Crowditz on R3 Printing: HOT!
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Aug 21, 2019
Crowditz: Equity Crowdfunding Data, Analytics, and Insights Momentum: HOT Likelihood of Reaching Max: LIKELY
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Deal highlights
R3 Printer is the key to enabling mass customization at prices that can compete with mass production
Patent-pending systems remove the barriers to running a scalable on-demand manufacturing business
Allows on-demand manufacturers to operate more 3D printers with the same staff by virtually eliminating downtime, cutting the cost of custom 3D-printed products
Breakthrough printhead design unlocks faster print speeds and larger print sizes, boosting revenue and increasing the addressable market
Venture-backed, and a recipient of federal grant funding from the United States Air Force
Targeting the $15.8 billion-dollar Additive Manufacturing (3D Printing) market sector
Industry growth is projected to $23.9 billion in revenue by 2022, and $35.6 billion by 2024
Mass production isn't personal
Manufacturing techniques like injection molding are the reason we have access to so many affordable products that make our lives comfortable and convenient. By standardizing the size and shape of a product and manufacturing it by the millions, the price becomes sufficiently low that most people can afford to buy it. That’s a win, right?
But there’s a downside: for the things in our lives that we wear, touch, or hold - usually the things that we interact with most - a standard size and shape means an imperfect fit for basically everyone.
Think about it: does it make sense that an insole that provides arch support has the same amount of arch for everyone? Of course not. But the only way around this is to manufacture using a different technology that introduces a whole new problem: cost.
Custom 3D-printed products are priced out of reach
The solution seems so simple: with enough 3D printers, one could build a business offering customized products that capture market share away from their mass-produced counterparts. But a look at the custom, 3D-printed products on the market today quickly reveals the issue:
While it’s clear that there’s a demand for products that are custom-made to fit the buyer, the unexpected outcome is that these are premium products available only to those who can afford them.
Why is this happening?
3D printers are too expensive to run
Manual labor is the silent killer that keeps custom, 3D-printed products priced out-of-reach in a premium product tier and away from the mainstream market.
On-demand manufacturing businesses operating 3D printers find themselves in a bind: cheap 3D printers require lots of setup, manual labor, and expertise to run while enterprise-grade 3D printers are expensive and are locked into overpriced proprietary materials that destroy margins.
The end result, no matter which class of 3D printer is used, is that the cost of 3D printing is currently too high, so custom 3D-printed products are expensive and priced out of the mainstream market.
Say hello to R3 Printer
R3 Printer is the additive manufacturing workhorse that businesses have been waiting for.
It’s designed from the inside-out to be the ultimate platform for running a scalable on-demand manufacturing service.
Radically re-engineered for performance
Patent-pending innovations on multiple key components make R3 Printer a purpose-built powerhouse for manufacturing.
On-demand manufacturers run 3D printers for a living, so we made sure that R3 Printer not only stands up to 24x7 duty cycles, but also outperforms current market offerings.
Unrestricted long-term value
R3 Printer is an unlocked product that gives our customers a competitive advantage.
With R3 Printer, on-demand manufacturers can print with experimental thermoplastics to serve customers they would otherwise be forced to turn away if they were locked into a competitor’s material ecosystem.
For government agencies with strict security requirements, or businesses with very specific software workflow needs, R3 Printer is the solution. Our customers have the power to disable cloud connectivity yet still retain access to all operations and monitoring features over a local network.
With R3 Printer, businesses get both long-term value and out-of-the-box functionality:
As seen in:
Lighter printhead = faster print speeds
You can’t beat the laws of physics: a lighter printhead can accelerate and decelerate faster than a heavy one.
In the case of R3 Printer, by shedding over 80% of the weight off the printhead, combined with other optimizations, R3 Printer can achieve print speeds that are 90% faster than competing extrusion-based 3D printers.
Smaller printhead = larger print sizes
R3 Printer has a 200% larger build area than competing extrusion-based 3D printers, even though it has the same exact footprint:
A smaller printhead can utilize the full length and width of a printer’s internal volume. Unlike the competition, whose relatively large printers have very limited print sizes, R3 Printer can produce parts almost as big as itself.
Active Overheat Prevention™ virtually eliminates jams
Active Overheat Prevention™ uses an additional sensor in the printhead to monitor heat absorption and trigger a pause in printing if a critical threshold is reached:
Common thermally-induced jams take about 45 minutes of trained labor to fix, and introduce the opportunity for operators to get burned or injured. These jams happen without warning and usually go undetected for a long time, often after back-to-back print jobs.
By virtually eliminating the need to repair thermally-induced printer failures, Active Overheat Prevention™ allows on-demand manufacturing businesses to operate more 3D printers with the same staff, eliminating a major cost driver of 3D-printed goods.
Please note: The above statements are the estimates of the Company based on the Company’s understanding of the market, all statements made are the opinion of the Company and have not been validated by any third party.
Multi-billion dollar market
R3 Printing is addressing the multi-billion dollar additive manufacturing (AM) market sector, forecasted to reach $15.8 billion in revenue by the end of the year:
The revenue forecast is expected to climb to $23.9 billion in 2022, and $35.6 billion in 2024.
Sources: Wohlers Associates, Wohlers Report “3D Printing and Additive Manufacturing State of the Industry” 2017, 2018, 2019 and Forbes, Significant 3D Printing Forecast Surges To $35.6 Billion
Double-digit growth rates
Forbes cited Wohlers Associates, the preeminent research and consulting firm, saying that for 2017 “investors will appreciate the solid 21 percent growth as the industry exceeds $7.3 billion.”
Historical data confirms that year-to-year growth has consistently been in the double digits.
Early-stage investments surpass $1 billion
Our target industry invests heavily in early-stage startups that develop disruptive technology. In 2018, there were 107 early-stage investments valued at nearly $1.3 billion.
Notable events in this space also include acquisitions, where established players from related industries acquire startups as part of their strategy for entering the lucrative, but competitive, additive manufacturing industry.
Intellectual property
We have four (4) utility patent applications pending on all of the core features and mechanisms that make R3 Printer the ultimate platform for additive manufacturing.
In addition, we have registered trademarks for all of the core elements of our brand. We see this as a key investment in solidifying and protecting R3 Printing’s presence as a recognizable standard-bearer for on-demand manufacturing technology.
Testing partners
We’re excited to be partnered with companies that are eager to test the next generation of on-demand manufacturing hardware and provide us with the valuable feedback we need to optimize our product for a full-scale launch:
Li-Leger Creative | Vancouver, BC | Product design and manufacturing.
Obsessively Geek | New York, NY | On-demand manufacturing.
Forge Manufacturing | Jacksonville, FL | On-demand manufacturing and digital design.
