DTM CORP /TX/, 424B3, 1997-05-05

DTM CORP /TX/
424B3, 1997-05-05
SPECIAL INDUSTRY MACHINERY, NEC

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<PAGE>

Filed pursuant to Rule 424(b)(3)
File No. 333-04173

[LOGO OF DTM CORPORATION 3,039,000 SHARES
APPEARS HERE]
DTM CORPORATION

COMMON STOCK

----------------

Of the 3,039,000 shares of DTM Corporation common stock (the "Common Stock")
offered hereby (the "Offering"), 2,852,191 shares are being sold by DTM
Corporation (the "Company" or "DTM") and 186,809 shares are being sold by the
selling shareholder identified in "Principal and Selling Shareholders" (the
"Selling Shareholder"). The Company will receive no proceeds from Common Stock
sold by the Selling Shareholder. Approximately $14.5 million of the proceeds
received by the Company will be used to retire existing indebtedness,
including $2.5 million of the $4.0 million of indebtedness owed to The
B.F.Goodrich Company ("BFGoodrich"), a shareholder of the Company.
Simultaneously with the closing of the Offering, BFGoodrich will convert the
other $1.5 million of indebtedness owed to it by the Company into 187,500
shares of newly issued Common Stock (the "BFGoodrich Debt Conversion").

Prior to the Offering, there has been no public market for the Common Stock.
See "Underwriting" for information relating to factors considered in
determining the Offering price. The Common Stock has been approved for
quotation on the Nasdaq National Market, subject to notice of issuance, under
the symbol "DTMC."

SEE "RISK FACTORS" BEGINNING AT PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDER(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $ 8.00 $ .56 $ 7.44 $ 7.44
- --------------------------------------------------------------------------------
Total(3)................... $24,312,000 $1,701,840 $21,220,301 $1,389,859
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Company, BFGoodrich and the Selling Shareholder have agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the Offering to be paid by the Company and
the Selling Shareholder, estimated at $437,000 and $31,000, respectively.
(3) BFGoodrich has granted the Underwriters a 30-day option to purchase up to
303,900 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Shareholders (including BFGoodrich) will be $26,743,200, $1,872,024,
$21,220,301 and $3,650,875, respectively. See "Underwriting."

----------------

The Common Stock is offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders, in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about May 7, 1997.

A.G. EDWARDS & SONS, INC. LADENBURG THALMANN & CO. INC.

The date of this Prospectus is May 2, 1997.
<PAGE>

2
<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY SHOULD BE READ WITH AND IS QUALIFIED IN ITS ENTIRETY BY
THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE
RISK FACTORS RELATED TO THE PURCHASE OF COMMON STOCK. SEE "RISK FACTORS."
UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS
ASSUMES THAT THERE HAS BEEN NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION AND REFLECTS AN EFFECTIVE 1.022-FOR-1 STOCK SPLIT EFFECTED AS A SERIES
OF RECAPITALIZATIONS COMPLETED IN APRIL 1997. SUCH STOCK SPLIT HAS BEEN
RETROACTIVELY APPLIED TO ALL SHARE AND PER SHARE AMOUNTS CONTAINED HEREIN.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO "DTM"
AND THE "COMPANY" REFER TO DTM CORPORATION AND ITS SUBSIDIARY ON A CONSOLIDATED
BASIS. "DTM," "PROTOFORM," "RAPIDSTEEL," "RAPIDTOOL," "SANDFORM,"
"SINTERSTATION(R)," "SLS(R)" AND "TRUEFORM" ARE TRADEMARKS OR SERVICE MARKS OF
DTM CORPORATION. "SOMOS(R)" IS A TRADEMARK OF E.I. DUPONT DE NEMOURS AND
COMPANY ("DUPONT").

THE COMPANY

DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems, powdered
materials and related services. The Company's selective laser sintering systems
("Systems") and materials are based on proprietary and patented selective laser
sintering technology. Rapid prototyping is the creation of a solid three-
dimensional model, prototype or pattern directly from three-dimensional
computer aided design ("CAD") data. Rapid tooling is the creation of durable
tooling from CAD data that can be subsequently employed to produce substantial
quantities of parts for market introduction of a product. Use of the Company's
SLS Systems significantly reduces the time required to produce models and
prototypes for testing actual product fit and form, ergonomic design and
functionality from what otherwise could be months or weeks to days or, in some
cases, hours. The Company's SLS Systems are used to accelerate the design,
development and market introduction of products in a wide range of industries,
including but not limited to the automotive, aerospace, medical, electronics,
telecommunications, computer, appliance, footwear, toy and power tool
industries. The B.F. Goodrich Company currently owns approximately 92 percent
of the outstanding Common Stock.

The Company has experienced substantial sales growth since the sale of its
first commercial SLS System, the Sinterstation 2000, in December 1992. Sales of
Sinterstation Systems, powdered materials and related services have increased
each year. As of December 31, 1996, the Company had sold 136 SLS Systems and
placed an additional two SLS Systems through a rental program resulting in a
total of 138 SLS Systems shipped worldwide. Revenue has increased from
approximately $1.1 million in 1991 to approximately $24.4 million in 1996, a
level that the Company believes makes it the second largest industry
participant as measured by revenues. The Company attributes its revenue growth
primarily to the increasing worldwide acceptance of rapid prototyping as a
technology capable of accelerating development and design of new products, as
well as the refinement of its selective laser sintering process to a level
which affords users distinct advantages over other rapid prototyping
technologies.

The selective laser sintering rapid prototyping process employed by the
Company replicates a CAD model by using laser energy to convert heat-fusible
powders into three-dimensional solid objects within DTM's commercial SLS
Systems. A focused carbon dioxide laser beam melts and bonds ("sinters") the
surface of a bed of powder into a solid horizontal cross-section of the object
being modeled. Subsequent powder layers are deposited, sintered and bonded to
the previous layer as the energy from the laser beam fuses sequential layers
together. This layered manufacturing process is continued until the CAD model
has been fully replicated as a plastic part or metal tool insert. Upon
completion of the part build, the excess, or unsintered, plastic or metal
powder is removed for use in subsequent part builds. The Company either owns or
has exclusive licenses under various patents covering the technology utilized
in its SLS Systems and related products.

DTM believes that its SLS Systems have distinct advantages relative to
competing rapid prototyping technologies. SLS Systems have the ability to (i)
process multiple powdered materials for a wide range of applications, (ii)
produce strong and durable functional plastic prototypes that can be drilled,
painted, equipped with electronics and mounted in working product assemblies
that duplicate the final product, (iii) rapidly produce prototype metal mold
inserts from metal powder, thereby significantly reducing the time required to
manufacture prototype tooling, (iv) build parts more quickly by sequencing and
stacking multiple parts in a single production run and (v) accommodate new
powdered plastic, metal and ceramic materials and expanded applications.

3
<PAGE>

Past purchasers of the Company's SLS Systems include The Boeing Company,
Eastman Kodak Company, Fiskars Oy, Ford Motor Company, General Motors
Corporation, Hughes Christensen, LG Electronics, Inc. (Goldstar), Mercedes-Benz
AG, Pratt & Whitney, Rockwell International Corporation, Samsung Electronics
Co., Ltd., Toyota Motor Corporation and Whirlpool Corporation, among others.
The Company also sells a substantial portion of its SLS Systems to service
bureaus, which are businesses that use rapid prototyping technology to
fabricate and sell models and prototype parts.

DTM has devoted substantial effort to developing what it believes is a
leading position in the high end of the rapid prototyping industry and to
protecting its intellectual property rights. In the last two years, the Company
has introduced four new powdered sintering materials, a new tooling process and
a new Sinterstation System. The Company introduced ProtoForm powder in 1995,
which is specifically designed for the production of strong and durable
functional plastic prototypes. During 1995, the Company also introduced the
RapidTool process and RapidSteel powder, which allow customers who desire
multiple parts in their material of choice to directly create metal mold
inserts for injection mold tooling. The Company believes that, with the
introduction of its TrueForm powder in early 1996, it provides the most
effective solution for the rapid creation of patterns for investment casting.
Also in 1996 the Company introduced SandForm powder, a sand-based material that
enables foundries to create sand cores (without tooling) that can be used in
the sand casting of metal parts. The Company recently announced the expected
availability of two new powders: Somos 201 powder, a new material supplied by
DuPont that yields highly flexible parts with rubber-like characteristics, and
VeriForm powder, a significantly improved material for functional prototypes.
These developments continue to expand the potential end uses for rapid
prototyping from the original concept models to more functional plastic and
metal parts. The Company believes that its selective laser sintering technology
is the only commercially practiced rapid prototyping process that allows a user
to access all of these capabilities from a single platform. The Company
believes that it further expanded the potential end user market with the
September 1996 introduction of the Sinterstation 2500 System, a new
Sinterstation System with twice the build volume of the original System and
with a significantly higher scan speed.

The Company believes that it is positioned to capitalize on its competitive
advantages and increase its share of the rapid prototyping market through the
following strategies: (i) using its ProtoForm powder to increase the Company's
SLS System and materials sales for strong durable part applications; (ii)
targeting the RapidTool process, the TrueForm powder, and the SandForm powder
to the growing rapid prototyping markets of metal prototype tools, investment
cast parts, and sand cast parts; (iii) developing and marketing new and
improved metal, plastic and ceramic powdered materials; (iv) continuing to
significantly upgrade the performance of the Sinterstation Systems in both
productivity and accuracy; and (v) expanding the Company's distribution
network, including the Company's direct sales force and agent network.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the
Company.......................... 2,852,191 Shares
Common Stock offered by the
Selling Shareholder.............. 186,809 Shares
Common Stock to be outstanding
after the Offering............... 6,907,306 Shares(1)
Risk Factors...................... The Offering involves a high degree of risk
and immediate and substantial dilution. See
"Risk Factors" and "Dilution."
Use of Proceeds................... To retire existing indebtedness and for
general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol..... DTMC
</TABLE>
- --------
(1) Based upon the number of shares outstanding as of March 31, 1997. Includes
(i) 187,500 shares of Common Stock to be issued to BFGoodrich
simultaneously with the closing of the Offering upon conversion of $1.5
million of indebtedness owed by the Company to BFGoodrich and (ii) 624,224
shares of Common Stock issuable to employees upon the exercise of
immediately exercisable stock options that will be outstanding in
connection with the closing of the Offering under the DTM Corporation
Equity Appreciation Plan. See "Management--Equity Appreciation Plan."

4
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenue:
Products................. $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 22,070
Service and support(1)... 2,027 2,593 1,112 1,579 2,309
-------- -------- -------- -------- ----------
Total revenue........... 4,868 9,582 9,239 14,211 24,379
Cost of sales:
Products................. 2,462 5,699 5,370 8,803 13,021
Service and support...... 1,705 2,141 511 873 1,424
-------- -------- -------- -------- ----------
Total cost of sales..... 4,167 7,840 5,881 9,676 14,445
-------- -------- -------- -------- ----------
Gross profit............. 701 1,742 3,358 4,535 9,934
Operating loss........... (9,624) (9,644) (5,731) (5,606) (4,338)
Interest expense, net.... (10) (328) (178) (530) (1,066)
Cost of discontinued
registration............ -- -- -- -- (752)
Income tax benefit
allocated from
BFGoodrich.............. 3,032 3,084 1,825 2,138 1,667
Net loss................. $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (4,489)
======== ======== ======== ======== ==========
Pro forma(2):
Net loss................. $ (6,156)
Net loss per share(3).... $ (1.71)
Number of shares
used(4)................. 3,609,211
Pro forma, as adjusted for
the Offering(2)(5):
Net loss................. $ (5,069)
Net loss per share(3).... $ (0.88)
Number of shares
used(4)................. 5,760,476
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(4)(6)
------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $ 1,622 $ 8,864
Total assets........................................ 17,897 24,370
Total debt.......................................... 15,809 --
Total liabilities................................... 26,382 10,573
Shareholders' equity (deficit)...................... (8,485) 13,797
</TABLE>
- --------
(1) Includes domestic rapid prototyping service bureau activity through
December 1993, at which time the Company sold its domestic service bureau.
Revenues associated with the service bureau operations for the years ended
December 31, 1992 and 1993 totaled approximately $1.9 million for each
year.
(2) Computed on a stand-alone basis, without allocation of income tax benefit
from BFGoodrich.
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Impact of Recently Issued Accounting Standard" for
the potential impact on earnings per share of future periods under
Statement of Financial Accounting Standards No. 128, Earnings per Share.
(4) Gives effect to the issuance of an estimated 507,045 shares of Common Stock
issuable to employees upon the exercise of immediately exercisable options,
which will have exercise prices substantially less than the Offering price
of $8.00 per share, that will be outstanding in connection with the closing
of the Offering under the DTM Corporation Equity Appreciation Plan. See
"Management--Equity Appreciation Plan."
(5) Gives effect to (i) that number of offered shares the net proceeds from
which are necessary to fund debt repayments as described in "Use of
Proceeds" and (ii) the elimination of historically incurred interest
expense of approximately $1.1 million related to such debt.
(6) Reflects the sale of 2,852,191 shares of Common Stock by the Company at the
Offering price of $8.00 per share, less the underwriting discount,
estimated offering expenses and the application of the net proceeds to the
Company therefrom. See "Use of Proceeds" and "Capitalization."

