17. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may face legal claims or actions in the normal course of business. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings. While the outcome of these claims cannot be predicted with certainty, management does not believe the outcome of any current legal proceedings will have a material adverse impact on the Company’s consolidated financial statements.

On October 20, 2023, purported stockholder Pietro Campanella filed an amendment to the November 21, 2021 class action complaint in Delaware Court of Chancery (Campanella v. Rockwell, Case No. 2021-1013-LWW). Campanella asserts breach of fiduciary duty claims against former directors and officers of The ExOne Company and aiding and abetting claims against Desktop Metal in connection with the ExOne Merger. Campanella generally alleges that ExOne’s merger proxy statement and supplemental disclosures did not adequately disclose information related to Desktop Metal’s whistleblower investigation at one of its subsidiaries, EnvisionTEC, and resignation of EnvisionTEC CEO and Desktop Metal Board member, Ali El-Siblani, prior to the stockholder vote on the merger. Defendants filed a motion to dismiss the amended class action complaint on January 12, 2024. Plaintiff’s opposition to Defendants’ motion is due April 5, 2024, and Defendants’ reply is due May 10, 2024.

On November 21, 2023, alleged stockholders Denish Bhavsar and Samhita Gera filed a derivative complaint in the United States District Court for the District of Delaware on behalf of Desktop Metal against current and former directors and officers of Desktop Metal (C.A. No. 23-1339-GBW). The complaint alleges claims for breach of fiduciary duty, unjust enrichment, waste, abuse of control, gross mismanagement, violations of Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), SEC Rule 14a-9, and contribution under Sections 10(b) and 21D of the Exchange Act. On January 9, 2024, the court granted the parties’ joint stipulation to stay the case and consolidate the case with another derivative action pending in the United States District Court for the District of Delaware, Cherry v. Fulop, et al., C.A. No. 22-962-GBW.

As previously disclosed, four alleged shareholders of Desktop Metal stock filed purported securities class action complaints in the United States District Court for the District of Massachusetts, alleging that Desktop Metal and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities and Exchange Act by making false or misleading statements regarding EnvisionTEC’s manufacturing and product compliance practices and procedures. Plaintiffs filed a Consolidated Complaint on December 19, 2022. The parties completed briefing on the motion to dismiss in May 2023, and Judge Indira Talwani held oral argument on September 13, 2023. The Court issued a decision dismissing the Consolidated Complaint with prejudice and entered

Judgment for defendants on September 21, 2023. On October 13, 2023, Lead Plaintiff Sophia Zhou (“Appellant”) filed a Notice of Appeal. Appellant filed her opening brief on February 28, 2024, and the parties anticipate that they will complete briefing by May 2024.

On September 6, 2023, and September 11, 2023, purported stockholders Catherine Coffman, Ryan O’Dell, and Elaine Wang filed actions in the United States District Court for the Southern District of New York (Coffman v. Desktop Metal, et al., Case No. 1:23-cv-07900; O’Dell v. Desktop Metal, et al., Case No. 1:23-cv-07992; Wang v. Desktop Metal, et al., Case No. 1:23-cv-08041). On September 7, 2023, purported stockholder Michael Kent filed an action in the United States District Court for the District of Delaware (Kent v. Desktop Metal, et al., Case No. 1:23-cv-00991). The complaints generally allege that certain officers and directors of Desktop Metal violated Sections 14(a) and 20(a) of the Exchange Act by causing a materially incomplete and misleading registration statement to be filed with the SEC on June 20, 2023 in connection with Desktop Metal’s proposed merger with Stratasys. Ms. Coffman dismissed her complaint on October 2, 2023. Mr. Kent dismissed his complaint on October 5, 2023. Mr. O’Dell dismissed his complaint on October 18, 2023. Ms. Wang dismissed her complaint on October 19, 2023.

The Company believes that these complaints are all without merit and intends to defend against them vigorously.

Whistleblower Complaint

On November 4, 2021, the Audit Committee of the Board of Directors engaged a third party to conduct an independent internal investigation as a result of a whistleblower complaint relating to manufacturing and product compliance practices at its EnvisionTEC US LLC facility in Dearborn, Michigan. In response, and to address the issues identified in the investigation, the Company implemented changes in the management of the Dearborn facility and improvements in manufacturing and compliance policies and procedures for the applicable products. Following notification to the FDA, the Company also initiated voluntary recalls of certain shipments of Flexcera resins and the PCA4000 curing box. The investigation is now closed, and the matters subject to the investigation and the Company’s responsive actions did not have, and are not anticipated to have, a material impact on the Company’s financial statements or its business.

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Commitments

The Company has also entered into licensing and royalty agreements with certain manufacturing and software companies and universities related to the use of patented technology. Under the terms of each agreement, the Company has made initial, immaterial one-time payments and is obligated to pay a set percentage, ranging from 4% -  13%, of all consideration received by the Company for sales of related products and services, until the agreements are terminated. The Company’s aggregate minimum annual commitment under these contracts is $0.6 million. During the years ended December 31, 2023 and 2022, the Company recorded immaterial licensing and royalty fees.

Within the Company’s normal course of operations, it issues short-term financial guarantees and letters of credit through credit facilities with German banks to third parties in connection with certain commercial transactions requiring security. The credit facility provides a capacity amount of $11.6 million for the issuance of financial guarantees and letters of credit for commercial transactions requiring security. The credit facilities do not require cash collateral for the issuance of financial guarantees and letters of credit for commercial transactions requiring security for amounts up to $3.3 million. Amounts in excess of $3.3 million require cash collateral under the credit facility.

As of December 31, 2023, total outstanding financial guarantees and letters of credit issued by the Company under the credit facility were $0.1 million, which have expiration dates ranging from January 2024 to September 2024. As of December 31, 2023, cash collateral of $0.1 million was required for financial guarantees and letters of credit issued under the credit facility, and is included in current portion of restricted cash in the consolidated balance sheets.

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As of December 31, 2023, the Company has a future purchase commitment through December 31, 2024 of $15.8 million for equipment that it plans to lease to customers in connection with digital dentistry solution offerings related to our Desktop Labs platform.

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