Halo Aerospace | West Palm Beach, FL | Aerospace R&D.
Additional testing partners are in our pipeline.
We have also received federal funding to assist us in finding test partners within the United States Air Force (USAF).
Venture capital
R3 Printing is a proud alumnus of Ocean Accelerator Class IV, a highly selective Cincinnati-based technology accelerator that only accepts up to 10 startups in its annual cohort.
Ocean deploys seed-stage capital to each of its portfolio companies.
Previous equity crowdfunding
Our previous round on Republic was funded at 390% of our initial goal. The funds were used to complete R&D on various technology components, with the additional funds allowing us to do so in an accelerated timeline while also enabling the pursuit of high-value partnership opportunities.
Our current funding round will be allocated towards completing Design for Manufacture (DFM) / Design for Assembly (DFA) optimizations and purchasing the first factory run of R3 Printer units. DFM/DFA optimizations are small tweaks to our hardware component designs that lower our factory costs and help ensure that we can scale efficiently.
Government grant funding
R3 Printing is a proud recipient of a Small Business Innovation Research (SBIR) Phase I government grant, in partnership with AFWERX and the United States Air Force (USAF).
As part of this grant, R3 Printing is undertaking several initiatives:
We’re engaging with the USAF and other military/defense end-users to gain a deep understanding of their pain points as they move to adopt additive manufacturing technology.
We’re connecting with USAF and other Department of Defense (DoD) stakeholders to pursue additional prospective partnership opportunities.
If awarded a SBIR Phase II grant, we’ll begin drafting work plans for bespoke product development to fit USAF/defense-specific requirements.
Please note: The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.
Incubation
R3 Printing is a current incubee and resident at NYDesigns, located in Long Island City, NY. NYDesigns provides us with office space, access to a network of mentors and advisors, and a secure 5,000 square-foot fabrication lab.
Other incubation programs we’ve had the pleasure to partner and grow with include Fordham Foundry and FutureWorks, a hardware and advanced manufacturing incubator funded by the New York City Economic Development Corporation (NYCEDC).
We know the importance of having a clearly-defined target market and a focused approach to capturing it. To achieve this, we’ve segmented our go-to-market strategy into three phases:
By systematically entering and saturating a market segment before progressing to the next one, we operate efficiently and avoid wasting valuable resources pursuing high-lift relationships prematurely.
Initial target market
Our path to capturing market share starts with the 670 small and medium-sized businesses (SMBs) we’ve identified that provide on-demand manufacturing (ODM) services within the US and Canada:
The definition of ‘SMB’ in this case is specifically those ODMs with between 5 and 500 3D printers each. These businesses are eager to lower their overhead labor costs, and because of their small size there’s minimal bureaucracy and sales are closed quickly.
Subsequent target markets
After sufficiently saturating our initial target market, we’ll expand our sales coverage to include other SMB entities such as engineering, architecture, and product design firms. These businesses don’t solely rely on profits from selling manufacturing services, and they will likely require more marketing resources to convert into closed sales.
Up next are large enterprises, including universities. These entities typically enter complex, multi-year relationships with their technology partners. Although lucrative, the high-lift process to getting a signed contract requires significant sales, legal, and customer success teams to meet the support requirements of these agreements.
Premium cloud features
As we progress through the stages of our market capture strategy and pursue contracts with larger enterprises, we anticipate a need for cloud features that go beyond what we would offer as a default suite of functionality.
To fill this need, we plan to build and offer premium cloud features on a subscription basis.
Note: We stand by our pledge to never force our customers to pay for the ability to manage or query data from their products, either via cloud or via local network. These premium cloud features are for larger enterprises that would rather subscribe to an additional service than invest in the software engineering required to build the features they need in-house.
Future products
We have big plans for R3 Printing, and our roadmap goes far beyond our launch product.
We didn’t just design a better 3D printer, we developed a future-focused platform for the ultimate additive manufacturing ecosystem:
R3 PrintGrid™ is the solution for customers with extreme manufacturing capacity needs. By stacking R3 Printer units vertically and connecting them to a shared water cooling loop and power delivery system, these customers can operate even more efficiently by manufacturing more parts per square foot in their factories than ever before.
We’re not the first to introduce an enterprise-grade 3D printer to the market, but we are the first to introduce a 3D printer that’s designed from the inside out for businesses that operate on-demand manufacturing services.
R3 Printer is the only product that checks all the boxes for our target market:
On-demand manufacturers operating a fleet of 3D printers currently have three tiers of products to choose from, none of which are optimized for running a profitable business:
Budget 3D Printers
This is a popular starting point, and the route that co-founders Dan and Paul took when starting their own 3D printing service. The main benefit is that one can start their business with a lower upfront investment, but the operators are permanently left with limited print sizes and slow print speeds. Out-of-the-box, this tier of 3D printer requires either lots of maintenance or heavy modifications that need real engineering knowledge to implement.
By operating a fleet of budget-tier 3D printers, businesses are left with a limited customer base and potentially high overhead labor costs.
High-End Consumer (“Prosumer”) 3D Printers
An upgrade to higher-end consumer (or “prosumer”) 3D printers doesn’t yield many more benefits, especially given the larger initial investment. For the most part, these printers offer slightly improved (but still limited) print sizes, improved out-of-the-box reliability, and some convenience features like network connectivity- though not necessarily cloud-based fleet management. At the end of the day, the upfront investment in these 3D printers compared to their ability to generate more revenue isn’t that great.
Therefore, most on-demand manufacturing services still opt for budget-tier 3D printers and simply put up with their shortcomings and/or invest in their modification.
(Current) Enterprise-Grade 3D Printers
Current enterprise-grade 3D printers typically begin above the $10k price point, offer larger print sizes, and additional software management features. At first glance, they seem like a great platform for running an on-demand manufacturing service. Unfortunately, customers of these products are typically locked into proprietary material supplies controlled by the manufacturer that strip away profits in the long-term, and stretches out the timeline to recoup the large initial investment.
By operating a fleet of (current) enterprise-grade 3D printers, businesses are left with a high initial investment to recoup and often a locked materials supply that limits their ability to price themselves competitively.
The case for an unlocked materials supply
Many enterprise-grade 3D printers lock their customers into a proprietary material supply. This has major ramifications for the businesses that operate them. Not only are the proprietary materials priced far above market rate, they also prevent the operators from using new and experimental materials from other suppliers, further hurting their businesses by limiting their addressable market.
R3 Printing pledges to never lock its products to a particular material or software ecosystem. Instead, we plan on building additional streams of revenue by allowing our customers to opt-in to additional services and features that add value to their businesses, but they will never be forced to do so (or unable to build it themselves if they don’t subscribe).
