognized by the Company was approximately $1,145 for stock options and $449 for restricted stock. Total future compensation expense related to unvested awards
13
yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of approximately 1.3 years.
During the nine months ended September 30, 2017, 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:
|
|
February 10,
2017
|
|
August 14,
2017
|
Weighted average fair value per stock option
|
|
$5.46 - $5.75
|
|
$3.40 - $4.38
|
Volatility
|
|
62.89% - 63.75%
|
|
61.68% - 67.92%
|
Average risk-free interest rate
|
|
1.89% - 1.94%
|
|
1.40% - 1.82%
|
Dividend yield
|
|
0.00%
|
|
0.00%
|
Expected term (years)
|
|
5.0 - 5.5
|
|
2.5 - 5.5
|
During the nine months ended September 30, 2016, 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:
|
|
August 12,
2016
|
|
|
August 19,
2016
|
|
Weighted average fair value per stock option
|
|
$8.07
|
|
|
$7.97
|
|
Volatility
|
|
|
66.43%
|
|
|
|
66.24%
|
|
Average risk-free interest rate
|
|
|
1.18%
|
|
|
|
1.20%
|
|
Dividend yield
|
|
|
0.00%
|
|
|
|
0.00%
|
|
Expected term (years)
|
|
|
6.0
|
|
|
|
5.5
|
|
For certain stock option awards, volatility is estimated based on the historical volatility of the Company when the expected term of the award is less than the period for which the Company has been publicly traded. For certain stock option awards, volatility is estimated based on the historical volatilities of certain peer group companies when the expected term of the award exceeds the period for which the Company has been publicly traded. 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:
|
|
Nine Months Ended
|
|
|
|
2017
|
|
|
2016
|
|
|
|
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
|
|
|
314,303
|
|
|
$
|
15.62
|
|
|
$
|
9.38
|
|
|
|
210,970
|
|
|
$
|
17.43
|
|
|
$
|
10.67
|
|
Stock options granted
|
|
|
389,000
|
|
|
$
|
8.16
|
|
|
$
|
3.89
|
|
|
|
139,000
|
|
|
$
|
13.72
|
|
|
$
|
8.00
|
|
Stock options exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Stock options forfeited
|
|
|
(500
|
)
|
|
$
|
15.74
|
|
|
$
|
9.60
|
|
|
|
(6,001
|
)
|
|
$
|
15.74
|
|
|
$
|
9.60
|
|
Stock options expired
|
|
|
(6,666
|
)
|
|
$
|
17.43
|
|
|
$
|
10.67
|
|
|
|
(26,332
|
)
|
|
$
|
17.74
|
|
|
$
|
10.87
|
|
Outstanding at end of period
|
|
|
696,137
|
|
|
$
|
11.51
|
|
|
$
|
6.35
|
|
|
|
317,637
|
|
|
$
|
15.77
|
|
|
$
|
9.48
|
|
Stock options exercisable at end of period
|
|
|
427,953
|
|
|
$
|
12.67
|
|
|
$
|
7.16
|
|
|
|
178,304
|
|
|
$
|
17.01
|
|
|
$
|
10.32
|
|
Stock options expected to vest at end of period
|
|
|
268,184
|
|
|
$
|
9.66
|
|
|
$
|
5.06
|
|
|
|
132,908
|
|
|
$
|
14.18
|
|
|
$
|
8.38
|
|
At September 30, 2017, intrinsic value associated with stock options exercisable was approximately $586. At September 30, 2017, intrinsic value associated with stock options expected to vest was approximately $659. The weighted average remaining contractual term of stock options exercisable and expected to vest at September 30, 2017, was approximately 6.7 years and 7.2 years, respectively. There were no stock option exercises during the nine months ended September 30, 2017 or 2016.