5
<PAGE>

SUMMARY CONSOLIDATED OPERATING DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SLS Systems sold or rented(1).......................... 9 19 23 36 51
Cumulative SLS Systems sold or rented(1)............... 9 28 51 87 138
</TABLE>
- --------
(1) Includes the rental of four SLS Systems during the year ended December 31,
1995. Two of such rental Systems were converted to sales during the year
ended December 31, 1995.

Recent Results

Revenues for the first quarter of 1997 were $8.0 million compared to $5.8
million in the first quarter of 1996, which includes revenues from the sale of
17 (including one rental conversion) and 13 SLS Systems, respectively. Gross
profit for the first quarter of 1997 was $3.5 million compared to $2.3 million
in the first quarter of 1996 and, as a percentage of revenues, increased to
43% in 1997 from 40% in 1996. Operating expenses for the first quarter of 1997
were $4.1 million compared to $3.0 million in the first quarter of 1996, and
were approximately 51% of revenues for each quarter. The $1.1 million increase
in operating expenses was primarily due to increased selling, engineering and
research and development expenses. The Company incurred an operating loss of
$0.6 million for the first quarter of 1997 compared to $0.7 million in the
first quarter of 1996 and a net loss of $0.7 million in the first quarter of
1997 compared to a net loss of $0.6 million in the first quarter of 1996.

Comparison of Years Ended December 31, 1996 and December 31, 1995

Revenues. Revenues for 1996 were $24.4 million, an increase of 71.6 percent,
or $10.2 million, compared to revenues of $14.2 million for 1995.

Product sales revenue for 1996 was $22.1 million, an increase of 74.7
percent, or $9.4 million, compared to product sales revenue of $12.6 million
for 1995. The increase was primarily attributable to greater sales of SLS
Systems and powdered materials. The number of SLS Systems sold or rented
increased to 51 in 1996 from 36 in

17
<PAGE>

1995. Revenues from powdered materials sales increased as a result of a larger
number of installed SLS Systems along with increased sales of ProtoForm powder
and the introduction of TrueForm, RapidSteel and SandForm powdered materials
during 1996.

Service and support revenue for 1996 was $2.3 million, an increase of 46.2
percent, or $730,000, compared to service and support revenue of $1.6 million
for 1995. Service and support revenue increased primarily as a result of the
recognition of deferred warranty and maintenance revenue associated with the
larger number of installed SLS Systems.

Gross Profit. Gross profit for 1996 was $9.9 million, an increase of 119.1
percent, or $5.4 million, compared to gross profit of $4.5 million for 1995.
As a percentage of revenue, gross profit increased to 40.7 percent during the
period from 31.9 percent in 1995.

Gross profit attributable to product sales for 1996 was $9.0 million, an
increase of 136.3 percent, or $5.2 million, compared to gross profit
attributable to product sales of $3.8 million for 1995. As a percentage of
product sales revenue, gross profit attributable to product sales increased to
41.0 percent during the period, compared to 30.3 percent for the same period
in 1995. The increase in gross profit attributable to product sales as a
percentage of product sales revenue resulted primarily from an increase in the
average SLS System sales price due in part to the introduction of the higher
priced Sinterstation 2500 System. Gross profit margin was also positively
impacted during 1996 by the sale of two SLS Systems in the first quarter that
had been used in the Company's operations and were carried on the Company's
books at a substantially depreciated value.

Gross profit attributable to service and support revenues for 1996 was
$885,000, an increase of 25.4 percent, or $179,000, compared to gross profit
attributable to service and support revenues of $706,000 for 1995. As a
percentage of service and support revenue, gross profit attributable to
service and support revenues was 38.3 percent and 44.7 percent for 1996 and
1995, respectively.

Selling, General and Administrative Expense. Selling, general and
administrative expenses include payroll and fringe benefits, advertising and
promotion expenses and other. Selling, general and administrative expense for
1996 was $10.0 million, an increase of 50.8 percent, or $3.4 million, compared
to selling, general and administrative expense of $6.6 million for 1995. A
larger workforce in 1996 resulted in compensation and fringe benefits
increasing more than $1.3 million over 1995 costs. Agent commissions and
advertising and promotion costs increased by approximately $703,000 over 1995
costs. Selling, general and administrative expenses in 1996 were also
adversely impacted by a $268,000 addition to the allowance for doubtful
accounts, primarily relating to one account, in the fourth quarter and
severance costs of $250,000. Other selling, general and administrative
expenses for 1996 increased by approximately $839,000 over 1995 costs. As a
percentage of revenue, selling, general and administrative expense decreased
to 40.9 percent in 1996 from 46.6 percent in 1995, primarily due to the effect
of fixed costs being spread over a larger base of revenues.

Research and Development Expense. Research and development expense for 1996
was $4.3 million, an increase of 21.9 percent, or $771,000, compared to
research and development expense of $3.5 million for 1995. As a percentage of
revenue, research and development expense decreased to 17.6 percent for 1996
from 24.8 percent for 1995, primarily due to the increase in revenues. The
increase in research and development expense for 1996 as compared to research
and development expense for 1995 was due to the Company completing development
on the Sinterstation 2500, the continuing improvement of the selective laser
sintering process and the ongoing development of new powdered materials to be
used in the selective laser sintering process.

Interest Expense. Net interest expense for 1996 was $1.1 million, an
increase of $536,000 compared to interest expense of $530,000 for 1995. This
reflects an increase in the average daily balance of the Company's outstanding
indebtedness and an increase in the average interest rates on such debt.

Cost of Discontinued Registration. In the fourth quarter of 1996, the
Company expensed $752,000 of legal, accounting and other professional services
related to this initial public offering, which was commenced in 1996 and
postponed.

18
<PAGE>

Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $1.7 million in 1996
compared to $2.1 million in 1995.

Comparison of Years Ended December 31, 1995 and December 31, 1994

Revenues. Revenues for 1995 were $14.2 million, an increase of 53.8 percent,
or $5.0 million, compared to revenues of $9.2 million for 1994.

Product sales revenue for 1995 was $12.6 million, an increase of 55.4
percent, or $4.5 million, compared to product sales revenue of $8.1 million
for 1994. The increase was primarily attributable to higher SLS Systems and
powdered materials sales. The number of SLS Systems shipped increased to 36 in
1995 (including two rental SLS Systems) from 23 in 1994. In 1995 the Company
began offering technological enhancements as upgrades to its SLS Systems and
experienced increased revenues from powdered material sales as a result of a
larger number of SLS System users purchasing DTM materials and the
introduction of the Company's new ProtoForm powdered material in March 1995.

Service and support revenue for 1995 was $1.6 million, an increase of 42.0
percent, or $467,000, compared to service and support revenue of $1.1 million
for 1994. Service and support revenue increased primarily as a result of the
recognition of deferred warranty and maintenance revenues associated with the
larger number of installed SLS Systems.

Gross Profit. Gross profit for 1995 was $4.5 million, an increase of 35.1
percent, or $1.1 million, compared to gross profit of $3.4 million for 1994.
As a percentage of revenue, gross profit decreased to 31.9 percent in 1995
from 36.3 percent in 1994.

Gross profit attributable to product sales for 1995 was $3.8 million, an
increase of 38.9 percent, or $1.0 million, compared to gross profit
attributable to product sales of $2.8 million for 1994. As a percentage of
product sales revenue, gross profit decreased to 30.3 percent in 1995 from
33.9 percent in 1994. The decrease in gross profit as a percentage of product
sales revenue in 1995 resulted primarily from a lower average sales price of
the Company's SLS Systems and because in 1994, the Company's gross profit was
positively impacted by the sale of two SLS Systems that were carried at no
cost. These two SLS Systems were pre-production or "beta" units that had been
sold to customers under a special testing program in 1992 in which such
customers undertook to provide testing results to DTM. Upon providing
commercial SLS Systems to the customers involved in the testing program, the
pre-production units were returned to DTM and carried at no value because the
Company, at that time, did not intend to offer such units for resale.

Gross profit attributable to service and support revenues for 1995 was
$706,000, an increase of 17.5 percent, or $105,000, compared to gross profit
attributable to service and support revenues of $601,000 for 1994. As a
percentage of service and support revenue, gross profit decreased to 44.7
percent in 1995 from 54.0 percent in 1994. The decrease in gross profit as a
percentage of service and support revenue resulted from a greater number of
field service employees and related costs required to service a larger, more
geographically diverse installed base.

Selling, General and Administrative Expense. Selling, general and
administrative expense for 1995 was $6.6 million, an increase of 26.1 percent,
or $1.4 million, compared to selling, general and administrative expense of
$5.2 million for 1994. A larger workforce in 1995 resulted in compensation and
fringe benefits increasing more than $780,000 over 1994 costs. In addition,
agent commissions and advertising and promotion costs increased by
approximately $620,000 over the prior year. As a percentage of revenue,
selling, general and administrative expense decreased to 46.6 percent in 1995
from 56.8 percent in 1994, primarily due to the increase in revenues.

Research and Development Expense. Research and development expense for 1995
was $3.5 million, a decrease of 8.3 percent, or $319,000, compared to research
and development expense of $3.8 million for 1994.

19
<PAGE>

As a percentage of revenue, research and development expense decreased to 24.8
percent in 1995 from 41.6 percent in 1994, primarily due to the increase in
revenues.

Interest Expense. Net interest expense for 1995 was $530,000, an increase of
$352,000 compared to interest expense of $178,000 for 1994. This reflects an
increase in the average daily balance of the Company's outstanding
indebtedness and an increase in the average interest rates on such debt.

Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $2.1 million in 1995
compared to $1.8 million in 1994.

SELECTED QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly results of
operations for the three-month periods ended March 31, 1995 through December
31, 1996. This information has been presented on substantially the same basis
as the audited consolidated financial statements appearing elsewhere herein.
The unaudited quarterly results of operations should be read in conjunction
with the Company's audited consolidated financial statements and related
notes. The quarterly financial information presented herein should not be
relied upon as an indication of future quarterly performance.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995 1996 1996 1996 1996(1)
---------- --------- -------------- ------------- ---------- --------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SLS Systems sold or
rented.............. 6 9 10 11 13 12 6 20
Revenues:
Product............. $ 1,749 $ 2,903 $ 3,036 $4,944 $5,329 $ 5,049 $ 3,040 $8,652
Service and
support............ 264 291 452 572 461 507 736 605
------- ------- ------- ------ ------ ------- ------- ------
Total............... 2,013 3,194 3,488 5,516 5,790 5,556 3,776 9,257
Cost of sales:
Product............. 1,275 2,173 2,179 3,176 3,169 3,022 1,757 5,073
Service and
support............ 160 170 300 243 300 320 428 376
------- ------- ------- ------ ------ ------- ------- ------
Total............... 1,435 2,343 2,479 3,419 3,469 3,342 2,185 5,449
------- ------- ------- ------ ------ ------- ------- ------
Gross profit......... 578 851 1,009 2,097 2,321 2,214 1,591 3,808
Operating expenses... 2,304 2,437 2,475 2,925 2,990 3,219 3,724 4,339
------- ------- ------- ------ ------ ------- ------- ------
Operating loss....... $(1,726) $(1,586) $(1,466) $ (828) $ (669) $(1,005) $(2,133) $ (531)
======= ======= ======= ====== ====== ======= ======= ======
</TABLE>
- --------
(1) Operating expenses for the three months ended December 31, 1996 include
unusual expenses of $250,000 for severance costs and $268,000 of bad debt
expense. Excluding these items, operating loss for the period would have
been $13,000.

SEASONALITY

The Company's revenues are affected by capital budgeting and spending
patterns in the North American market and shortened selling periods in certain
international markets. Due to these seasonal factors, the Company typically
experiences slowdowns in sales of SLS Systems during the first quarter as the
result of capital spending patterns in the North American market and during
the third quarter as the result of shortened selling periods in certain
international markets.

FOREIGN OPERATIONS

The Company competes on an international basis through its wholly owned
subsidiary located in Germany and through export sales derived from its United
States sales operations (principally to the Pacific Rim). Sales to

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customers outside of the United States constitute a significant portion of
DTM's revenues. International sales accounted for 34.8 percent, 33.5 percent
and 50.0 percent of the Company's total net revenues in 1994, 1995 and 1996,
respectively. The only foreign country that accounted for more than 10% of the
Company's sales during either 1995 or 1996 was Germany, which accounted for
12.0% of the Company's 1995 revenues (declining to 9.6% of the Company's
revenues in 1996).

The Company's German subsidiary has a cost structure which is significantly
different than that of the United States operations. The German company
conducts sales within Germany on its own behalf. It also acts as a sales agent
for the Company and provides certain administrative assistance. Sales into
European countries other than Germany are made directly by the Company to the
end customer. The future results of operations in Germany are expected to be
at or near break-even.

International sales are generally priced in U.S. dollars. However, European
sales prices are sometimes negotiated in either Deutsch Marks or the local
currency. The Company does not engage in hedging to mitigate the effects of
foreign currency exchange rate risk and has not experienced any significant
impact therefrom.