Our market research shows that this is a key part of long-term customer retention, and we’re making it a big part of our strategy for capturing market share from the incumbent enterprise-grade 3D printer manufacturers as well.
Meet the founders
Dan and Paul are passionate entrepreneurs with track records in sales and technology.
After a successful exit from a Manhattan commercial real estate firm, Dan ran the day-to-day operations of a 3D printing service alongside Paul. With his background in business development and sales strategy, he found untapped markets where additive manufacturing was the perfect disruptor. He has since been key in R3 Printing’s fundraising and investment strategy that fuels the product development and intellectual property pursuits of the company.
Paul grew up with a passion for invention and automation with Thomas Edison as his role model. At Morgan Stanley, he was instrumental in developing macros that cross-checked his entire team’s work in an otherwise manual and error-prone environment. He was then recruited to work in the technology division of the world’s largest hedge fund, where he was the architect behind a firm-wide overhaul of automated alerting capabilities.
Paul is the inventor behind the patent-pending features that make R3 Printer the on-demand manufacturing platform of the future.
Join us.
Together, we’ll disrupt a $15.8 billion-dollar industry and usher in a new era of customized goods that are manufactured on-demand, just for you.
Deal terms
Valuation cap
$7,500,000
The maximum valuation at which your investment converts
into equity shares or cash.
Learn more.
Discount
18%
If a trigger event for R3 Printing occurs, the discount provision
gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.
Type of security
Crowd SAFE
·
Learn more
A SAFE is a Simple Agreement for Future Equity. An investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event. The Crowd SAFE is a modified SAFE that is better suited for crowdfunding.
Funding goal
$25,000 – $435,000
R3 Printing needs to raise
$25K
before the deadline. The maximum amount R3 Printing is willing
to raise is $435K.
Learn more
Deadline
R3 Printing needs to reach their minimum funding goal before the deadline
().
If they don’t, all investments will be refunded.
Learn more
Documents
This securities offering is filed with the SEC. View the official filing and all updates:
Form C
SEC.gov
Perks
In addition to your Crowd SAFE, you'll receive perks for investing in R3 Printing.
Invest
$500
Receive
- $500 Crowd SAFE
- Silver Tier: We’ll feature your name on the Investors page of the R3 Printing website (you can opt-out), so everyone can know that you got in early!
Invest
$1,000
Receive
- $1,000 Crowd SAFE
- Gold Tier: Get all the above! Plus:
- Limited edition R3 Printing Early Investor mugs that reflect the signature design of our launch product, R3 Printer.
Invest
$5,000
Receive
- $5,000 Crowd SAFE
- Platinum Tier: Get all the above! Plus:
- Get a feel for what R3 Printer can do: we’ll send you a customized R3 Printing Early Investor mini sculpture, made with carbon fiber, fresh off an R3 Printer pre-production unit!
Invest
$10,000
Receive
- $10,000 Crowd SAFE
- Diamond Tier: Get all the above! Plus:
- Get to know the R3 Printing team and our launch product, R3 Printer! The founders will be hosting an event in the NYC area, and your name will be on the VIP list.
Why others invested
See all reviews (432) See all (432)I am an industrial designer from heart. I love 3d printing and this investment goes to help bring 3d printing to more people and for a better future.
5 months ago
I invested because I've personally worked with an enterprise 3D printer while in the US Navy. It cost 75K, the print material was costly, and it took too long to print 1 item. This industry could use a disruptor. I believe in you R3!!!
4 months ago
I am already familiar with additive manufacturing in my day job. It is very expensive and demand in ever increasing. This is a great idea and I am looking forward to watching the growth explosion. Wish I could put more into it!
3 months ago
About R3 Printing
Legal Name
R3 Printing, Inc.
Founded
Mar 2018
Form
Delaware
Corporation
Headquarters
29-10 Thomson Avenue
, Queens, NY
Headquarters
29-10 Thomson Avenue, Queens, NY, US
R3 Printing Team
Everyone helping build R3 Printing, not limited to employees
Len Gray
Advisor: Strategy
Ray Spoljaric
Advisor: Growth
Petra Wood
Advisor: Brand & Digital Marketing
Sarah Pavis
Consultant: Design for Manufacture
Matthew G. Miller
Patent & Trademark Attorney
Thomas Hendrix
Advisor: Defense Industry Engagement
Eric Horan
Advisor: Defense Industry Engagement
Daniel Downs
Co-Founder | Business Development
Len Gray
Advisor: Strategy
Paul Sieradzki
Co-Founder | Product Engineering
Ray Spoljaric
Advisor: Growth
Petra Wood
Advisor: Brand & Digital Marketing
Sarah Pavis
Consultant: Design for Manufacture
Matthew G. Miller
Patent & Trademark Attorney
Thomas Hendrix
Advisor: Defense Industry Engagement
Eric Horan
Advisor: Defense Industry Engagement
Press
FAQ
How do I earn a return on my investment?
How do I earn a return on my investment?
We are using Republic's Crowd SAFE security. Learn how this translates into a return on investment here.
What’s your exit strategy?
What’s your exit strategy?
All companies adapt to their circumstances, but at this time we foresee two doors: IPO or acquisition. We’re open to both, and will lead the Company in the direction that makes the most sense for both our shareholders and the long-term health of the Company.
If you’re a close follower of the 3D printing / additive manufacturing industry, you’ll notice that there is a lot of industry consolidation through acquisitions. It’s a highly competitive tech space, so it makes sense that larger corporations will acquire startups that have innovated new technology / carved out lucrative niches for themselves. If we take this route, we look forward to working with a company that shares our mission and seeks to drive it forward.
Have you taken steps to protect your proprietary technology with patents?
Have you taken steps to protect your proprietary technology with patents?
You bet! We have four (4) utility patent applications pending, all of which are owned by the Company (or “assigned to” in legalese).
Why are your patents “pending”?
Why are your patents “pending”?
The USPTO gets hundreds of thousands of patent applications each year, and there are only so many patent examiners to review these applications. This creates a considerable delay before any submitted patent application gets reviewed.
It’s worth noting: even though our patents are “only” pending, anyone who files an application after us on technology that is too similar to ours will be blocked. Also, after our various applications become public record, any would-be infringers are put on notice and may be on the hook for infringing activities that occurred after that date.
How is R3 Printer different from the competition?
How is R3 Printer different from the competition?
Elevator Pitch: R3 Printer is an enterprise-grade 3D printer designed for businesses that offer 3D printing services for a profit (often called on-demand manufacturing). It prints almost twice as fast as our competitors, and is designed to virtually eliminate jams and maintenance to allow our target customers to both scale their businesses and price themselves competitively, all while maintaining or even increasing their margins.
Can R3 Printer print metal?
Can R3 Printer print metal?