14
The activity for restricted stock was as follows:
|
|
Nine Months Ended
|
|
|
|
2017
|
|
|
2016
|
|
|
|
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
|
|
|
94,171
|
|
|
$
|
14.29
|
|
|
|
77,670
|
|
|
$
|
19.57
|
|
Restricted stock granted
|
|
|
60,000
|
|
|
$
|
9.01
|
|
|
|
74,500
|
|
|
$
|
11.78
|
|
Restricted stock vested
|
|
|
(74,999
|
)
|
|
$
|
12.40
|
|
|
|
(35,998
|
)
|
|
$
|
19.25
|
|
Restricted stock forfeited
|
|
|
(11,667
|
)
|
|
$
|
14.28
|
|
|
|
(3,668
|
)
|
|
$
|
19.46
|
|
Outstanding at end of period
|
|
|
67,505
|
|
|
$
|
11.69
|
|
|
|
112,504
|
|
|
$
|
14.52
|
|
Restricted stock expected to vest at end of period
|
|
|
67,505
|
|
|
$
|
11.69
|
|
|
|
112,504
|
|
|
$
|
14.52
|
|
Restricted stock vested during the nine months ended September 30, 2017 and 2016, had a fair value of approximately $670 and $351, respectively.
Note 13. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1
|
|
Observable inputs such as quoted prices in active markets for identical investments that the Company has the ability to access.
|
|
|
|
Level 2
|
|
Inputs include:
|
|
|
|
|
|
Quoted prices for similar assets or liabilities in active markets;
|
|
|
|
|
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
|
|
|
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
|
|
Inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
|
|
|
|
Level 3
|
|
Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.
|
The Company is required to disclose its estimate of the fair value of material financial instruments, including those recorded as assets or liabilities in its consolidated financial statements, in accordance with GAAP.
15
During the quarter ended March 31, 2017, the Company entered into two separate foreign exchange forward contracts with a German bank in an effort to hedge the variability of certain foreign exchange risks
between the Euro (the functional currency of the Company’s ExOne GmbH subsidiary) and British Pound Sterling (the currency basis for cash flows resulting from a commercial sales arrangement with a customer). The first of the two foreign exchange forward co
ntracts was both entered into and settled (in connection with cash received from the customer) during the quarter ended March 31, 2017, resulting in a realized gain on settlement of approximately $16 (
€
15). The second of the two foreign exchange forward co
ntracts was settled on August 31, 2017, resulting in a realized gain on settlement of approximately $14 (
€
12). Neither of the contracts was designated as a hedging instrument and accordingly, realized and unrealized gains (losses) for all periods have been
recorded to other (income) expense – net in the accompanying condensed statement of consolidated operations and comprehensive loss. The Company has classified both contracts as Level 2 fair value measurements.
The carrying values and fair values of other financial instruments (assets and liabilities) not required to be recorded at fair value were as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
Cash and cash equivalents
|
|
$
|
17,706
|
|
|
$
|
17,706
|
|
|
$
|
27,825
|
|
|
$
|
27,825
|
|
Restricted cash
|
|
$
|
1,098
|
|
|
$
|
1,098
|
|
|
$
|
330
|
|
|
$
|
330
|
|
Current portion of long-term debt*
|
|
$
|
135
|
|
|
$
|
140
|
|
|
$
|
132
|
|
|
$
|
138
|
|
Current portion of capital leases
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
72
|
|
|
$
|
72
|
|
Long-term debt
̶
net of current portion*
|
|
$
|
1,543
|
|
|
$
|
1,570
|
|
|
$
|
1,644
|
|
|
$
|
1,674
|
|
Capital leases
̶
net of current portion
|
|
$
|
41
|
|
|
$
|
41
|
|
|
$
|
10
|
|
|
$
|
10
|
|
*
Carrying values at September 30, 2017 and December 31, 2016 are net of unamortized debt issuance costs of approximately $32 and $36, respectively.
The carrying amounts of cash and cash equivalents, restricted cash, current portion of long-term debt and current portion of capital leases approximate fair value due to their short-term maturities. The fair value of long-term debt – net of current portion and capital leases – net of current portion have been estimated by management based on the consideration of applicable interest rates (including certain instruments at variable or floating rates) and other available information (including quoted prices of similar instruments available to the Company). Cash and cash equivalents and restricted cash are classified in Level 1; current portion of long-term debt, current portion of capital leases, long-term debt – net of current portion and capital leases – net of current portion are classified in Level 2
.