EQUITY APPRECIATION PLAN

The Company adopted a phantom stock appreciation rights plan whereby all
phantom stock appreciation rights outstanding upon the Offering will be
converted into immediately exercisable options to acquire shares of the
Company's Common Stock. Such conversion will result in a non-recurring, non-
cash, compensation expense, in the quarter in which it becomes probable that
the closing of the Offering will occur. The amount to be recognized as
compensation expense, with respect to SARs granted during 1995 (which comprise
approximately 81.2% of the total number of SARs granted), will be equal to
approximately $2.9 million to record the appreciation in value of the SARs,
resulting in a substantial reported net loss. See "Management--Equity
Appreciation Plan" and "Note 11--Equity Appreciation Plan" to the Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, cash used by the Company for operations and investing
activities has exceeded cash generated by the Company. The Company generally
has financed its cash needs through transactions with BFGoodrich and
borrowings from commercial banks and other short-term sources.

Net cash used in operating activities was approximately $1.8 million, $1.6
million and $4.1 million in 1994, 1995 and 1996, respectively. Net cash used
in operating activities of $4.1 million for 1996 resulted primarily from the
net loss for the year of $4.5 million adjusted for depreciation and
amortization of $2.2 million. In addition, increases in accounts receivable of
$4.3 million and increases in inventory of $2.7 million were offset by an
increase to accounts payable of $3.3 million. For the three years ended
December 31, 1994, 1995 and 1996, BFGoodrich allocated to the Company
approximately $1.8 million, $2.1 million and $1.7 million, respectively, for
tax benefits resulting from inclusion of the Company in the consolidated
income tax return of BFGoodrich. Such amounts are included in "Due to/from
BFGoodrich" in changes in assets and liabilities used in operating activities
in the Consolidated Statements of Cash Flows in the Consolidated Financial
Statements. See Note 9 to the Consolidated Financial Statements.

The Company's 1996 fourth quarter revenues of $9.3 million resulted from
sales of 20 SLS Systems, a majority of which Systems were sold in the second
half of the quarter. Of the $7.8 million in gross accounts receivable as of
December 31, 1996, the Company had collected approximately $5.2 million
through February 28, 1997. The Company believes that the remaining $2.6
million (other than the doubtful accounts that are reserved) will be
collected. The significant increase in the allowance for doubtful accounts was
primarily due to one account, with an impact of $268,000. The Company believes
that the remaining balance of $372,000 in the allowance for doubtful accounts
is adequate. The Company reviews the balance in the allowance for doubtful
accounts on an ongoing basis to ensure the adequacy of the reserve.

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The Company's investing activities include expenditures for patents and
licenses, capitalized software costs and furniture and equipment, principally
consisting of the Company's SLS Systems built for internal use and rental
purposes. Net cash used by investing activities was approximately $1.4
million, $2.4 million and $3.0 million in 1994, 1995 and 1996, respectively.
The Company expects that capital expenditures in 1997 will approximate $2.1
million.

The existence of the tax benefit allocation and other services from
BFGoodrich reduced the Company's net loss for years 1994 through 1996. The
Company expects that the loss of the tax benefit allocation would materially
adversely affect its financial results and cash flows if the Company were to
generate losses in any given year, but does not anticipate any adverse effect
if the Company generates profits. The benefits of utilizing future tax loss
carryforwards would be realized, however, should sufficient profits be
generated prior to the expiration of any tax loss carryforwards. The Company
believes that it is reasonably likely that additional costs will be incurred
as its other arrangements with BFGoodrich are discontinued over time, but does
not believe that these costs will be material.

Total indebtedness of the Company was approximately $15.8 million as of
December 31, 1996, consisting primarily of notes payable to commercial banks
under existing lines of credit, short-term borrowings from other financing
sources and a line of credit extended to the Company by BFGoodrich under which
the Company may borrow up to $4.0 million. As of December 31, 1996, amounts
outstanding under these facilities were approximately $11.0 million, $769,000,
and $4.0 million respectively, at weighted average interest rates of 6.2
percent, 21.1 percent and 8.5 percent, respectively. In connection with the
Offering, the Company is required to repay all its bank indebtedness and the
amounts outstanding under the line of credit with BFGoodrich (after giving
effect to the BFGoodrich Debt Conversion). Absent the Offering, the notes
payable to the banks and the line of credit from BFGoodrich mature on July 31,
1998. Short term borrowings mature upon collection of the related
collateralized receivables or termination of the related SLS System rental
agreement. In the past, BFGoodrich assisted the Company in obtaining loans
from commercial banks by providing comfort letters to lenders. The Company has
been advised by BFGoodrich that upon completion of the Offering it does not
intend to continue to finance, or arrange for the financing of, the operations
of the Company.

The Company has obtained a loan commitment letter from Texas Commerce Bank
for a revolving line of credit ("line of credit") contingent upon the
successful completion of the Offering, retirement of existing bank and
BFGoodrich indebtedness and negotiation and execution of mutually acceptable
definitive documentation. Assuming a line of credit is established with the
terms set forth in the commitment letter, the Company's ability to borrow
thereunder will be subject to a borrowing base calculation and the Company
meeting certain financial thresholds, including attaining certain levels of
"established profitability," as defined therein. Until achieving one such
level, the Company would be permitted to borrow up to $3.0 million;
thereafter, available advances against eligible receivables would be increased
up to a maximum of $6.0 million. Loans under the line of credit would mature
within one year, would be collateralized by the Company's accounts receivable
and inventory and would bear interest at the bank's prime interest rate plus
three quarters of one percent. The commitment provides that the Company would
be bound by customary covenants, including restrictions on additional liens or
borrowings, as well as the payment of dividends, and affirmative reporting
requirements. In addition, the terms of the commitment letter specify that the
bank would have the option to terminate the obligation to make further
advances under the line of credit on 30 days notice if employment of the chief
executive officer of the Company terminates and a qualified successor is not
appointed by the Company and approved by Texas Commerce Bank within a
specified period of time.

The Company believes that the available cash balances upon completion of the
Offering, after repayment of the amounts identified above and the new bank
line of credit, along with cash from operations, will provide sufficient
liquidity for the Company to meet its anticipated cash requirements for at
least the 12 months following the Offering, however, there can be no assurance
that this will be the case. See "--Safe Harbor Statement."

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IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. SFAS No.
128 replaces the presentation of primary earnings per share (EPS) under
Accounting Principles Board Opinion No. 15 and related Interpretations, with
the presentation of basic EPS (which primarily gives effect only to common
shares actually outstanding) and requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures. The Company is required to adopt SFAS No. 128 during the
fourth quarter of 1997. The Company has not completed its evaluation of the
potential impact of this new standard on EPS in future periods. However, based
on the equity instruments currently outstanding under existing stock
compensation plans, this new standard is not expected to have a material
impact on EPS in future periods.

SAFE HARBOR STATEMENT

Investors are cautioned that forward-looking statements contained in this
Prospectus involve risks and uncertainties including without limitation the
matters described in "Risk Factors" and the following: (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to
change at any time at the discretion of management and the Board of Directors;
(ii) the Company's plans and results of operations will be affected by the
Company's ability to manage its growth and working capital; (iii) the
Company's business is highly competitive and the entrance of new competitors
or the expansion of the operations by existing competitors in the Company's
markets could adversely affect the Company's plans and results of operations.

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BUSINESS

DTM Corporation develops, designs, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems , powdered
materials and related services. The Company's SLS Systems and materials are
based on proprietary and patented selective laser sintering technology. Rapid
prototyping is the creation of a solid three-dimensional model or prototype
directly from CAD data. Rapid tooling is the creation of durable tooling that
can be subsequently employed to produce substantial quantities of parts for
market introduction. Use of the Company's SLS Systems significantly reduces
the time required to produce models and prototypes for testing actual product
fit and form, ergonomic design and functionality from what otherwise could be
months or weeks to days or, in some cases, hours. The Company's SLS Systems
are used to accelerate the design, development and market introduction of
products in a wide range of industries, including but not limited to the
automotive, aerospace, medical, electronics, telecommunications, computer,
appliance, footwear, toy and power tool industries. BFGoodrich currently owns
approximately 92 percent of the outstanding Common Stock. See "Principal and
Selling Shareholders."

INDUSTRY OVERVIEW

Since the 1980s, the field of product engineering, design and development
has undergone rapid change with ever-increasing emphasis on time to market as
a key factor in successful product introduction. The rapid prototyping
industry has arisen as a part of, and in response to, this change. In
addition, utilization and growth in purchases of rapid prototyping systems
have been directly influenced by the availability of CAD installations. During
the early years of the rapid prototyping industry, the limited availability of
CAD outside of North America restricted growth; however, worldwide
installations of CAD have proliferated in recent years, making rapid
prototyping technology a viable alternative to conventional methods.

Development of Rapid Prototyping

Under conventional technology, models, prototypes, patterns and metal mold
inserts are typically created using milling and computer numerically
controlled and electrode machining techniques--cutting and sanding solid
blocks of materials to arrive at the desired shape. Depending on the material
used and the complexity of the part, this process can be time-consuming and
expensive. In some cases, the only way to create an appropriate test model or
prototype using conventional methods is essentially to duplicate the steps
used to create the mass-produced product. The conventional processes can take
weeks, and in some cases months, and often involve costly steps and delays for
a manufacturer seeking to take advantage of a new market opportunity.

The first rapid prototyping systems were introduced in 1986 in an attempt to
address some of the cost and time to market disadvantages of conventional
technology. These systems were based on stereolithography, a process that uses
a laser to convert liquid resin into a solid part. Because of the nature of
the resin material, these initial systems were only capable of producing parts
for use as concept models that were limited to verification of the design's
form and fit. Successive technologies such as selective laser sintering, along
with advances in stereolithography, have broadened the applications for rapid
prototyping to include functional prototypes and patterns for secondary
processes that enable users to test actual product fit and form, ergonomic
design and functionality.

The Rapid Prototyping Advantage

The capability of rapid prototyping to manufacture models, prototypes,
patterns and metal tool inserts quickly affords users the opportunity to save
time and money by (i) reducing the product development and design cycle and,
consequently, speeding the time to market for new products, (ii) avoiding
product design and development errors by allowing designers to check the fit,
form and function of new designs prior to mass production and (iii) minimizing
the use of more costly conventional techniques.

Rapid prototyping also has made it possible to create patterns that are
subsequently converted into usable parts through secondary processes such as
the production of non-durable molds and investment casting. A

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common technique for replicating small numbers of parts is to use a non-
durable mold, in which the rapid prototyping pattern is embedded in silicone
rubber that hardens, then is cut open to create a mold. The non-durable mold
is used to replicate parts by injecting the mold with a plastic polymer.
Typically, between 10 and 30 parts can be replicated before the mold breaks
down. The Company believes that the creation of patterns for the production of
non-durable molds is one of the fastest growing applications in the rapid
prototyping market. Investment casting is a common manufacturing process used
for the production of metal parts. For investment casting, a rapid prototyping
pattern is coated with a ceramic slurry (particles suspended in a liquid).
After the slurry has hardened, the ceramic coated pattern is placed in a
furnace where the pattern is burned out leaving a ceramic shell. The ceramic
shell is cooled and molten metal is poured into the shell. When the metal has
hardened, the ceramic shell is removed, leaving a metal part. The usage of
investment casting of rapid prototyping patterns has significantly increased
as a technique for the production of prototype metal parts.

Four emerging capabilities of rapid prototyping are (i) the creation of core
and cavity metal mold inserts from metal powder for use in plastic injection
molding, (ii) the direct production of prototype metal parts from a range of
metal powders, (iii) the manufacture of flexible parts for automotive,
consumer and medical applications and (iv) the direct manufacturing of sand
molds and cores (patterns placed in sand molds for the purpose of creating
features and voids in a cast metal part) for use in the casting of metal parts
by foundries. The Company believes that its selective laser sintering
technology is the only commercially practiced rapid prototyping process that
allows a user to access all of these capabilities from a single platform.

Market Direction

The Company believes that the emerging ability of rapid prototyping to
manufacture metal parts in a range of materials and to make prototype metal
molds for use in plastic injection molding will expand rapid prototyping
beyond pattern, model and prototype applications, thereby further fueling
market growth. The Company also anticipates that the demand for rapid
prototyping materials and related services will grow significantly as the
installed base increases and that materials and related services will
represent an increasingly significant portion of future total industry
revenues.

DTM believes that the industry has entered a process of market segmentation
with a high- and low-end distinction emerging. The low-end segment is
characterized by smaller, lower-priced rapid prototyping systems, or "desk-
top" systems. These desk-top systems produce models primarily for evaluating
design form and fit and are designed with an emphasis on speed of part build
as opposed to part accuracy and functionality. Today, this type of application
is served by virtually all existing commercial systems regardless of their
price or size. The high-end market segment is served by rapid prototyping
systems, such as its SLS Systems, that produce functional parts and can be
integrated into rapid manufacturing processes. These systems are generally
larger, more complex, more expensive and more versatile than desk-top systems.
The Company anticipates that integration of high-end systems into the
manufacturing process will occur as rapid prototyping technologies such as
selective laser sintering introduce the capability to manufacture metal parts
directly and quickly produce both tooling that can produce parts and the parts
themselves in the manufacturers' desired quantities and materials of choice.
In particular, the Company believes that the key to continuing widespread
acceptance of a particular rapid prototyping system will be its ability to
reduce time to market by quickly producing tooling, either permanent or
prototype, for functional part production.