Yes, but you’ll need additional equipment.
Strictly speaking, R3 Printer is an extrusion-based 3D printer designed to print objects using a continuous filament of a thermoplastic material. The reason we specify ‘thermoplastic’ is because the material needs to enter the printhead in a solid state, be melted into a liquid or amorphous state, and deposited in layers to become part of a solid object. The temperature requirements to do this with pure metal are prohibitive for extrusion-based designs, including R3 Printer (at this time).
But! There’s a lot of innovation happening in the materials space that can get us around this temperature limitation. If one were to mix metal powder into the filament to the point where the filament was actually mostly metal, one could print an object with an extrusion-based 3D printer such as R3 Printer without needing to melt the actual metal. Then, as a post-process, one could put the printed part in a furnace to burn off the thermoplastic and bind the metal powder into a solid. There are already companies working on this, and because R3 Printer isn’t locked to any materials supplier, our customers can experiment and benefit from this innovative approach to 3D-printing metal parts.
Why don’t you just license out your technology?
Why don’t you just license out your technology?
That’s a great thought, and one we’ve explored too. We’re not opposed to licensing our technology. However, shopping around a technology license as a sole or primary revenue strategy is a disadvantageous bargaining position compared to having a product on the market and a book of business of our own. We see it best for both current and future shareholders to proceed with our product roadmap as if there were no plans for licensing, and review licensing deal offers on a case-by-case basis.
What is the company structure?
What is the company structure?
R3 Printing is a Delaware C-Corp founded in March 2018. At this time, co-founders Dan and Paul are the only shareholders; all fundraising has been done using instruments such as Convertible Notes or Crowd SAFEs that haven’t been triggered, or government grant funding where there is no equity involved. Dan and Paul see this as a major advantage: in the early stages of a startup, it's imperative that the directors can execute quickly and nimbly to capture fundraising and market opportunities and build the Company into a high-growth vehicle that creates value for the shareholders - both current and future.
What progress have you made since your last fundraising campaign?
What progress have you made since your last fundraising campaign?
It’s been an incredible year since our campaign launched on Republic, and we’ve only continued to pick up steam. Since our launch last year, we graduated from the OCEAN Accelerator in Cincinnati, and were invited to share our vision on stages in three other states and at LAUNCH Festival in Sydney. Our target market / customer base has now grown to include the United States Air Force and we’ve received federal government grant funding to help us execute on the customer discovery process and understand the USAF’s pain points as they move to adopt additive manufacturing technology.
On the product side of things, we are now in the Design for Manufacturing (DFM) stage. This means that we’re tweaking the final design of various components and systems to make them cheaper to manufacture and/or easier to assemble, which translates into cost savings as well. For example, the R3 Printhead has been redesigned to be a two-piece design that can be manufactured by CNC milling, which not only de-risks us by using a more traditional manufacturing method available around the globe, but also drastically cuts the production cost. We’ve also improved on the construction of R3 Printer’s sheet metal chassis to use fewer parts which not only eases assembly, and therefore reduces costs, but also makes it stiffer- an added benefit to ensuring print quality at high speeds.
What will the funds from this campaign be used for?
What will the funds from this campaign be used for?
Completing the Design for Manufacturing (DFM) process and first-factory-run working capital are our largest expenses. In the DFM process, we work with experienced consultants to advise us of changes we can make to reduce the cost to manufacture or assemble our product.
As we approach the launch of our product, we not only need upfront capital to manufacture batches of R3 Printer units all at once but we also need to recruit staff for sales and marketing. There are 670 businesses operating between 5 and 500 3D printers (each!) in the US and Canada, and adding new team members as well as investing in producing engaging marketing content will help us capture our initial target market quickly.
Why do you only list two employees when your Team section shows other people?
Why do you only list two employees when your Team section shows other people?
At the time of this disclosure, co-founders Dan and Paul are the only employees of the Company as defined by State and Federal rules and regulations. However, we augment our ability to execute on product development and business initiatives by engaging experts in a consultant and/or advisory capacity. We do plan to hire full-time employees as we approach the launch of our product.
Still have questions? Check the
discussion section.
Risks
The development and commercialization of our products is highly competitive.
We face competition with respect to any products that we may seek to develop or commercialize in the future. Our competitors include major companies worldwide. Many of our competitors have significantly greater financial, technical and human resources than we have and superior expertise in research and development and marketing approved products and thus may be better equipped than us to develop and commercialize products. These competitors also compete with us in recruiting and retaining qualified personnel and acquiring technologies. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, our competitors may commercialize products more rapidly or effectively than we are able to, which would adversely affect our competitive position, the likelihood that our products will achieve initial market acceptance, and our ability to generate meaningful additional revenues from our products.
The products we sell are advanced, and we need to rapidly and successfully develop and introduce new products in a competitive, demanding and rapidly changing environment.
To succeed in our intensely competitive industry, we must continually improve, refresh and expand our product and service offerings to include newer features, functionality or solutions, and keep pace with price-to-performance gains in the industry. Shortened product life cycles due to customer demands and competitive pressures impact the pace at which we must introduce and implement new technology. This requires a high level of innovation by both our software developers and the suppliers of the third-party software components included in our systems. In addition, bringing new solutions to the market entails a costly and lengthy process, and requires us to accurately anticipate customer needs and technology trends. We must continue to respond to market demands or our business operations may be adversely affected.
We must also anticipate and respond to customer demands regarding the compatibility of our current and prior offerings. These demands could hinder the pace of introducing and implementing new technology. Our future results may be affected if our products cannot effectively interface and perform well with software products of other companies and with our customers’ existing IT infrastructures, or if we are unsuccessful in our efforts to enter into agreements allowing integration of third-party technology with our database and software platforms. Our efforts to develop the interoperability of our products may require significant investments of capital and employee resources. In addition, many of our principal products are used with products offered by third parties and, in the future, some vendors of non-Company products may become less willing to provide us with access to their products, technical information and marketing and sales support. As a result of these and other factors, our ability to introduce new or improved solutions could be adversely impacted and our business would be negatively affected.
We must acquire or develop new products, evolve existing ones, address any defects or errors, and adapt to technology change.
Technical developments, client requirements, programming languages, and industry standards change frequently in our markets. As a result, success in current markets and new markets will depend upon our ability to enhance current products, address any product defects or errors, acquire or develop and introduce new products that meet client needs, keep pace with technology changes, respond to competitive products, and achieve market acceptance. Product development requires substantial investments for research, refinement, and testing. We may not have sufficient resources to make necessary product development investments. We may experience technical or other difficulties that will delay or prevent the successful development, introduction, or implementation of new or enhanced products. We may also experience technical or other difficulties in the integration of acquired technologies into our existing platform and applications. Inability to introduce or implement new or enhanced products in a timely manner could result in loss of market share if competitors are able to provide solutions to meet customer needs before we do, give rise to unanticipated expenses related to further development or modification of acquired technologies as a result of integration issues, and adversely affect future performance.