Note 14. Concentration of Credit Risk
During the quarters and nine months ended September 30, 2017 and 2016, 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 quarters ended September 30, 2017 and 2016, the Company’s five most significant customers represented approximately 46.0% and 36.0% of total revenue, respectively. For the nine months ended September 30, 2017 and 2016, the Company’s five most significant customers represented approximately 22.2% and 21.4% of total revenue, respectively. At September 30, 2017 and December 31, 2016, accounts receivable from the Company’s five most significant customers were approximately $2,293 and $1,867, respectively.
Note 15. Related Party Transactions
Revenues
Sales of products and/or services to related parties for the quarters ended September 30, 2017 and 2016 were approximately $8 and $1, respectively. Sales of products and/or services to related parties for the nine months ended September 30, 2017 and 2016 were approximately $25 and $73, respectively. None of the transactions met a threshold requiring review and approval by the Audit Committee of the Board of Directors of the Company.
There were no amounts due from related parties at September 30, 2017.
Amounts due from related parties at December 31, 2016, were approximately $1 and are reflected in accounts receivable – net in the accompanying condensed consolidated balance sheet. In addition, the Company has received prepayments for certain undelivered services to a related party of approximately $8 at September 30, 2017, which are reflected in deferred revenue and customer prepayments in the accompanying condensed consolidated balance sheet. There were no prepayments received from related parties at December 31, 2016.
Expenses
During the quarters ended September 30, 2017 and 2016, purchases from related parties were approximately $4 and $3, respectively. During the nine months ended September 30, 2017 and 2016, purchases from related parties were approximately $12 and $13, respectively. Purchases by the Company during the quarters and nine months ended September 30, 2017 and 2016 included website design services and leased office space from related parties under common control by the Executive Chairman of the Company (formerly the Chairman and CEO of the Company through August 19, 2016). None of the transactions met a threshold requiring review and approval by the Audit Committee of the Board of Directors of the Company.
16
The Company also receives the benefit of the corporate use of an airplane from a related party under common control by the Executive Chairman of the Company (formerly the Chairman and CEO of the Company through August 19, 2016) for no consi
deration.
The Company estimates the fair market value of the benefits received during the quarter and nine months ended September 30, 2016 were approximately $17 and $21, respectively. There were no such benefits received during the quarter or nine months
ended September 30, 2017.
Amounts due to related parties at September 30, 2017 and December 31, 2016, were approximately $1 and $1, respectively. Amounts due to related parties for both periods are reflected in accounts payable in the accompanying condensed consolidated balance sheet.
Revolving Credit Facility with a Related Party
On October 23, 2015, ExOne and its ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with RHI Investments, LLC (“RHI”), a related party, on a $15,000 revolving credit facility to (i) assist the Company in its efforts to finance customer acquisition of its 3D printing machines and 3D printed and other products and services and (ii) provide additional funding for working capital and general corporate purposes. RHI was determined to be a related party based on common control by the former Chairman and CEO of the Company (the Executive Chairman of the Company effective August 19, 2016). Prior to execution, the Credit Agreement was subject to review and approval by a sub-committee of independent members of the Board of Directors of the Company (which included each of the members of the Audit Committee of the Board of Directors). The Company incurred approximately $215 in debt issuance costs associated with the Credit Agreement.
On January 10, 2016, the Company delivered notice to RHI of its intent to terminate the Credit Agreement in connection with the closing of a registered direct offering of common stock to an entity under common control by the former Chairman and CEO of the Company
(the Executive Chairman of the Company effective August 19, 2016)
. There were no borrowings under the Credit Agreement from January 1, 2016 through the effective date of its termination, January 13, 2016. In connection with the termination, the Company settled its remaining accrued interest under the Credit Agreement of approximately $5 relating to the commitment fee on the unused portion of the revolving credit facility
(100 basis points, or 1.0% on the unused portion of the revolving credit facility)
. In
addition, during the quarter ended March 31, 2016, the Company recorded approximately $204 to interest expense related to the accelerated amortization of debt issuance costs. Upon termination of the Credit Agreement, all liens and guaranties in respect thereof were released.
Other
Refer to Note 2 for further discussion relating to two separate equity offerings during the quarter ended March 31, 2016, certain elements of which qualified as related party transactions.
Note 16. Subsequent Events
The Company has evaluated all of its activities and concluded that no 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.
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