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THE DTM RAPID PROTOTYPING SOLUTION

The market for rapid prototyping products and services includes multiple,
competing technologies. DTM believes that it is the only company that markets
selective laser sintering in North America and one of only two companies that
market the technology outside of the United States. The Company believes that
the following characteristics differentiate its selective laser sintering
process from other competing rapid prototyping technologies:

Wide Range of Applications

The Company's SLS Systems can currently process seven materials: a
polycarbonate powder; two nylon powders; ProtoForm powder (a nylon
composite); RapidSteel powder; TrueForm powder; and SandForm powder. The
Company recently announced the expected availability of two new products:
Somos 201 powder, a new material supplied by DuPont that yields highly
flexible parts with rubber-like characteristics, and VeriForm powder, a
significantly improved material for functional prototypes. This wide range
of materials permits the user of an SLS System to produce models, patterns,
functional prototypes and tooling from one platform. Transition from one
material to another, and hence from one application to another, generally
takes less than one hour. The Company does not believe that a potential
rapid prototyping user could duplicate the SLS Systems' total materials and
applications capability through the use of any other single rapid
prototyping system.

Strong and Durable Functional Plastic Prototypes

The selective laser sintering process produces parts that can be drilled,
painted, equipped with electronics and mounted in working product
assemblies that duplicate the final product. Unlike parts produced with
many other technologies, these prototypes can be used for rigorous testing
of product designs in harsh conditions such as extreme temperatures and
high humidity. For example, prototype parts produced using the selective
laser sintering process have been placed in automobile engines and operated
for up to 30,000 miles. Product development and design teams can minimize
performance problems and reduce design errors by testing parts in projected
use conditions prior to the mass production of a product.

RapidTool Process Capability

The ability to produce metal mold inserts from metal powder reduces the
time required to make tooling that can be used to produce up to 80,000
plastic parts in the material of choice for market testing or introduction.
Conventional milling and machining techniques can require weeks, and in
some cases months, and are labor intensive. The RapidTool process can
produce prototype metal mold inserts in less than 10 working days, with
minimal supervision. The Company believes that competing, commercial rapid
prototyping technologies currently do not have the ability to create
tooling from metal powder. A variation of the Company's RapidTool process
and RapidSteel material system can also be used to manufacture, in less
than two working days, epoxy-infiltrated metal cores and cavities that can
be used on injection molding machines to produce up to approximately 200
functional parts in the material of choice.

SLS System Productivity

The Company believes that its SLS Systems have certain productivity
advantages over competing rapid prototyping systems. In the selective laser
sintering process, the unfused powder remains in the build chamber,
supporting the shape of the part during the build. Due to this support,
multiple part builds can be stacked in the Company's SLS System's part
build chamber, which allows the SLS Systems to produce multiple parts in a
single run. Conversely, many competing technologies require multiple runs
of a system to create multiple parts. The Company also believes that its
SLS Systems have certain part build speed advantages over other rapid
prototyping technologies. The Company anticipates that productivity
enhancements now under development could result in significant further
improvements in 1997.

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Expandable and Upgradable Technology

DTM's selective laser sintering technology has potential for expansion,
both in terms of improvements to the process and in terms of current and
potential powdered sintering materials and applications. The Company
believes that a significant advantage of selective laser sintering is that
new and improved materials will, in most cases, be capable of being used in
existing SLS Systems with very few modifications, if any. The Company has
previously introduced a number of upgrades to the Sinterstation 2000 System
that allowed SLS System users to capture the benefits of DTM's SLS System
product improvement programs without having to purchase a new SLS System.
For example, DTM recently made available to its existing customers a laser
scanning upgrade that, with an on-site retrofit, provides enhanced part
accuracy and quality. Additionally, in 1997, the Company expects to make an
upgrade available to customers who have the Sinterstation 2000 System and
desire the thermal and scan speed performance capability of the
Sinterstation 2500 System. The Company expects to begin shipping this
upgrade package in the middle of 1997. The ability to retrofit SLS Systems
affords DTM's customers a degree of protection against the rapid
obsolescence found in many products using other emerging technologies.

BUSINESS STRATEGY

Since its inception, the Company's focus has been on the development and
improvement of the SLS Systems and related materials. During 1995, the Company
also began to concentrate on the development and execution of an international
marketing and distribution strategy for its products. With the advances the
Company has recently achieved in the form of the RapidTool process, the
introduction of ProtoForm, RapidSteel, TrueForm and SandForm powders, the
introduction of the Sinterstation 2500 System and the recently announced
expected availability of Somos 201 and VeriForm powders, the Company believes
that it is positioned to capitalize on its competitive advantages through the
following strategies:

Increase Share of Existing Market Applications

The creation of strong and durable parts, as well as patterns for secondary
processes, are two of the fastest growing existing applications in the
rapid prototyping industry. The Company believes that its ProtoForm powder
has allowed it to become a leading supplier of rapid prototyping systems
for use in the production of functional prototypes. The Company anticipates
expanding its position in this area by introducing an improved functional
prototyping material that gives users the ability to produce parts with
significantly improved resolution and surface finish. Additionally,
TrueForm powder allows the SLS System user to manufacture non-durable
patterns that can be used to fabricate non-durable molds, as well as to
create cast parts through investment casting. The Company believes that its
TrueForm powder has enhanced DTM's ability to market the SLS Systems to
customers in the fast growing pattern segment of the rapid prototyping
market. The Company also has been engaged in raising the awareness of users
of investment casting technology of the benefits of using TrueForm for the
production of high quality cast metal parts. The Company expects to realize
increased market share as customer awareness of the benefits of these
materials increases.

Capitalize on RapidTool Process Capability

DTM plans to pursue a leadership role in metal injection mold insert
applications by marketing the proprietary RapidTool process to tool making
operations within OEMs, service bureaus and tool manufacturing companies.
The Company believes that the successful introduction of its RapidTool
process will facilitate the integration of the selective laser sintering
technology into manufacturing processes, an area that has experienced
limited penetration by other rapid prototyping techniques. The Company
intends to improve the RapidTool process by introducing enhancements that
will allow for a significant reduction in the cycle time to produce a core
or cavity.

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Expand Selective Laser Sintering Materials Offerings

Based upon recent successful new materials introductions, the Company
believes that it has established the requisite expertise and processes with
which to further broaden its selective laser sintering materials product
line. Preliminary experiments, coupled with the proven diversity of the
selective laser sintering materials capability, lead the Company to believe
that in the future it should be possible to (i) broaden the performance of
the selective laser sintering process to include the production of metal
prototype parts, (ii) develop new and improved functional plastic
prototyping materials, (iii) broaden the selective laser sintering metal
mold inserts product line to include additional durable materials, (iv)
introduce an improved RapidSteel materials system which allows for the
production in less than 48 hours of epoxy-infiltrated metal molds that have
a mold production life of up to approximately 200 parts, an application not
efficiently served by current rapid prototyping technology and (v) develop
a ceramic-based materials system for the production of tools and parts. The
Company believes that as a result of this strategy, recurring sources of
revenue, such as materials, will become an increasingly larger portion of
total revenues.

An example of the Company's ability to expand its offering of selective
laser sintering materials is the recent introduction of SandForm powder.
SandForm powder is used by foundries for the quick and direct production of
sand molds and cores for the casting of metal parts. Sand molds and cores
are used for casting metal parts worldwide, particularly for the mass
production of automotive engine and drive train components. The Company
believes that selective laser sintering is the only rapid prototyping
technology capable of the direct manufacture of sand molds and cores.

Broaden SLS System Product Line

The Company's strategy is to continue to pursue the development of more
advanced SLS Systems. An example of this strategy is the Company's recent
introduction of the Sinterstation 2500 System, an SLS System with a larger
part build chamber than the Sinterstation 2000 System and certain other
productivity improvements. The Sinterstation 2500 System, coupled with the
Sinterstation 2000 System, provides the Company with a family of SLS
Systems to offer to both existing and prospective customers. In addition,
the Company has announced that existing owners of its Sinterstation 2000
System will have the ability to upgrade to the performance capability of a
Sinterstation 2500 System and that it intends to begin shipping the upgrade
in 1997. The Company also intends to introduce during 1997 the
Sinterstation 2000 GT System, a system that has the speed and performance
capability of the Sinterstation 2500 System with the smaller part build
chamber of the Sinterstation 2000 System.

Expand Distribution Network

The Company intends to continue to expand its direct sales force, agent
network and service and support capabilities. Specifically, the Company
intends to increase its direct sales force in Western Europe and North
America, establish a direct sales force in the Pacific Rim and extend its
agent network into additional key South American, Pacific Rim and Eastern
European countries. Expansion of the Company's field service and support
functions is expected to parallel the growth of the installed System base.
The Company intends to emphasize its commitment to customer support by
decentralizing its field service and applications support resources into
regional offices, thereby minimizing its response time to customer support
requests.

DTM'S SELECTIVE LASER SINTERING TECHNOLOGY

The Selective Laser Sintering Process

The Company's SLS Systems employ a combination of software and hardware to
produce plastic models, functional prototypes and patterns from powdered
materials. The patterns can, in turn, be used for secondary processes such as
the production of non-durable molds and investment casting. SLS Systems also
can be used to

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produce metal prototype mold inserts. Customers input designs into the SLS
Systems in the form of CAD drawings, typically in STL format, an industry-
standard file type that most CAD systems can generate. From the CAD file, SLS
Systems quickly and accurately produce models, prototypes, patterns and
tooling in the specified shape.

The Company's selective laser sintering process uses laser energy to sinter
powdered material to create solid objects. The object described by the CAD
file is built layer by layer using the following technique:

. As the selective laser sintering process begins, a thin layer of the
heat-fusible powder is deposited into the part build chamber.

. An initial cross-section of the object under fabrication is selectively
"drawn" on the layer of powder by a heat-generating CO/2/ laser. The
interaction of the laser beam with the powder elevates the temperature to
the point of melting, fusing the powder particles and forming a solid
mass. The intensity of the laser beam is modulated to melt the powder
only in areas defined by the object's design geometry.

. An additional layer of powder is deposited via a roller mechanism on top
of the previously scanned layer.

. The process is repeated, with each new layer fusing to the layer below
it. Successive layers of powder are deposited and the process is repeated
until the part is complete.

The RapidTool Process

The RapidTool process employs selective laser sintering to produce
steel/copper composite mold inserts. RapidSteel powder, DTM's polymer-coated
steel powder, is placed in the SLS System. A "green" part (which consists of
metal powder held together by the polymer) is then produced by using the laser
to selectively sinter the polymer binder and effectively bind the metal
particles together, replicating the mold inserts described in a CAD file. This
part is formed using the same layer by layer manufacturing process that is
used to make plastic parts. The green part is dipped in a polymer binder
solution that infiltrates the part and, after drying for several hours, gives
the green part the hardness necessary for the subsequent process step in a
furnace. The furnace cycle consists of a multi-stage firing cycle. The first
stage burns out the remaining polymers from the steel matrix, the second stage
lightly sinters the metal particles together and the final stage infiltrates
copper into the steel matrix. The green part also can be infiltrated with an
epoxy material to form a core and cavity capable of producing up to
approximately 200 parts on an injection molding machine in the material of
choice.

PRODUCTS

The Sinterstation Systems

The Sinterstation Systems contain three key hardware modules: (i) the Powder
Engine Module, where the laser sinters the powdered material and builds the
prototype, model or mold insert; (ii) the Controls Module, which contains the
computer and system operator's console for running the SLS Systems; and (iii)
the Environment Control Module, which regulates the temperature and atmosphere
of the build chamber. The size and number of objects that can be built in the
build chamber varies depending on the part size, type of sintering powder used
and part configuration. Objects that are larger than the size of the build
chamber can often be built in pieces and then assembled with no sacrifice in
strength or accuracy.

The Company has developed a large library of application software designed
to control the selective laser sintering process. This software sets
parameters and directs the various components of the platform hardware based
on the type of material being used in the build process. The Company also has
designed a range of service, support and utility software programs to assist
customers in optimizing the prototype and mold building process. For example,
one of the Company's productivity programs organizes multiple parts within the
build chamber for maximum space utilization.

The Company's SLS Systems can be configured for use with a single powder or
for any combination of thermoplastics and metal. The list prices for
Sinterstation Systems range from $299,000 to approximately

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$500,000, depending on the options selected by the customers. Systems
typically include the SLS System platform including all three modules,
material handling equipment, documentation, software licenses, licenses for
using DTM-supplied powdered material and installation. Some of these options
may increase the purchase price of the System. The purchase price also
includes a one-week training course in operation of the SLS System for up to
two of the customer's personnel.