Quality management plays an essential role in determining and meeting customer requirements, preventing defects, improving the Company’s products and services and maintaining the integrity of the data that supports the safety and efficacy of our products.
Our future success depends on our ability to maintain and continuously improve our quality management program. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products. In addition, a successful claim brought against us in excess of available insurance or not covered by indemnification agreements, or any claim that results in significant adverse publicity against us, could have an adverse effect on our business and our reputation.
In order for the Company to compete and grow, it must attract, recruit, retain and develop the necessary personnel who have the needed experience.
Recruiting and retaining highly qualified personnel is critical to our success. These demands may require us to hire additional personnel and will require our existing management personnel to develop additional expertise. We face intense competition for personnel. The failure to attract and retain personnel or to develop such expertise could delay or halt the development and commercialization of our product candidates. If we experience difficulties in hiring and retaining personnel in key positions, we could suffer from delays in product development, loss of customers and sales, and diversion of management resources, which could adversely affect operating results. Our consultants and advisors may be employed by third parties and may have commitments under consulting or advisory contracts with third parties that may limit their availability to us.
We rely on other companies to provide major components for our products.
We depend on third-party suppliers and subcontractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers may be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide major components which meet required specifications and perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or two subcontractors or suppliers for a particular major component.
We depend on third-party service providers and outsource providers for a variety of services and we outsource a number of our non-core functions and operations.
In certain instances, we rely on single or limited service providers and outsourcing vendors because the relationship is advantageous due to quality, price, or lack of alternative sources. If production or service was interrupted and we were not able to find alternate third-party providers, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If outsourcing services are interrupted or not performed or the performance is poor, this could impact our ability to process, record and report transactions with our customers and other constituents. Such interruptions in the provision of supplies and/or services could result in our inability to meet customer demand, damage our reputation and customer relationships and adversely affect our business.
We depend on third party providers, suppliers and licensors to supply some of the hardware, software and operational support necessary to provide some of our services.
We obtain these materials from a limited number of vendors, some of which do not have a long operating history or which may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If demand exceeds these vendors’ capacity or if these vendors experience operating or financial difficulties, or are otherwise unable to provide the equipment or services we need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability to serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material negative impact on our operations, business, financial results and financial condition.
We rely on various intellectual property rights, including patents and trademarks in order to operate our business.
Such intellectual property rights, however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage. In addition, the steps that we have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, could adversely impact our competitive position and results of operations. We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights.
As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management’s attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
One of the potential risks we face in the distribution of our products is liability resulting from counterfeit, tainted, or defective products infiltrating the supply chain.
Because we source products from various sources, we rely on various suppliers and their quality control measures. While we have procedures to maintain the highest quality levels in our products, we may be subject to faulty components in our products, which would negatively affect our products and our customers' experience with them and could decrease customer demand for our products. In addition, if there is serious injury due to our products, there can be no assurance that the insurance coverage we maintain is sufficient or will be available in adequate amounts or at a reasonable cost, or that indemnification agreements will provide us with adequate protection.
Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of the products can lead to injury or other adverse events.
These events could lead to recalls or safety alerts relating to our products (either voluntary or required by governmental authorities) and could result, in certain cases, in the removal of a product from the market. Any recall could result in significant costs as well as negative publicity that could reduce demand for our products. Personal injuries relating to the use of our products can also result in product liability claims being brought against us.
We plan to implement new lines of business or offer new products and services within existing lines of business.
There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new products or services may not be achieved and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
We collect store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business/operating margins, revenues and competitive position.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The expenses associated with protecting our information/ these steps could reduce our operating margins.
An intentional or unintentional disruption, failure, misappropriation or corruption of our network and information systems could severely affect our business.
Such an event might be caused by computer hacking, computer viruses, worms and other destructive or disruptive software, 'cyber attacks' and other malicious activity, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of confidential customer data or intellectual property. Operational or business delays may result from the disruption of network or information systems and the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers.
If we do not respond to technological changes or upgrade our websites and technology systems, our growth prospects and results of operations could be adversely affected.
To remain competitive, we must continue to enhance and improve the functionality and features of our websites and technology infrastructure. As a result, we will need to continue to improve and expand our hosting and network infrastructure and related software capabilities. These improvements may require greater levels of spending than we have experienced in the past. Without such improvements, our operations might suffer from unanticipated system disruptions, slow application performance or unreliable service levels, any of which could negatively affect our reputation and ability to attract and retain customers and contributors. Furthermore, in order to continue to attract and retain new customers, we are likely to incur expenses in connection with continuously updating and improving our user interface and experience. We may face significant delays in introducing new services, products and enhancements. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete or less competitive, and our business may be harmed. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that our business will improve.
The Company’s success depends on the experience and skill of the board of directors, its executive officers and key employees.
In particular, R3 Printing is dependent on Paul Sieradzki and Daniel Downs who are the co-founders of R3 Printing. R3 Printing has or intends to enter into employment agreements with Paul Sieradzki or Daniel Downs although there can be no assurance that it will do so or that they will continue to be employed by R3 Printing for a particular period of time. The loss of Paul Sieradzki or Daniel Downs or any member of the board of directors or executive officer could harm the R3 Printing’s business, financial condition, cash flow and results of operations.
We are subject to income taxes as well as non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in the United States of America.
Significant judgment is required in determining our provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable: (i) there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our income tax provisions, expense amounts for non-income based taxes and accruals and (ii) any material differences could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.
We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of public companies.
We do not have the internal infrastructure necessary, and are not required, to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurance that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect to incur additional expenses and diversion of management’s time if and when it becomes necessary to perform the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.
Changes in raw material and manufacturing input prices could adversely affect our business and results of operations.
Because pricing for the majority of our cellulose specialty fibers customers is set annually, we typically have very limited ability to pass along fluctuations in costs to customers after pricing has been established. Raw material costs and energy are a significant operating expense. The cost of raw materials and energy can be volatile and are susceptible to rapid and substantial increases due to factors beyond our control, such as changing economic conditions, political unrest, instability in energy-producing nations, and supply and demand considerations. Price increases and general volatility could adversely affect our business and results of operations.
Failure to develop new products and production technologies or to implement productivity and cost reduction initiatives successfully may harm our competitive position.
