Business Context and Reporting Period
Company: Nano Dimension Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2016
Business Overview: Nano Dimension is a development-stage company engaged in the development of a 3D printer (Dragonfly 2020) capable of printing multi-layer printed circuit boards (PCBs) and proprietary nano-technology inks. The company operates primarily in Israel and lists its American Depositary Shares (ADSs) on the NASDAQ Capital Market. As of the reporting date, the company has not yet commercialized its products at scale and remains in a beta testing phase.
Key Financial Metrics (Year Ended Dec 31, 2016)
| Metric | Value (NIS '000s) | Value (USD '000s) |
|---|---|---|
| Revenues | 175 | 46 |
| Cost of Revenues | 740 | 193 |
| Gross Loss | (565) | (147) |
| Research & Development Expenses | 15,606 | 4,059 |
| General & Administrative Expenses | 18,443 | 4,797 |
| Operating Loss | (34,614) | (9,003) |
| Total Comprehensive Loss | (34,470) | (8,965) |
| Cash and Cash Equivalents (End of Period) | 47,599 | 12,379 |
| Total Assets | 85,459 | 22,226 |
| Total Equity | 74,218 | 19,302 |
| Accumulated Loss | (70,604) | (18,363) |
Note: USD figures are convenience translations based on an exchange rate of NIS 3.845 to $1.00.
Material Changes vs. Prior Period
- Revenue Generation: The company recorded its first revenues of NIS 175,000 ($46,000) in 2016, derived from leasing printers to beta customers and ink deliveries. There were no revenues in 2015 or 2014.
- Operating Loss: Operating loss increased by 54.7% to NIS 34.6 million ($9.0 million) from NIS 22.4 million ($5.7 million) in 2015. This was driven by increased R&D and G&A expenses.
- R&D Expenses: Increased by 39.9% to NIS 15.6 million ($4.1 million), primarily due to a rise in personnel (from 34 to 75 R&D employees) and materials costs. Notably, NIS 16.3 million ($4.2 million) of development costs were capitalized as intangible assets in 2016.
- G&A Expenses: Increased by 64.2% to NIS 18.4 million ($4.8 million), driven by higher payroll and professional service fees related to public company compliance and investor relations.
- Capitalization: The company began amortizing intangible assets in Q4 2016 upon the initiation of the beta program, resulting in NIS 668,000 ($174,000) in amortization expense included in cost of revenues.
Guidance, Outlook, and Risks
Outlook and Guidance
- Commercialization Timeline: Management expects to end the beta plan and commence commercial sales of the Dragonfly 2020 3D printer and ink products in the second half of 2017.
- Liquidity: As of December 31, 2016, the company held approximately $12.4 million in cash. Management estimates it has sufficient capital to complete product development and bring the commercial product to market, with anticipated cash requirements of approximately $8 million.
- Future Funding: The company expects to require additional capital to support mass production and commercialization. Future funding may be sought through debt or equity financing.
Risks and Contingencies
- Development Stage: The company has a limited operating history, has incurred significant losses since inception, and anticipates continuing losses until successful commercialization.
- Intellectual Property Litigation: XJet Ltd. filed a claim in March 2015 seeking NIS 20 million ($5.2 million) alleging misappropriation of trade secrets and technology. The parties are engaged in settlement discussions as of the filing date. An injunction could delay development or require product modifications.
- Government Grants: The company relies on royalty-bearing grants from the Israel Innovation Authority (IIA). These grants impose restrictions on transferring know-how or manufacturing outside Israel and require royalty payments on future sales.
- Market Competition: The company faces competition from traditional PCB manufacturers and other 3D printing companies. There is no assurance that the Dragonfly 2020 will achieve market acceptance.
Key Facts for Investor Verification
- Commercialization Date: Verify if the company successfully transitions from beta testing to commercial sales in the second half of 2017 as projected.
- Litigation Status: Monitor the outcome of the settlement discussions with XJet Ltd. and any potential impact on the Dragonfly 2020 technology or patent portfolio.
- Cash Burn Rate: Assess whether the current cash balance of ~$12.4 million is sufficient to fund operations through commercialization without immediate dilutive equity raises.
- Beta Program Conversion: Evaluate the conversion rate of beta customers (currently six partners) into paying commercial customers and the revenue potential of the "razor/razor-blade" ink model.
- Capitalization of R&D: Review the criteria used to capitalize NIS 16.3 million in development costs and the assumptions regarding the 10-year useful life of the intangible assets.