Sintering Materials

The Company's materials are sold in drums. The list prices for the following
powdered materials range from $23 to $60 per pound, depending on the material,
except for SandForm powder, which sells for $4.50 per pound. Characteristics
and uses of selective laser sintering powders available through DTM for use in
its Sinterstation Systems are as follows:

<TABLE>
<CAPTION>
MATERIAL/
YEAR INTRODUCED DESCRIPTION CHARACTERISTICS USES
<S> <C> <C> <C>
VERIFORM POWDER 1997 DTM-developed Tough, high strength mate- Designed for testing
high resolution rial creates parts with functional prototypes in
engineering excellent feature defini- high stress, harsh envi-
thermoplastic tion in one of several ronments and other de-
colors manding applications
where the prototype
needs to operate like
the final product.
- -------------------------------------------------------------------------------------------
SOMOS 201 POWDER DuPont-developed Highly ductile rubber-like Flexible functional pro-
1997 elastomeric en- material that can with- totypes of rubber and
gineering poly- stand "under-the-hood" specialized plastic
mer high temperatures and parts such as hoses,
harsh environments gaskets, moldings seals,
athletic shoes and medi-
cal models.
- -------------------------------------------------------------------------------------------
SANDFORM POWDER Polymer-coated Interchangeable with ex- Sand molds and inserts
1996 zirconium sand isting sand mold and core for casting parts in a
particles materials; particle size variety of metals.
and material characteris-
tics that enable fast pro-
duction of smooth sand
mold patterns
- -------------------------------------------------------------------------------------------
TRUEFORM POWDER DTM-developed Capable of producing ex- Patterns for casting
1996 polymer with tremely smooth, accurate single metal parts or
very fine parti- pattern masters low-quantity plastic
cle size and parts with complex geom-
spherical shape etry; thin wall struc-
tures where surface fin-
ish is important.
- -------------------------------------------------------------------------------------------
RAPIDSTEEL POWDER DTM-developed Creates durable metal mold Injection mold core and
1995 carbon steel inserts that can produce cavity inserts for pro-
particles with a thousands of plastic parts totype hard tooling us-
special polymer ing DTM's RapidTool
coating process.
- -------------------------------------------------------------------------------------------
PROTOFORM POWDER DTM-developed Extremely durable, flexi- Prototypes with fine de-
1995 composite mate- ble and strong; stands up tail and high strength
rial consisting to harsh chemicals and de- where testing in harsh
of nylon and manding temperature conditions is required.
spherical glass environments Can also be used to make
particles models.
- -------------------------------------------------------------------------------------------
NYLON AND FINE NYLON Engineering Durable material that can Functional prototypes of
1993/1994 thermoplastic be drilled, painted and actual products that re-
used in environments simi- quire snap fits. Can
lar to the end product; also be used to make
offers substantial heat models.
and chemical resistance
- -------------------------------------------------------------------------------------------
POLYCARBONATE Engineering Durable and heat resistant Conceptual models and
1991 thermoplastic durable pattern masters
for plastic short run
tooling, metal invest-
ment casting and sand
casting.
- -------------------------------------------------------------------------------------------
</TABLE>

30
<PAGE>

The Company sells its SLS Systems with the materials capabilities selected
by the customer and an initial supply of powders. Thereafter customers can add
materials capabilities by purchasing materials start-up modules, which include
an initial supply of materials plus the software developed by the Company for
optimal processing of that particular material. The Company subcontracts with
other manufacturing organizations for the production of sintering materials or
obtains those materials directly from the producer. The Company follows a
practice of single sourcing materials with these suppliers.

Other Products

Along with the Sinterstation Systems and powdered sintering materials, the
Company supplies ancillary equipment used for finishing parts as well as
processing and handling powdered materials. These products are offered by DTM
primarily as a convenience to its customers. However, a specialized furnace
used as part of the Company's RapidTool process is manufactured expressly for
DTM, which holds the worldwide marketing rights. In addition, DTM is currently
the exclusive source of a custom workbench for recycling powder, which is also
manufactured solely for the Company.

RESEARCH AND NEW PRODUCT DEVELOPMENT

The Company's research and development effort focuses on improving core
technologies that are critical to future growth. These include development of
new materials, as well as improved powder handling technology, laser beam
delivery systems and thermal control systems. The Company's development
efforts are enhanced through informal development arrangements with key
customers, materials suppliers and hardware suppliers. The Company also
collaborates on research and development with The University of Texas as well
as other universities and research institutions that operate SLS Systems.

During 1994, 1995 and 1996, the Company devoted approximately $3.8 million,
$3.5 million and $4.3 million to research and development, respectively. These
expenditures have resulted in ongoing improvement in the selective laser
sintering technology. The Company's Sinterstation Systems have been improved
significantly since the first commercial sale in 1992, which improvements have
resulted in higher degrees of accuracy, reliability and productivity. Recent
research and development successes in the powder and process area include the
introduction of a second nylon powder in 1994, the commercial release of
ProtoForm powder in early 1995, the introduction of the RapidTool process and
related RapidSteel powder in late 1995, the commercial release of TrueForm
powder in early 1996 and SandForm powder in the third quarter of 1996 and the
introduction of the Sinterstation 2500 System in September 1996. The Company
recently announced the expected availability of two new powders: Somos 201
powder, a new material supplied by DuPont that yields highly flexible parts
with rubber-like characteristics, and VeriForm powder, a significantly
improved material for functional prototypes.

Longer term, the Company believes that the selective laser sintering
technology is capable of processing an even wider range of materials, thereby
improving the performance of the Company's products in existing applications
and advancing the technology into new applications. Based on preliminary
experiments, coupled with the proven diversity of the selective laser
sintering materials capability, the Company believes that it should be able to
(i) broaden the performance of the SLS System to include the production of
prototype metal parts, (ii) develop new and improved functional plastic
prototyping materials, (iii) broaden the metal mold inserts product line to
include additional durable materials and (iv) develop ceramic materials for
the production of special tooling and part applications.

MARKETING AND CUSTOMERS

Customers

Rapid prototyping systems are purchased by OEMs, universities, military and
defense organizations and service bureaus. Past purchasers of the Company's
SLS Systems include The Boeing Company, Eastman

31
<PAGE>

Kodak Company, Fiskars Oy, Ford Motor Company, General Motors Corporation,
Hughes Christensen, LG Electronics, Inc. (Goldstar), Mercedes-Benz AG, Pratt &
Whitney, Rockwell International Corporation, Samsung Electronics Co., Ltd.,
Toyota Motor Corporation and Whirlpool Corporation, among others. These
customers have purchased SLS Systems in the past and continue to purchase
materials from the Company. However, none of such customers individually
accounted for a material amount of the Company's sales in 1996. In addition,
universities and technical transfer centers in 12 countries had purchased SLS
Systems as of December 31, 1996.

The Company also sells a substantial portion of SLS Systems to service
bureaus. Service bureaus typically offer a full line of product design,
prototyping and limited-run manufacturing services. They are generally used by
companies that may not be able to justify the cost of their own rapid
prototyping system, that have elected to outsource rapid prototyping services
or that may choose to investigate different technologies before making their
own investment in a rapid prototyping system. The Company anticipates that
service bureaus will continue to be a major provider of rapid prototyping
goods and services. In 1996, 46.5 percent of the Company's revenues were
derived from the sales of products and services to service bureaus, and the
Company anticipates that service bureaus will continue to provide a
significant portion of its revenues. Many of the Company's customers have
purchased more than one SLS System and, based on these experiences, the
Company anticipates a significant repeat business with its existing customers.

Generally, the Company's revenues are derived from sales to a wide variety
of customers. However, during 1995 approximately 15 percent of total revenues
were derived from sales to Compression Inc. In 1994 and 1996, the Company did
not have a customer representing 10 percent or more of sales revenues. While
the Company anticipates that occasional multiple unit purchases by a single
purchaser could result in a large percentage of total sales being concentrated
in one customer from time to time, it does not consider itself dependent on
any particular customer.

Product Distribution

The Company distributes its products in the United States, Canada, Western
Europe and key Pacific Rim and South American countries. In the United States
and Canada, the Company employs a direct sales force augmented by agents in
the Upper Midwest. In Germany, the Company's products are distributed by DTM
GmbH, a wholly owned German subsidiary. DTM GmbH is a sales and service
organization whose efforts are augmented by sales agents in France, Italy,
Portugal, Spain, Sweden and the United Kingdom. The Company also distributes
its goods and provides services in the Pacific Rim and South America through a
network of agents, including agents in Argentina, Australia, Brazil, China,
Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea and
Taiwan. As of December 31, 1996, the Company had shipped SLS Systems to
customers in a total of 17 countries.

DTM's sales agents are selected for their sales and product service
capabilities. They generally are experienced in selling products in fields
related to rapid prototyping, but agree contractually to represent the
Company's products exclusively in the field of rapid prototyping. The sales
agents periodically undergo refresher training in SLS System service.
Throughout the next year, the Company intends to continue the expansion of its
direct sales force, agent network and service and support capabilities.

Marketing and Sales

The Company's marketing programs utilize a mix of seminars, trade shows,
direct mailings, literature, videos, press releases, telemarketing, brochures
and customer and application profiles to identify prospects that match a
typical SLS System user profile. The Company also focuses its marketing
resources on expanding the use of the selective laser sintering technology by
existing customers. This strategy includes marketing SLS Systems, upgrades and
related products.

The Company views ongoing sales to service bureaus as important to its
overall business strategy and focuses a significant share of its marketing and
selling resources on these target customers. In early 1996, the Company

32
<PAGE>

introduced its "DTM OnBoard" marketing program. DTM OnBoard is a strategic
partnering effort between DTM and service bureaus. Upon enrollment in DTM
OnBoard, the Company trains the service bureau's personnel to promote
selective laser sintering applications, conducts joint seminars and direct
mail campaigns for sales lead generation and carries out a cooperative
marketing program.

The Company offers an SLS System rental program for customers who wish to
test the selective laser sintering technology prior to making a purchase
commitment or who wish to get an early start on implementation of the process
while waiting for completion of their internal funding process.

SERVICE AND SUPPORT

The Company maintains a staff of field service and support personnel in
Europe and North America. The field service organization is responsible for
installations of new SLS Systems and for conducting the Company's warranty
service and maintenance program. The Company's sales agents in the Pacific Rim
and South America also are trained to service SLS Systems. As a result of the
capability of the Company's field service organization and its trained agents,
the Company's response time to customer requests for assistance is generally
24 hours or less. The Company's applications support personnel assist
customers with SLS System operations and provide advice and assistance on
building unusually complicated parts. The applications team also is charged
with keeping customers informed of changes and advancements in the selective
laser sintering technology or SLS System operating procedures.

The Company is in the process of decentralizing its field service and
applications groups in order to maintain its high level of customer service.
In the United States, a service facility was opened in the Detroit area in
early 1996. Further decentralization in North America will occur in 1997. The
Company has also expanded its Pacific Rim field service capability by
establishing a field service office in Singapore in January of 1997.

The Company provides each new customer with a one-week training course in
advance of delivery of its SLS System. The course covers SLS System operation
and preventive maintenance procedures, materials and process information,
safety training and problem-solving techniques. The class includes formal
classroom instruction, guided user-interface simulations and actual SLS System
operation in the DTM applications laboratory. Supplemental technical
assistance is provided to customers through a telephone customer support line
or additional on-site training that can be scheduled at the customer's
request. Furthermore, when customers add metal powder capability, the Company
provides additional RapidTool process training at its facilities in Austin,
Texas.

The Company's SLS Systems are sold with a comprehensive 12-month warranty on
parts and labor, which excludes consumable items and the laser charge. The
Company's customers may continue the level of service provided by the initial
12-month warranty by purchasing an annual maintenance contract. The
maintenance contract provides comprehensive part and labor coverage,
preventive maintenance and software upgrades. Historically, annual maintenance
contracts have been purchased for the majority of the Systems sold after
expiration of the initial warranty period. For those customers choosing not to
purchase annual maintenance contracts, DTM also provides repair and
maintenance services on a time and materials basis.

MANUFACTURING

The Company's manufacturing strategy is based on the outsourcing of major
sub-assemblies of the Sinterstation Systems, which include the Powder Engine
Module, Controls Module and Environment Control Module. The sub-assemblies are
built by different suppliers and shipped to Austin, Texas, for assembly. The
Company performs final assembly by connecting the sub-assemblies and adding
other key components. The SLS System then is put through extensive calibration
and testing, which includes making parts from various materials. A final
quality check precedes clean-up and packaging for shipment. Assembly and final
testing at the Company's site comprises a 21-day cycle. When the SLS System
arrives at the customer's location, DTM personnel install it and perform on-
site testing over a period of two to three days. The Company also assembles
upgrade packages and, in some cases, installs those packages.

33
<PAGE>

Procurement lead time for the major sub-assemblies of the SLS Systems can be
up to 16 weeks. Due to the Company's long lead time for major sub-assemblies,
it places orders for such parts on a forecast basis with the intention of
moving raw materials inventory immediately into work in process. The Company
involves its suppliers in the design and testing stages of new components in
order to improve manufacturability. The Company believes that the benefits of
maintaining close relationships with its suppliers are more cost efficient
product designs and the ability to control manufacturing costs. While the
Company subcontracts for manufacture of SLS System components, powdered
sintering materials and accessories from single-source, third-party suppliers,
multiple sources exist for almost all of the components of the Company's
products.