We depend significantly on the development of commercially viable new products, product grades and applications, as well as process technologies, free of any legal restrictions. If we are unsuccessful in developing new products, applications and production processes in the future, our competitive position and results of operations may be negatively affected. However, as we invest in new technology, we face the risk of unanticipated operational or commercialization difficulties, including an inability to obtain necessary permits or governmental approvals, the development of competing technologies, failure of facilities or processes to operate in accordance with specifications or expectations, construction delays, cost overruns, the unavailability of financing, required materials or equipment and various other factors. Likewise, we have undertaken and are continuing to undertake initiatives to improve productivity and performance and to generate cost savings. These initiatives may not be completed or beneficial or the estimated cost savings from such activities may not be realized.
Product liability claims could adversely impact our business and reputation.
Our business exposes us to potential product liability risk, as well as warranty and recall claims that are inherent in the design, manufacture, sale and use of our products. In the event our products actually or allegedly fail to perform as expected and we are subject to such claims above the amount of insurance coverage, outside the scope of our coverage, or for which we do not have coverage, our results of operations, as well as our reputation, could be adversely affected. Our products may be subject to recall for performance or safety-related issues. Product recalls subject us to harm to our reputation, loss of current and future customers, reduced revenue and product recall costs. Product recall costs are incurred when we, either voluntarily or involuntarily, recall a product through a formal campaign to solicit the return of specific products due to a known or suspected performance issue. Any significant product recalls could have an adverse effect on our business and results of operations.
We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities.
Disruptions in operations due to technical problems or other interruptions such as floods or fire would adversely affect the manufacturing capacity of our facilities. Such interruptions could cause delays in production and cause us to incur additional expenses such as charges for expedited deliveries for products that are delayed. Additionally, our customers have the ability to cancel purchase orders in the event of any delays in production and may decrease future orders if delays are persistent. Additionally, to the extent that such disruptions do not result from damage to our physical property, these may not be covered by our business interruption insurance. Any such disruptions may adversely affect our business and results of operations.
Many of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production accurately and achieve maximum efficiency of our manufacturing capacity.
Many of our customers do not commit to firm production schedules and we continue to experience reduced lead-times in customer orders. Additionally, customers may change production quantities or delay production with little lead-time or advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments or forecasts, as well as our internal assessments and forecasts of customer demand. The variations in volume and timing of sales make it difficult to schedule production and optimize utilization of manufacturing capacity. This uncertainty may require us to increase staffing and incur other expenses in order to meet an unexpected increase in customer demand, potentially placing a significant burden on our resources. Additionally, an inability to respond to such increases may cause customer dissatisfaction, which may negatively affect our customers’ relationships.
Further, in order to secure sufficient production scale, we may make capital investments in advance of anticipated customer demand. Such investments may lead to low utilization levels if customer demand forecasts change and we are unable to utilize the additional capacity. Additionally, we order materials and components based on customer forecasts and orders and suppliers may require us to purchase materials and components in minimum quantities that exceed customer requirements, which may have an adverse impact on our results of operations. Such order fluctuations and deferrals may have an adverse effect on our business and results of operations.
The Company could be negatively impacted if found to have infringed on intellectual property rights.
Technology companies, including many of the Company’s competitors, frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. As the Company grows, the intellectual property rights claims against it will likely increase. The Company intends to vigorously defend infringement actions in court and before the U.S. International Trade Commission. The plaintiffs in these actions frequently seek injunctions and substantial damages. Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted litigation. If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non-infringing technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company from marketing or selling certain products. In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase the Company’s operating expenses.
Regardless of the merits of particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations and distracting to management. In recognition of these considerations, the Company may enter into arrangements to settle litigation. If one or more legal matters were resolved against the Company’s consolidated financial statements for that reporting period could be materially adversely affected. Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could adversely affect its financial condition and results of operations.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with advertisers, advertising agencies, customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our products, services or other contractual obligations. The term of these indemnity provisions generally survives termination or expiration of the applicable agreement. Large indemnity payments would harm our business, financial condition and results of operations. In addition, any type of intellectual property lawsuit, whether initiated by us or a third party, would likely be time consuming and expensive to resolve and would divert management’s time and attention.
We rely heavily on our technology and intellectual property, but we may be unable to adequately or cost-effectively protect or enforce our intellectual property rights, thereby weakening our competitive position and increasing operating costs.
To protect our rights in our services and technology, we rely on a combination of copyright and trademark laws, patents, trade secrets, confidentiality agreements with employees and third parties, and protective contractual provisions. We also rely on laws pertaining to trademarks and domain names to protect the value of our corporate brands and reputation. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our services or technology, obtain and use information, marks, or technology that we regard as proprietary, or otherwise violate or infringe our intellectual property rights. In addition, it is possible that others could independently develop substantially equivalent intellectual property. If we do not effectively protect our intellectual property, or if others independently develop substantially equivalent intellectual property, our competitive position could be weakened.
Effectively policing the unauthorized use of our services and technology is time-consuming and costly, and the steps taken by us may not prevent misappropriation of our technology or other proprietary assets. The efforts we have taken to protect our proprietary rights may not be sufficient or effective, and unauthorized parties may copy aspects of our services, use similar marks or domain names, or obtain and use information, marks, or technology that we regard as proprietary. We may have to litigate to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of others’ proprietary rights, which are sometimes not clear or may change. Litigation can be time consuming and expensive, and the outcome can be difficult to predict.
We rely on agreements with third parties to provide certain services, goods, technology, and intellectual property rights necessary to enable us to implement some of our applications.
Our ability to implement and provide our applications and services to our clients depends, in part, on services, goods, technology, and intellectual property rights owned or controlled by third parties. These third parties may become unable to or refuse to continue to provide these services, goods, technology, or intellectual property rights on commercially reasonable terms consistent with our business practices, or otherwise discontinue a service important for us to continue to operate our applications. If we fail to replace these services, goods, technology, or intellectual property rights in a timely manner or on commercially reasonable terms, our operating results and financial condition could be harmed. In addition, we exercise limited control over our third-party vendors, which increases our vulnerability to problems with technology and services those vendors provide. If the services, technology, or intellectual property of third parties were to fail to perform as expected, it could subject us to potential liability, adversely affect our renewal rates, and have an adverse effect on our financial condition and results of operations.
If we fail to maintain or expand our relationships with our suppliers, in some cases single-source suppliers, we may not have adequate access to new or key technology necessary for our products, which may impair our ability to deliver leading-edge products.
In addition to the technologies we develop, our suppliers develop product innovations at our direction that are requested by our customers. Further, we rely heavily on our component suppliers to provide us with leading-edge components that conform to required specifications or contractual arrangements on time and in accordance with a product roadmap. If we are not able to maintain or expand our relationships with our suppliers or continue to leverage their research and development capabilities to develop new technologies desired by our customers, our ability to deliver leading-edge products in a timely manner may be impaired and we could be required to incur additional research and development expenses. Also, disruption in our supply chain or the need to find alternative suppliers could impact the costs and/or timing associated with procuring necessary products, components and services. Similarly, suppliers have operating risks that could impact our business. These risks could create product time delays, inventory and invoicing problems, staging delays, and other operational difficulties.
