Investments and Notes Receivable

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

(7) Investments and Notes Receivable

The Company holds various investments in equity and debt instruments that are included in other assets on our condensed consolidated balance sheets. The following table summarizes our investment balances as of September 30, 2023 and December 31, 2022:


(in thousands)	September 30, 2023		December 31, 2022
Equity investments under the equity method of accounting	$	5,782	$	—
Equity investments without readily determinable fair values	20,962		12,953
Other(1)	200		200
Total equity investments	$	26,944	$	13,153

Long-term note receivable(2)	$	530	$	515
Total notes receivable	$	530	$	515

(1) Reflects warrant investment carried at fair value. The fair value of these warrants is measured using Level 3 fair value measurement inputs. Refer to Note 19 for a description of these inputs.

(2) Includes interest amounts that have been accrued on, recorded to and reported as part of the notes receivable balance.

Equity Investments under the Equity Method of Accounting

Dussur

In March 2022, we and Dussur signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa. The joint venture is to enable the development of Saudi Arabia’s domestic additive manufacturing production capabilities, consistent with the Kingdom’s ‘Vision 2030,’ which is focused on diversification of the economy and long-term sustainability. 3D Systems had committed to an initial investment in the joint venture of approximately $6,500, of which $3,435 had been deposited into an escrow account as of December 31, 2022 and, accordingly, was reported as restricted cash within other assets on the December 31, 2022 balance sheet. In February 2023, the Company officially became a shareholder in the joint venture. During April 2023, the $3,435 held in escrow, as well as the additional amount of approximately $3,065 owed to the joint venture as of March 31, 2023, was deposited into a bank account of the joint venture for use in its operations. Additional future investments in the joint venture are contingent upon the achievement of certain milestones. As of September 30, 2023, the Company owns 49% of the joint venture's common stock. The impact of this investment on the Company’s future financial condition and cash flows is expected to be limited to the cash outflow(s) related to any future contingent investments, if required.

The Company accounts for the joint venture under the equity method of accounting, which requires the Company to recognize its proportionate share of the joint venture's reported net income or loss. Due to the timing of when the joint venture's reported financial information is expected to be available, the Company records amounts required to be recognized pursuant to the equity method of accounting on a one quarter lag. For the three and nine months ended September 30, 2023, Company has recorded and separately reported a loss on equity method investment in the condensed consolidated statements of operations.

Equity Investments without Readily Determinable Fair Values

Theradaptive

In June 2023, we made an $8.0 million investment in Theradaptive, Inc. ("Theradaptive"), via the purchase of Series A Preferred Stock, pursuant to which we hold an approximate 9.15%, or 8.25% fully-diluted, ownership interest in Theradaptive. Theradaptive is currently developing a protein that encourages bone growth. This biotechnology could be applied to 3D printed metal splints for patients who otherwise may require amputation of a limb because the lost bone is too vast to replace with a splint. The Company expects to account for its investment in Theradaptive on a cost basis, subject to assessment for impairment, as (1) the fair value of Theradaptive's equity is not readily determinable and (2) the investment is not subject to the equity method of accounting due to the Company's lack of significant influence. The investment in Theradaptive is not expected to materially impact our future financial position, results of operations, or cash flows. No impairment charges were recognized with respect to this investment during the three or nine month periods ended September 30, 2023.

Enhatch

In March 2022, we made a $10,000 investment in convertible preferred shares for an approximate 26.6% ownership interest in Enhatch Inc. (“Enhatch”), the developer of the Intelligent Surgery Ecosystem. We simultaneously entered into a supply agreement with Enhatch. We also obtained warrants to purchase additional shares of Enhatch, as well as the right to purchase in the future (“call option”) the remaining shares of Enhatch that 3D Systems does not own if certain revenue targets are achieved. As of the original investment date, the fair values of the convertible preferred shares, inclusive of the embedded call option, and warrants were bifurcated and were $9,670 and $330, respectively. The investment, including the embedded call option and the warrants, is recorded in other assets on the consolidated balance sheets.

Enhatch’s Intelligent Surgery Ecosystem provides technologies which streamline and scale the design and delivery of patient-specific medical devices by automating the process. Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants and instrumentation design, and industry-leading production processes, will help more efficiently meet the growing demand for personalized medical devices.

As of September 30, 2023 and December 31, 2022, the reported carrying value of the Company's convertible preferred stock investment in Enhatch, inclusive of the call option, is $6,900, which reflects the cumulative impact of $2,770 of historical impairment charges that have been recognized since the date of the original investment. These impairment charges were recorded during the three months ended September 30, 2022. No impairment charges were recognized with respect to this investment during the three or nine month periods ended September 30, 2023.