The Company's manufacturing facilities in Austin, Texas, are currently
configured to assemble and test the SLS Systems. The Company believes that it
will have sufficient manufacturing capacity to fulfill demand for its SLS
Systems in 1997. The Company expects that it will lease additional space for
its operations in late 1997.

INTELLECTUAL PROPERTY

The selective laser sintering technology was initially developed by
researchers at The University of Texas. The first selective laser sintering
patent was issued to The University of Texas in 1989. DTM has an exclusive
worldwide license from The University of Texas to use the selective laser
sintering technology (the "License"), the term of which continues until
expiration of the patent rights that are the subject of the License. The
License includes the original patents plus a right of first refusal for all
improvements thereon. It requires that DTM commercialize the technology, which
it has done and continues to do. Under the License, DTM is required to make
royalty payments equal to four percent of net sales of SLS Systems and certain
powdered materials. In connection with obtaining the License, the Company
issued 20,442 shares of Common Stock to The University of Texas. Under the
License, The University of Texas reserves the right to practice the patented
technology for research and educational purposes. The License can be
terminated by The University of Texas (i) if DTM becomes bankrupt or
insolvent, (ii) if DTM commits a material breach or default and fails to cure
that breach or default within 90 days of notice thereof or (iii) as to foreign
jurisdictions, after 1997, if DTM fails to commercialize the technology in
that jurisdiction. The License provides that DTM will indemnify The University
of Texas from expenses or damages incurred by The University of Texas arising
from DTM's use of the licensed subject matter.

The Company has further refined and improved the selective laser sintering
process and materials and has been issued patents in its own name for many of
those developments. As of February 5, 1997, the Company owned or had exclusive
licenses to 25 U.S. patents and nine pending U.S. applications. As of the same
date, the Company owned or had exclusive licenses to four European patents,
five pending European applications and five international Patent Cooperation
Treaty applications. In addition, the Company owns or has exclusive rights to
seven issued patents and 19 pending applications in countries outside of the
United States and Europe. Technology that is covered by existing patents or is
the subject matter of pending patent applications includes some or all of the
following: (i) the fundamental elements of the selective laser sintering
process; (ii) related inventions on powder delivery, beam delivery and thermal
control; (iii) certain of the sintering powders that DTM has developed; (iv)
certain combinations of powdered materials; and (v) certain post-processing
steps for part finishing. Pending patent applications cover recent
developments in composite materials, as well as specially tailored powder
formulations that produce exceptional feature detail and surface finish. It is
anticipated that DTM will make additional patent application filings as a
result of research currently in progress.

Some of the Company's patents have been acquired from third parties other
than The University of Texas. DTM acquired certain patents in the powdered
materials area through assignment from BFGoodrich in 1992. Also in 1992, DTM
acquired a patent that was originally issued to Ross Housholder in 1981. The
Company believes that the Housholder patent is a pioneer patent in the rapid
prototyping field.

Most of the key claims of the U.S. patents covering selective laser
sintering, excluding the Housholder patent, have been submitted
internationally. The first European Patent Convention patent, which was issued
by the European Patent Office ("EPO") in December 1994, gives patent
protection in Austria, Belgium, France,

34
<PAGE>

Germany, Italy, the Netherlands, Sweden, Switzerland and the United Kingdom.
However, this patent is the subject of an opposition proceeding before the EPO
that was initiated by a competitor of the Company. The competitor initially
alleged that the patent claims have been the subject of an unallowable
amendment and that the subject matter is not novel and does not involve an
inventive step. The Company received a favorable initial ruling from the EPO
in response to these allegations. However, the competitor has recently filed
papers before the EPO that again allege the patent is invalid, citing new
arguments for its positions. The Company has responded to these arguments and
intends to continue to defend the validity of this patent vigorously. The
Company is the plaintiff in a lawsuit in the United States involving claims of
infringement of certain of the Company's patents and has initiated similar
litigation in Europe. See "Business--Legal Proceedings."

The Company has three trademarks registered with the U.S. Patent and
Trademark Office and has filed applications for registration in the United
States of an additional five trademarks.

LEGAL PROCEEDINGS

DTM filed an action in the United States District Court for the Eastern
District of Wisconsin in October 1995 against three parties who are operating
an SLS System. DTM alleges that the defendants willfully infringed a DTM
patent. In June 1996, DTM amended its lawsuit to also assert that one of the
defendants breached an oral settlement agreement. The Company seeks injunctive
relief, damages and attorneys fees. The defendants have denied infringement
and the existence of an oral settlement agreement, and the defendants seek
attorneys fees. The defendants have also asserted the affirmative defenses of
patent invalidity, implied license, failure to mark patented articles, patent
unenforceability and invalidity of the oral settlement agreement. Discovery
commenced in late 1995. In a subsequent filing, one of the defendants also has
asserted claims against DTM and BFGoodrich for violation of state and federal
antitrust laws. That defendant seeks injunctive relief as well as damages and
attorneys fees. DTM and BFGoodrich have indicated that they believe that the
subsequent counter and cross claims for violation of antitrust laws are
without merit. It is not possible at this time to predict the outcome of this
proceeding, although a ruling unfavorable to the Company could have a material
adverse effect on the Company's business and financial performance.

The Company initiated patent infringement litigation in March 1996 in the
3rd Chamber--1st section of the Court of Paris, France against EOS GmbH
("EOS"), a German competitor, against EOS S.A (France) and against one of
EOS's customers. The Company also initiated patent infringement litigation in
April 1996 in the County Court No. 1 in Munich, Germany against EOS and one of
EOS's customers, and in December 1996 initiated similar litigation in the
court of Pinerolo, Italy, against EOS and one of EOS's customers. In each of
these cases, the Company has alleged that EOS is selling rapid prototyping
systems in Europe that make unauthorized use of selective laser sintering
technology covered by the European patent under which DTM has exclusive
rights. The Company seeks injunctive relief plus damages. It is anticipated
that this litigation will be pursued in conjunction with the EPO proceeding in
which EOS has opposed the validity of that European patent. It is not possible
at this time to predict the outcome of these proceedings. See "Business--
Intellectual Property."

COMPETITION

The market for rapid prototyping systems and materials is highly
competitive. Several United States-based companies other than DTM are in
various stages of developing and marketing rapid prototyping systems and
services. These companies include 3D Systems Corporation ("3D Systems"), BPM
Technology, Inc., Helisys, Inc. ("Helisys"), Sanders Prototype, Inc., Soligen
Technologies, Inc. and Stratasys, Inc. ("Stratasys"). Of these, 3D Systems,
Helisys and Stratasys compete with DTM on a worldwide basis. The Company also
faces competition in various regions outside North America from companies such
as EOS and several Japanese companies, including CMET (Mitsubishi) and D-MEC
(Sony-JSR).

A number of the companies participating in the rapid prototyping industry
have developed or may be developing desk-top systems that are sold or will be
sold primarily on the basis of price. DTM believes that

35
<PAGE>

these companies include 3D Systems, BPM Technology, Inc., Denken Engineering
Co., Ltd., Helisys, Kira Corporation, Sanders Prototype, Inc. and Stratasys,
among others. Their products are based on ink jet printing, plastic extrusion
or paper laser cutting and laminating technologies. The Company expects that
low-end products eventually will be priced at less than $50,000. Competing for
the low-end desk-top market segment is not part of the Company's business
strategy and the Company does not consider the desk-top systems to provide
competition in the high end of the market.

The Company believes that its principal competitors for the plastic model,
functional prototype and pattern-creation segments of the rapid prototyping
market are 3D Systems, EOS and CMET (Mitsubishi). They employ a
stereolithography ("SLA")-based process that utilizes ultraviolet light
sources to polymerize liquid monomers into a solid plastic object. 3D Systems
was the first company to commercially introduce rapid prototyping technology.
The Company competes with 3D Systems on a worldwide basis and anticipates that
its competition with CMET (Mitsubishi) primarily will be confined to Japan.
EOS, located in Munich, Germany, markets systems based on both SLA and SLS
technologies, principally in Western Europe. EOS has been sued in Germany by
DTM for infringement of selective laser sintering technology patents. See
"Business--Intellectual Property" and "Business--Legal Proceedings." The
Company considers a process marketed by 3D Systems to be potential worldwide
competition for its RapidTool process and an EOS process to be a competitor of
the RapidTool process in Europe.

The Company competes for business with other rapid prototyping companies
primarily on the basis of product performance, reliability, accuracy and
versatility, as well as price and product service. The Company also competes
for business with conventional machining and milling techniques, which
continue to be the most common methods by which plastic models, functional
prototypes and tool inserts are manufactured.

EMPLOYEES

At December 31, 1996, the Company had 114 employees. Approximately 36.0
percent of the Company's employees are involved in engineering, research and
development and engineering product support. The remaining employees are
engaged in sales, marketing, finance and administration. None of the Company's
employees is represented by a union, and the Company has no prior experience
with a work stoppage. The future success of the Company depends on its ability
to attract and retain a qualified work force including employees with critical
engineering and selling skills.

FACILITIES

The Company currently occupies a 30,000-square foot facility at 1611 Headway
Circle, Building 2, Austin, Texas. The Company's lease on this facility
expires November 30, 1997, at which time the Company has an option to renew
the lease at then-current market rates. This facility houses the bulk of the
Company's operations except for off-site sales offices located in various
areas of the United States and offices of the Company's German subsidiary,
which are leased. The Company also leases a warehouse in Austin, Texas,
primarily for the purpose of maintaining an inventory of selective laser
sintering powders. DTM expects that such facilities will be sufficient to
support the Company's operations through the remainder of 1997. The Company
expects that it will acquire additional space for its operations in late 1997.
See "Business--Manufacturing."

36
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND OTHER MANAGEMENT PERSONNEL

The executive officers and directors of the Company and their ages as of
March 31, 1997 are set forth below. All directors were re-elected on March 18,
1997. The term of each director will continue until the 1998 annual meeting of
the Company's shareholders.

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS AGE POSITION
---------------------- --- --------
<S> <C> <C>
D. Lee Tobler........... 63 Chairman of the Board and Director
John S. Murchison, III.. 56 Chief Executive Officer, President and Director
Michael A. Ervin,
Ph.D. ................. 54 Vice President, Engineering
Uday Bellary............ 42 Vice President, Chief Financial Officer, Treasurer and Secretary
Thomas L. Lee........... 43 Vice President, Marketing
Marshall O. Larsen...... 48 Director
Alexander MacLachlan.... 64 Director
Thomas G. Ricks......... 44 Director
Steven G. Rolls......... 42 Director
<CAPTION>
OTHER MANAGEMENT
PERSONNEL
----------------
<S> <C> <C>
Klaus J. Esser.......... 52 Vice President, European Sales, DTM GmbH
Kevin McAlea, Ph.D. .... 38 Director of Process and Materials Research
Dennis K Medler......... 50 Vice President, Pacific Rim and South American Sales
</TABLE>

D. Lee Tobler is Chairman of the Board of the Company. He has served in that
capacity since March 1996 and as a director since September 1993. Mr. Tobler
is currently Executive Vice President and Chief Financial Officer of
BFGoodrich, the Company's majority shareholder, having joined BFGoodrich in
those capacities in early 1985 and having served as a director of BFGoodrich
since April 1988. Mr. Tobler is a member of the Company's Audit, Compensation
and Financial Policy Committees.

John S. Murchison, III joined the Company as Chief Executive Officer and
President in September 1990. He was a Director of the Company from September
1990 through September 1993 and currently serves as a Director, having been
again elected as a member of the Board of Directors in March 1996. Prior to
joining the Company, Mr. Murchison was a General Manager for The Pratt Group,
a privately held Australian-based company with worldwide holdings in
packaging, insurance, banking and trading, from 1987 to 1990.

Michael A. Ervin, Ph.D., the Company's Vice President, Engineering, joined
DTM in April 1993. He had 22 years of experience in manufacturing, research
and development with DuPont prior to joining DTM. Most recently, he was Vice
President of Research and Development for DuPont's Imaging System and Medical
Products Sector from 1990 to 1992.

Uday Bellary joined the Company in February 1997 as Vice President, Chief
Financial Officer, Secretary and Treasurer. Prior to joining DTM, he served as
Director of Finance for Cirrus Logic, Inc., a manufacturer of semiconductor
chips, having served that company in various finance and accounting functions,
since May 1990. Prior to that, he was with Intel Corporation, Conner
Peripherals, Inc., Pritchard Services PLC and Price Waterhouse LLP. Mr.
Bellary is also a certified public accountant.

Thomas L. Lee joined the Company in October 1995 as Vice President,
Marketing. From February 1993 to September 1995, Mr. Lee was a Marketing
Consultant for Foundation Marketing. He was a Division Marketing Manager for
Tektronix, Inc., a manufacturer of test and measurement instrumentation
systems from October 1991 to February 1993. From July 1990 to October 1991, he
was a marketing manager for Sequent Computer Systems. More than 12 years of
his career were spent in marketing and management roles at Intel Corporation.