Industry consolidation may result in increased competition, which could result in a loss of customers or a reduction in revenue.
Some of our competitors have made or may make acquisitions or may enter into partnerships or other strategic relationships to offer more comprehensive services than they individually had offered or achieve greater economies of scale. In addition, new entrants not currently considered to be competitors may enter our market through acquisitions, partnerships or strategic relationships. We expect these trends to continue as companies attempt to strengthen or maintain their market positions. The potential entrants may have competitive advantages over us, such as greater name recognition, longer operating histories, more varied services and larger marketing budgets, as well as greater financial, technical and other resources. The companies resulting from combinations or that expand or vertically integrate their business to include the market that we address may create more compelling service offerings and may offer greater pricing flexibility than we can or may engage in business practices that make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology or service functionality. These pressures could result in a substantial loss of our customers or a reduction in our revenue.
To date, we have not generated revenue, do not foresee generating any revenue in the near future and therefore rely on external financing.
We are a startup company and our business model currently focuses on hardware development rather than generating revenue. While we intend to generate revenue in the future, we cannot assure you when or if we will be able to do so.
We rely on external financing to fund our operations. We anticipate, based on our current proposed plans and assumptions relating to our operations (including the timetable of, and costs associated with, new product development) that, if the Minimum Amount is raised in this Offering, it will be sufficient to satisfy our contemplated cash requirements through approximately May 2020, assuming that we do not accelerate the development of other opportunities available to us, engage in an extraordinary transaction or otherwise face unexpected events, costs or contingencies, any of which could affect our cash requirements.
We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure, commercial operations, development activities and establish offices.
Our future funding requirements will depend on many factors, including but not limited to the following:
- The cost of expanding our operations;
- The financial terms and timing of any collaborations, licensing or other arrangements into which we may enter;
- The rate of progress and cost of development activities;
- The need to respond to technological changes and increased competition;
- The costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
- The cost and delays in product development that may result from changes in regulatory requirements applicable to our products;
- Sales and marketing efforts to bring these new product candidates to market;
- Unforeseen difficulties in establishing and maintaining an effective sales and distribution network; and
- Lack of demand for and market acceptance of our products and technologies.
We may have difficulty obtaining additional funding and we cannot assure you that additional capital will be available to us when needed, if at all, or if available, will be obtained on terms acceptable to us. If we raise additional funds by issuing additional debt securities, such debt instruments may provide for rights, preferences or privileges senior to the Securities. In addition, the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. If adequate funds are not available, we may have to delay, scale back, or eliminate some of our operations or our research development and commercialization activities. Under these circumstances, if the Company is unable to acquire additional capital or is required to raise it on terms that are less satisfactory than desired, it may have a material adverse effect on its financial condition.
We may face potential difficulties in obtaining capital.
We may have difficulty raising needed capital in the future as a result of, among other factors, our lack of an approved product and revenues from sales, as well as the inherent business risks associated with our company and present and future market conditions. Our business currently does not generate any sales and future sources of revenue may not be sufficient to meet our future capital requirements. We will require additional funds to execute our business strategy and conduct our operations. If adequate funds are unavailable, we may be required to delay, reduce the scope of or eliminate one or more of our research, development or commercialization programs, product launches or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
We were incorporated under the laws of Delaware on March 12, 2018. Accordingly, we have no history upon which an evaluation of our prospects and future performance can be made. Our proposed operations are subject to all business risks associated with new enterprises. The likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the inception of a business, operation in a competitive industry, and the continued development of advertising, promotions, and a corresponding client base. We anticipate that our operating expenses will increase for the near future. There can be no assurances that we will ever operate profitably. You should consider the Company’s business, operations and prospects in light of the risks, expenses and challenges faced as an early-stage company.
Our growth depends on our ability to secure contracts to sell extrusion-based three-dimensional printers to on-demand manufacturing businesses and/or the public sector, the demand for which is outside our control.
Our growth is primarily dependent upon our ability to obtain new contracts to sell extrusion-based three-dimensional printers to on-demand manufacturing businesses. The demand for such printers in either the private or public sector may decrease and our potential for growth will depend on a number of factors we cannot control.
At this time, we are partly dependent on government appropriations, which may not be made on a timely basis or at all and may be adversely impacted by budgetary constraints at the federal, state, or local levels.
A portion of our current and/or projected cash flow is subject to the receipt of sufficient funding of and timely payment by contracting governmental entities. If the contracting governmental agency does not receive sufficient appropriations to cover its contractual obligations, it may terminate our contract, delay, or reduce payment to us. Any delays in payment, or the termination of a contract, could have a material adverse effect on our cash flow and financial condition, which may make it difficult to satisfy our payment obligations or our indebtedness (if applicable), in a timely manner. In addition, as a result of, among other things, recent economic developments, federal, state, or local governments have encountered, and may continue to encounter, unusual budgetary constraints. As a result, a number of state and local governments are under pressure to control additional spending or reduce current levels of spending which could limit or eliminate appropriations for the printers that we sell. Additionally, as a result of these factors, we may be requested in the future to reduce our existing per diem contract rates or forego prospective increases to those rates. Budgetary limitations may also make it more difficult for us to renew our existing contracts on favorable terms or at all.
Failure to comply with extensive government regulation and applicable contractual requirements could have a material adverse effect on our business, financial condition or results of operations.
The industry in which we operate is subject to extensive federal, state and local regulations, including educational, environmental, health care and safety laws, rules and regulations, which are administered by many regulatory authorities. Some of the regulations are unique to the additive manufacturing industry, and the combination of regulations affects all areas of our operations. We may not always successfully comply with these and other regulations to which we are subject and failure to comply can result in material penalties or the non-renewal or termination of government contracts. In addition, changes in existing regulations could require us to substantially modify the manner in which we conduct our business and, therefore, could have a material adverse effect on us. Although we do not believe that existing legislation will have a material adverse effect on us, future legislation may have such an effect on us.
Governmental agencies may investigate and audit our contracts and, if any improprieties are found, we may be required to refund amounts we have received, to forego anticipated revenues and we may be subject to penalties and sanctions, including prohibitions on our bidding in response to Requests for Proposals ('RFPs'), from governmental agencies to manage correctional facilities. Governmental agencies we contract with have the authority to audit and investigate our contracts with them. As part of that process, governmental agencies may review our performance of the contract, our pricing practices, our cost structure and our compliance with applicable laws, regulations and standards. For contracts that actually or effectively provide for certain reimbursement of expenses, if an agency determines that we have improperly allocated costs to a specific contract, we may not be reimbursed for those costs, and we could be required to refund the amount of any such costs that have been reimbursed. If we are found to have engaged in improper or illegal activities, including under the United States False Claims Act, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing business with certain governmental entities. An adverse determination in an action alleging improper or illegal activities by us could also adversely impact our ability to bid in response to RFPs in one or more jurisdictions.