37
<PAGE>

Marshall O. Larsen has served as a Director of the Company since January
1996. Mr. Larsen is the President and Chief Operating Officer of BFGoodrich
Aerospace, one of two major business segments of BFGoodrich. He joined
BFGoodrich in 1977 and has served in various managerial positions, including
assistant to the President, and most recently, Group Vice President,
BFGoodrich Aerospace. He is a member of the Company's Compensation and
Financial Policy Committees.

Alexander MacLachlan has served as a Director of the Company since March
1996. From December 1994 to March 1996, Mr. MacLachlan served as Deputy Under
Secretary for the U.S. Department of Energy with oversight responsibilities
for technology transfer and laboratory operations. Prior to that time, he held
the position of Senior Vice President, Research and Development, and Chief
Technical Officer for DuPont beginning in 1986. He is a member of the
Company's Audit Committee.

Thomas G. Ricks has served as a Director of the Company since May 1988. From
August 1991 to March 1996, he served as Chairman of the Board of the Company.
Since March 1996, he has served as President and Chief Executive Officer of
The University of Texas Investment Management Company, a non-profit
corporation engaged exclusively in providing investment management services to
the Board of Regents of The University of Texas, a minority shareholder in the
Company. From August 1988 through March 1996, he held several financial and
asset management positions at The University of Texas. Mr. Ricks serves as a
member of the Audit, Compensation and Financial Policy Committees of the Board
of Directors. Mr. Ricks also is a director of the Newfield Exploration Company
and BDM International, Inc.

Steven G. Rolls has served as a Director of the Company since August 1994.
Mr. Rolls joined BFGoodrich as a Financial Analyst in 1981 and progressed
through a number of positions, including, most recently Vice President,
Finance of BFGoodrich Aerospace from 1989 until being elected Vice President
and Controller of BFGoodrich in 1993. He is a member of the Company's Audit
and Financial Policy Committees.

Klaus J. Esser joined DTM GmbH in 1993 as Sales Engineer, Germany, and was
subsequently appointed Vice President, European Sales. Prior to joining DTM
GmbH, Mr. Esser was Sales Manager, Northern Europe, GUS and Middle East, with
3D Systems GmbH, having joined that company in 1989. Prior to working in the
rapid prototyping industry for DTM GmbH and 3D Systems GmbH, he served in
sales, technical service and engineering capacities for companies in the
automotive and materials testing fields.

Kevin McAlea, Ph.D., has been the Director of Process and Materials Research
since joining DTM in March of 1993. Dr. McAlea is responsible for managing the
development of new selective laser sintering materials and applications.
Before joining DTM, he spent more than eight years in materials research and
development for General Electric Company ("GE"). His last position was
managing the Polymer Physics Program at GE's Corporate Research and
Development Center.

Dennis K Medler joined the Company as Executive Vice President, Sales and
Marketing in September 1993, and was subsequently appointed as Vice President,
Pacific Rim and South American Sales in July 1995. He initially worked for DTM
as Vice President, Sales and Marketing from 1988 to 1990 as the Company
entered the rapid prototyping industry. From April 1991 to December 1992, Mr.
Medler served as Vice President, Sales and Marketing of 3D Systems and from
January 1993 to September 1993, he served in a similar position with Point
Control Company, a software company.

38
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and its two other most highly compensated
executive officers (collectively, the "Named Officers") having annual cash
compensation of $100,000 or more for services rendered in all capacities to
the Company during the fiscal year ended December 31, 1996:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#)(1) COMPENSATION
- --------------------------- ------------ ------------------------------- ------------
<S> <C> <C> <C> <C>
John S. Murchison, III,
President.............. $ 150,000 -- 100,528 $1,301(2)
Michael A. Ervin, Vice
President,
Engineering............ 140,000 -- 50,264 --
Thomas L. Lee, Vice
President, Marketing... 120,000 -- 21,990 --
</TABLE>
- --------
(1) Consists of immediately exercisable options to be issued upon conversion
of SARs granted under the Equity Appreciation Plan in connection with the
closing of the Offering described herein. The number of SARs granted was
as follows: Murchison, 160,000 units; Ervin, 80,000 units; and Lee, 35,000
units. See "Management--Equity Appreciation Plan."
(2) Consists of portions of club membership dues attributable to personal use.

The following table sets forth information regarding the exercise and value
of EAP Options held at December 31, 1996 by the Named Officers:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
------------------- ----------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Murchison, III.. -- -- 0/100,528 $0/580,224
Michael A. Ervin........ -- -- 0/50,264 0/290,112
Thomas L. Lee........... -- -- 0/21,990 0/126,924
</TABLE>
- --------
(1) Represents the value of immediately exercisable EAP Options to be issued
in connection with the closing of the Offering, at the Offering price of
$8.00 per share less the weighted average exercise price of the EAP
Options.

DIRECTOR COMPENSATION

In March 1996, the Company instituted a program under which its non-
employee, non-affiliated directors are paid an annual retainer of $15,000, a
fee of $1,000 for each board meeting attended and a fee of $800 for each
committee meeting attended. The Company permits directors to defer all or part
of their compensation, if they so choose. Under these arrangements, the only
directors who are eligible to receive compensation are Messrs. Ricks and
MacLachlan. Mr. Ricks' compensation is payable to The University of Texas
Investment Management Company.

EQUITY APPRECIATION PLAN

In January 1995, the Company established the DTM Corporation Equity
Appreciation Plan. An aggregate of 10,000,000 phantom stock units were created
thereunder, and 1,000,000 of such units were allocated for the

39
<PAGE>

issuance of a like number of phantom stock appreciation rights ("SARs") to
employees of the Company. The value of each phantom stock unit as of any date
is equal to the fraction obtained by dividing the total value of the Company
(as determined under the Equity Appreciation Plan) as of such date by
10,000,000. The total value of DTM as of any date is deemed for purposes of
the Equity Appreciation Plan to be equal to a valuation of DTM, using a
methodology approved by the Board of Directors, as of the end of the
immediately preceding fiscal year made by an independent third party, subject
to approval of the Board of Directors.

Of the 1,000,000 authorized SARs, 993,500 have been granted to eligible
employees and are outstanding as of the date of this Prospectus. All employees
of the Company participated in the Equity Appreciation Plan as of February 15,
1997. Each granted SAR represents the right to receive the dollar amount of
any appreciation in the value of one phantom stock unit between the date on
which the SAR is granted and the date on which it is exercised. While the SARs
are not exercisable until the occurrence of a "Change of Control" (as defined
in the Equity Appreciation Plan), upon the date of execution of the
underwriting agreement relating to the Offering (the "Conversion Date"), all
SARs then outstanding will convert into immediately exercisable options to
acquire Common Stock ("EAP Options"). The 993,500 SARs outstanding as of the
date of this Prospectus will convert into EAP Options to acquire an aggregate
of an estimated 624,224 shares of Common Stock. Options to purchase 507,045
shares of Common Stock (those options arising from the conversion of SARs
awarded in 1995) will be exercisable for $2.23 per share. The remaining
options to purchase 18,221 and 98,958 shares of Common Stock (those options
arising from the conversion of SARs awarded in 1996 and 1997) will be
exercisable for $14.67 and $13.53, respectively, per share. Each EAP Option
will continue to be exercisable through the tenth anniversary of the grant of
the SAR from which it was converted. Each holder of an EAP Option may exercise
it in full or in part. EAP Options are only exercisable for cash.

The conversion of SARs into immediately exercisable EAP Options, certain of
which will have exercise prices substantially less than the market price per
share of Common Stock on the Conversion Date (such market price being deemed
for such purposes to be equal to the Offering price) will result in the
recognition by the Company of a non-recurring, non-cash compensation expense
measured by the difference between the aggregate market value of the shares of
Common Stock subject to such options and the aggregate exercise price of such
options (approximately $2.9 million). Such compensation expense is expected to
materially adversely affect operating results in the quarter and year in which
it becomes probable that the closing of the Offering will occur.

In March 1996, the Board of Directors capped at 1,000,000 the aggregate
number of SARs that can be granted under the Equity Appreciation Plan.

STOCK OPTION PLAN

In January 1996, the Company adopted the DTM Corporation Stock Option Plan
(the "Option Plan"), which authorizes the Compensation Committee of the Board
of Directors (the "Compensation Committee") to grant options to key management
employees to acquire up to 357,755 shares of Common Stock, at option prices of
not less than 100 percent of the fair market value of the Common Stock on the
date of grant. No options have been granted under the Option Plan.

Under the Option Plan, options are granted upon terms and conditions
established by the Compensation Committee, which terms and conditions include
the option price, the term of the option (which in no event shall exceed 10
years), the status of the option as a non-incentive stock option, or an
incentive or other statutory stock option, the date on which the option will
first become exercisable, and the type of consideration that may be used to
exercise an option, which may include existing shares of the Common Stock.
Options granted under the Option Plan will vest in three separate installments
with 35 percent of the options granted becoming exercisable on the first
anniversary date of the option grant, 35 percent becoming exercisable on the
second anniversary date and 30 percent becoming exercisable on the third
anniversary date. The Compensation Committee also has the right to determine
the length of time, if any, following the termination of an optionee's
employment by reason of death, disability or retirement during which an
outstanding option may remain exercisable, except that in no

40
<PAGE>

event may an option remain exercisable for more than 10 years after the date of
grant. The Option Plan also authorizes the Compensation Committee to grant
stock appreciation rights, pursuant to which stock options may be surrendered
to the Company in exchange for consideration equal to the difference between
the option price and the fair market value of the Common Stock on the date of
surrender.

All grants of options will be subject to agreements between the Company and
the optionee, which will contain the terms and conditions of the option and
will bind the optionee to any temporary restrictions on sales of Common Stock
required by the underwriters in any public offering of the Common Stock.

MANAGEMENT INCENTIVE PLAN

In January 1996, the Company adopted the DTM Corporation Management Incentive
Plan (the "MIP Plan"), which provides for the grant of incentive compensation
to key management employees who have the potential to positively influence the
performance of the Company, as a reward for levels of performance above the
ordinary performance standards compensated by base salary.

Under the MIP Plan, each participant is assigned a "cash bonus target" of 20
to 50 percent of base salary, depending upon the management level of the
particular individual. Each year, the Compensation Committee creates corporate
performance measures, establishes targets for each such measure and, if it so
chooses, assigns different weights to each measure. The MIP Plan is structured
so that if each measure is met precisely, the MIP Plan establishes a bonus
equal to each individual's cash bonus target. If the performance measures are
exceeded, or if they are not met, a greater or lesser bonus is paid, depending
upon the extent to which actual performance varies from the performance target
and the weights given to the particular performance measures. Under the MIP
Plan, minimum thresholds are established that must be reached if any bonus is
to be paid. If the minimum thresholds are met or exceeded, the bonus payable
will be between 50 percent and 150 percent of the individual's cash bonus
target. The corporate performance measures that may be used by the Company in
any given year may include net income, pretax income, consolidated operating
income, operating income return on net capital employed, cash flow, working
capital, return on equity, return on assets and earnings per share. The
Compensation Committee and the Company's management have discretion to adjust
individual bonus payments up or down on a case-by-case basis.

Prior to 1997, no amounts were payable under the MIP Plan. Targets for 1997
are based on net profit and free cash flow milestones. No payments are due to
be paid until early 1998, assuming threshold performance targets are met.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors was formed in April
1990. During 1996, the members of the Compensation Committee were Messrs.
Larsen, Ricks and Tobler. The Compensation Committee oversees administration of
the Company's employee benefit plans and compensation policies.

CERTAIN TRANSACTIONS

SHAREHOLDERS' AGREEMENT

The Company and all of its existing shareholders are parties to a
shareholders' agreement (the "Shareholders' Agreement") that was originally
entered into in March 1988, and has been amended periodically since that time,
having been significantly amended and restated in late 1989 in connection with
BFGoodrich's initial involvement in the Company, and amended and restated again
in April 1996. Most of the provisions of the Shareholders' Agreement will
terminate as of the completion of the Offering. The following summary of the
Shareholders' Agreement is qualified in its entirety by reference to the full
Shareholders' Agreement, which is filed as Exhibit 10.9 to the Registration
Statement of which this Prospectus is a part.

Under the Shareholders' Agreement, the existing DTM shareholders have certain
rights of participation in public offerings by the Company of Common Stock,
sometimes referred to as "piggyback" registration rights.

41
<PAGE>

These rights continue for the benefit of the parties to that agreement who are
not eligible to sell shares of Common Stock absent registration under the
Securities Act of 1933, as amended (the "Securities Act"). However, if the
underwriter of such an offering determines that not all shares tendered for a
public offering can be sold, then the shares tendered by each shareholder will
be reduced proportionately. Participating shareholders must enter into
underwriting agreements, make representations and share in registration and
filing fees. DTM is obligated to pay all other costs associated with a public
offering and must indemnify shareholders for certain liabilities that could
arise in the context of a registered public offering of Common Stock.
Shareholders have a reciprocal obligation of indemnification for information
supplied by them. Shareholders' registration rights terminate when two
conditions are met: (a) there is a public market for the Common Stock; and (b)
their Common Stock can be sold pursuant to Rule 144 under the Securities Act.