We may not be able to obtain or maintain the insurance levels required by our government contracts.
Our government contracts require us to obtain and maintain specified insurance levels. The occurrence of any events specific to our company or to our industry, or a general rise in insurance rates, could substantially increase our costs of obtaining or maintaining the levels of insurance required under our government contracts, or prevent us from obtaining or maintaining such insurance altogether. If we are unable to obtain or maintain the required insurance levels, our ability to win new government contracts, renew government contracts that have expired and retain existing government contracts could be significantly impaired, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the loss of our contracts, due to terminations, non-renewals or competitive re-bids, which could adversely affect our results of operations and liquidity, including our ability to secure new contracts from other government customers.
We are exposed to the risk that we may lose our facility management contracts primarily due to one of three reasons: (i) the termination by a government customer with or without cause at any time; (ii) the failure by a customer to exercise its unilateral option to renew a contract with us upon the expiration of the then current term; or (iii) our failure to win the right to continue to operate under a contract that has been competitively re-bid in a procurement process upon its termination or expiration.
We define competitive re-bids as contracts currently under our management which we believe, based on our experience with the customer and the facility involved, will be re-bid to us and other potential service providers in a competitive procurement process upon the expiration or termination of our contract, assuming all renewal options are exercised. Our determination of which contracts we believe will be competitively re- bid may in some cases be subjective and judgmental, based largely on our knowledge of the dynamics involving a particular contract, the customer and the facility involved. Competitive re-bids may result from the expiration of the term of a contract, including the initial fixed term plus any renewal periods, or the early termination of a contract by a customer. Competitive re-bids are often required by applicable federal or state procurement laws periodically in order to further competitive pricing and other terms for the government customer. Potential bidders in competitive re-bid situations include us, other private operators and other government entities.
The potential impact of failing to deliver products on time could increase the cost of our products.
In most instances, we guarantee that we will deliver a product by a scheduled date. If we subsequently fail to deliver the product as scheduled, we may be held responsible for cost impacts and/or other damages resulting from any delay. To the extent that these failures to deliver occur, the total damages for which we could be liable could significantly increase the cost of the products; as such, we could experience reduced profits or, in some cases, a loss for that contract. Additionally, failure to deliver products on time could result in damage to customer relationships, the potential loss of customers, and reputational damage which could impair our ability to attract new customers.
The Units of SAFE (Simple Agreement for Future Equity) will not be freely tradable until one year from the initial purchase date. Although the Units of SAFE may be tradable under federal securities law, state securities regulations may apply and each Purchaser should consult with his or her attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the Units of SAFE. Because the Units of SAFE have not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction, the Units of SAFE have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be effected. Limitations on the transfer of the Units of SAFE may also adversely affect the price that you might be able to obtain for the Units of SAFE in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.
Neither the Offering nor the Securities have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
No governmental agency has reviewed or passed upon this Offering, the Company or any Securities of the Company. The Company also has relied on exemptions from securities registration requirements under applicable state securities laws. Investors in the Company, therefore, will not receive any of the benefits that such registration would otherwise provide. Prospective investors must therefore assess the adequacy of disclosure and the fairness of the terms of this Offering on their own or in conjunction with their personal advisors.
No guarantee of return on investment.
There is no assurance that a Purchaser will realize a return on its investment or that it will not lose its entire investment. For this reason, each Purchaser should read the Form C and all Exhibits carefully and should consult with its own attorney and business advisor prior to making any investment decision.
Purchasers will not become equity holders until the Company decides to convert the Securities into CF Shadow Securities or until an IPO or sale of the Company.
Purchasers will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time, and depending on when and how the Securities are converted, the Purchasers may never become equity holders of the Company. Purchasers will not become equity holders of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities. The Company is under no obligation to convert the Securities into CF Shadow Securities (the type of equity Securities Purchasers are entitled to receive upon such conversion). In certain instances, such as a sale of the Company, an IPO or a dissolution or bankruptcy, the Purchasers may only have a right to receive cash, to the extent available, rather than equity in the Company.
Purchasers will not have voting rights, even upon conversion of the Securities into CF Shadow Securities.
Purchasers will not have the right to vote upon matters of the Company even if and when their Securities are converted into CF Shadow Securities. Upon such conversion, CF Shadow Securities will have no voting rights and even in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to vote with the majority of the security holders in the new round of equity financing upon which the Securities were converted. For example, if the Securities are converted upon a round offering Series B Preferred Shares, the Series B-CF Shadow Security holders will be required to vote the same way as a majority of the Series B Preferred Share holders vote. Thus, Purchasers will never be able to freely vote upon any director or other matters of the Company.
Purchasers will not be entitled to any inspection or information rights other than those required by Regulation CF.
Purchasers will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by Regulation CF. Other security holders may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information. This lack of information could put Purchasers at a disadvantage in general and with respect to other security holders.
In a dissolution or bankruptcy of the Company, Purchasers will be treated the same as common equity holders.
In a dissolution or bankruptcy of the Company, Purchasers of Securities which have not been converted will be entitled to distributions as if they were common stock holders. This means that such Purchasers will be at the lowest level of priority and will only receive distributions once all creditors as well as holders of more senior securities, including any preferred stock holders, have been paid in full. If the Securities have been converted into CF Shadow Securities, the Purchasers will have the same rights and preferences (other than the ability to vote) as the holders of the Securities issued in the equity financing upon which the Securities were converted.
Purchasers will be unable to declare the Security in “default” and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any 'default' provisions upon which the Purchasers will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Purchasers have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may the Purchasers demand payment and even then, such payments will be limited to the amount of cash available to the Company.
The Company may never elect to convert the Securities or undergo a liquidity event.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
In addition to the risks listed above, businesses are often subject to risks not foreseen or fully appreciated by the management. It is not possible to foresee all risks that may affect us. Moreover, the Company cannot predict whether the Company will successfully effectuate the Company’s current business plan. Each prospective Purchaser is encouraged to carefully analyze the risks and merits of an investment in the Securities and should take into consideration when making such analysis, among other, the Risk Factors discussed above.
Discussion
R3 Printing successfully raised
$435,000
from 1577 investors
on September 25, 2019
Petra, Stephen, Santino, Tavaris, Holley, and 1572 others
invested.
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