One shareholder expressed interest in exercising its registration rights in
connection with the Common Stock offered at the time of the Offering. Its
shares have been included to the extent described herein. See "Principal and
Selling Shareholders." Following the Offering described herein, it is expected
that only BFGoodrich will have ongoing registration rights.

Under the Shareholders' Agreement, shares of Common Stock are subject to
restrictions on transfer until such time as there is a public market for the
Common Stock. In addition, the Shareholders' Agreement contains a methodology
whereby the Common Stock can be valued in advance of the existence of a public
market for purposes of exercises of rights of first refusal and for certain
other purposes thereunder. The Shareholders' Agreement terminates
automatically, except for the obligations related to compliance with
securities laws on transfer and certain registration rights, when there is a
public market for the Common Stock, as defined in the Shareholders' Agreement.
The remaining provisions of the Shareholders' Agreement may be terminated only
by shareholders holding 85 percent of the outstanding shares subject to that
agreement.

In April 1996, the Shareholders' Agreement was substantially amended and
restated. Provisions that had been amended or superseded, or that had expired,
either by agreement or the passage of time were deleted and various amendments
were incorporated. A provision allowing certain minority shareholders to
initiate an initial public offering of the Common Stock was deleted, with
BFGoodrich agreeing to deletion of a corresponding provision allowing it to
purchase minority shares in lieu of a shareholder-initiated initial public
offering. Special provisions granting BFGoodrich certain representation rights
on the Board of Directors, and committees thereof, were deleted. The survival
of registration rights after an initial public offering of the Common Stock
was limited to those parties who were parties to the Shareholders' Agreement
at the time of the amendment and restatement in April 1996. Finally, certain
rights to include minority shares in a sale of outstanding Common Stock were
revised to terminate at the time of an initial public offering.

INDEMNIFICATION AND LIABILITY OF OFFICERS AND DIRECTORS

The Company's directors and officers are granted certain indemnities by
virtue of the Articles of Incorporation and Bylaws of the Company. Under the
Articles of Incorporation, directors cannot be held liable to shareholders for
monetary damages except in the event of breach of the duty of loyalty, bad
faith, intentional misconduct or knowing violations of law and certain other
specified events. The Bylaws of DTM also contain provisions consistent with
Texas law providing for indemnification of directors, officers, employees and
agents acting on behalf of the Company. There is no pending litigation or
proceeding involving a director or officer of the Company as to which
indemnification is being sought. The Company is not aware of any pending or
threatened litigation that could result in claims for indemnification by any
director or officer.

Individuals who serve as directors and executive officers of the Company
have been included in the directors and officers insurance coverage of
BFGoodrich, as part of the insurance program that BFGoodrich maintains for its
business units and subsidiaries. However, the Company plans to transfer to
independent coverage effective upon the consummation of the Offering. DTM
directors who are also employees of BFGoodrich are entitled to indemnification
pursuant to BFGoodrich's bylaws. Furthermore, BFGoodrich's bylaws provide for
discretionary indemnification for certain other persons acting as officers or
directors of its subsidiaries.

42
<PAGE>

BFGOODRICH DEBT CONVERSION

BFGoodrich and the Company have agreed that, simultaneously with the closing
of the Offering, the Company will issue 187,500 shares of Common Stock to
BFGoodrich in satisfaction of $1.5 million of indebtedness owed to BFGoodrich
by the Company, effectively converting such indebtedness into Common Stock at
a price of $8.00 per share. The Company and BFGoodrich agreed to effect the
BFGoodrich Debt Conversion in order to enhance the Company's net tangible
assets (so as to exceed the Nasdaq National Market's quantitative designation
criteria in this regard) and its prospective covenant compliance under the
line of credit it expects to obtain from Texas Commerce Bank, as described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."

OUTSTANDING LINES OF CREDIT; FINANCING TRANSACTIONS

The Company has outstanding lines of credit with NationsBank of Texas, N.A.
National City Bank of Cleveland, Ohio, and Texas Commerce Bank National
Association for $4.7 million, $3.5 million and $4.0 million, respectively. As
of March 31, 1997, the Company had outstanding $11.8 million under these
credit facilities. BFGoodrich has issued to NationsBank, National City Bank
and Texas Commerce Bank comfort letters on behalf of DTM in connection with
these credit lines. These lines of credit expire as of July 31, 1998. In
addition, BFGoodrich has provided to the Company an additional line of credit
in the amount of $4.0 million. As of March 31, 1997, the Company had
outstanding the full $4.0 million available under the BFGoodrich line of
credit. This line of credit bears interest at a rate equal to the prime
commercial lending rate of Citibank, N.A. The BFGoodrich line of credit
matures July 31, 1998 or, if earlier, at the time of completion of the
Offering of Common Stock described herein. The Company has committed to prepay
and terminate all of the borrowing facilities referred to above shortly
following completion of the Offering and the BFGoodrich Debt Conversion. The
Company plans to replace them with a stand-alone commercial borrowing facility
that would be available to finance its then current operations, including
temporary cash shortages, or to meet future, currently unforeseen cash needs.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

CERTAIN ARRANGEMENTS WITH BFGOODRICH

The Company is a party to a tax allocation agreement with BFGoodrich. This
agreement provides for DTM to receive credit from BFGoodrich equal to the tax
benefit related to the losses DTM creates, to the extent that those losses are
utilized in the consolidated federal income tax return of BFGoodrich. As a
result of the sale of shares of Common Stock in the Offering described herein,
the ownership of outstanding Common Stock by BFGoodrich will decrease to less
than 80 percent. In that event, BFGoodrich will not be able to include DTM's
income or loss in BFGoodrich's consolidated federal income tax return
effective as of the time the 80 percent threshold is no longer met and,
consequently, DTM would lose the potential future benefit of the tax
allocation agreement between DTM and BFGoodrich. While DTM would be able to
use loss carryovers accrued during the time before the Company's taxes were
consolidated with those of BFGoodrich, these carryovers are subject to
significant annual limitations due to substantial changes in DTM's ownership.

In addition, BFGoodrich currently provides tax administration services and
participation in a group program for various types of insurance on a regular
basis, along with certain treasury and legal assistance on a periodic basis.
These arrangements are provided either at no cost to the Company or on terms
that could be considered more favorable to the Company than those that would
be available to DTM in arms-length transactions with unrelated vendors,
principally because DTM is able to take advantage of cost efficiencies
experienced by BFGoodrich due to the size of its operations. The Company
expects that DTM will continue to participate in many of these arrangements
after the Offering, until such time as BFGoodrich no longer owns a significant
interest in the Company. However, DTM may be ineligible to take part in some
insurance programs and certain other arrangements once BFGoodrich no longer
owns a majority of the outstanding Common Stock. Either party has the option
to terminate any of such arrangements at any time. See "Risk Factors--Loss of
Tax Allocation Agreement and Other Benefits from BFGoodrich."

As of December 31, 1996, the Company had payables outstanding to BFGoodrich
in the approximate amount of $614,000, relating to various transactions
involving income taxes, accrued interest, payroll taxes and certain insurance.

43
<PAGE>

In December 1992, BFGoodrich transferred to DTM the intellectual property
rights used in its business of developing and selling powdered materials for
SLS Systems, in exchange for Common Stock. In connection with that transfer,
BFGoodrich entered into a non-competition agreement with DTM, in which
BFGoodrich agreed not to compete with DTM in the development or manufacture of
materials for use in DTM's SLS Systems, or of selective laser sintering
systems themselves. This agreement will expire on the fifth anniversary of the
date that BFGoodrich no longer owns, directly or indirectly, more than 50
percent of DTM's voting stock.

CERTAIN MATTERS AFFECTING CORPORATE GOVERNANCE

Mr. Ricks was elected to the Board of Directors pursuant to a license
agreement between the Company and The University of Texas, which agreement
grants The University of Texas the right to maintain one Director on the
Company's Board. The University of Texas, however, has agreed to the deletion
of that provision contemporaneously with the closing of the Offering. Until
the March 1996 annual meeting of the Company's shareholders, BFGoodrich had
the right, under the Shareholders' Agreement, to nominate directors
proportionate to its percentage ownership of outstanding Common Stock, subject
to the rights of The University of Texas to elect one director. Preceding the
1997 annual meeting of shareholders, BFGoodrich proposed the nomination of
Messrs. Larsen, MacLachlan, Murchison, Ricks, Rolls and Tobler. Messrs.
MacLachlan, Murchison and Ricks are not employees of BFGoodrich and have no
understandings with BFGoodrich in connection with their nomination or service
as directors of the Company. Messrs. Larsen, Rolls and Tobler are BFGoodrich
employees and serve on the Board of Directors at the request of BFGoodrich but
subject to the duties and responsibilities of directors under Texas corporate
law. Due to the large percentage of shares of Common Stock held by BFGoodrich,
BFGoodrich may be able to control the Board of Directors and could determine
the outcome of matters submitted to the Company's shareholders for their vote
or consent.

ROYALTIES

In return for the exclusive, worldwide license from The University of Texas
for use of the selective laser sintering process patent, the Company is
obligated to pay The University of Texas a royalty equal to four percent of
net sales of SLS Systems and certain powdered materials. From the Company's
first commercial sale of an SLS System through December 31, 1994, DTM had paid
The University of Texas $134,000 of royalties attributable to sales of
licensed products. This amount was less than required under the License. Upon
the application of certain credits due DTM by The University of Texas, the
parties agreed that the net balance due The University of Texas from DTM as of
December 31, 1994 was $403,000, which was paid as agreed in eight quarterly
payments, plus interest, commencing in January 1995. Royalties on sales
commencing January 1, 1995 are paid currently in accordance with the terms of
the License. Through December 31, 1996, royalties to The University of Texas
paid or accrued by the Company totaled approximately $1.6 million. See
"Business--Intellectual Property."

44
<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1997 by (i) DTM Holdings, Ltd.
(the "Selling Shareholder") and the number of Shares to be sold by it, (ii)
each other person known to the Company to be the beneficial owner of more than
five percent of the outstanding Common Stock, (iii) each director of the
Company, (iv) each of the Named Officers and (v) all directors and executive
officers of the Company as a group. Except as otherwise indicated below, the
Company believes that each person listed below has sole voting and investment
power with respect to the shares owned, subject to applicable community
property laws. The address of each individual is in care of the Company, 1611
Headway Circle, Building 2, Austin, Texas 78754.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING AND THE OFFERING AND THE
BFGOODRICH BFGOODRICH
DEBT CONVERSION(1) DEBT CONVERSION(1)
NAME AND ADDRESS OF BENEFICIAL ------------------- SHARES ----------------------
OWNER OR IDENTITY OF GROUP NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------ ----------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
The BFGoodrich Company(2).. 2,969,690 91.55% -- 3,157,190 50.25%
4020 Kinross Lakes Parkway
Richfield, Ohio 44286-9368
DTM Holdings, Ltd.(3)...... 192,547 5.94% 186,809 5,738 *
c/o Bradley A. Fowler
Financial Services Austin,
Inc.
707 Southwest Tower
211 E. 7th Street
Austin, TX 78701
D. Lee Tobler(4)........... 2,969,690 91.55% -- 3,157,190 50.25%
John S. Murchison, III(5).. 100,528 3.01% -- 100,528 1.57%
Michael A. Ervin(5)........ 50,264 1.53% -- 50,264 *
Uday Bellary(5)............ 50,264 1.53% -- 50,264 *
Thomas L. Lee(5)........... 21,990 * -- 21,990 *
Marshall O. Larsen(4)...... 2,969,690 91.55% -- 3,157,190 50.25%
Alexander MacLachlan....... -- -- -- -- --
Thomas G. Ricks(6)......... 20,442 * -- 20,442 *
Steven G. Rolls(4)......... 2,969,690 91.55% -- 3,157,190 50.25%
All directors and executive
officers as a group
(9 persons)............... 3,213,179 92.69% -- 3,400,679 52.27%
</TABLE>
- --------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. In accordance with such
rules, EAP Options are assumed to be exercised to the extent held by the
person whose beneficial ownership is shown.
(2) BFGoodrich will beneficially own 2,853,290 shares, 45.41% of those
outstanding (or 41.33% assuming the exercise of all EAP Options), after
the Offering (and the BFGoodrich Debt Conversion) if the Underwriters'
over-allotment option is exercised in full.
(3) A Texas limited partnership of which Financial Services Austin, Inc. is
the general partner and may be deemed the beneficial owner of such shares.
(4) Includes only shares owned by BFGoodrich, of which the director disclaims
beneficial ownership.
(5) Represents for each individual shares of Common Stock issuable upon the
exercise of EAP Options.
(6) Includes only shares owned by The University of Texas System, of which Mr.
Ricks disclaims beneficial ownership.

45
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.0002 par value per share, of which 3,243,391 shares were
issued and outstanding as of March 31, 1997, and 3,000,000 shares of Preferred
Stock, $.001 par value per share, none of which have been issued. See
"Capitalization."

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the Company's shareholders. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor, after payment of
any dividends on any outstanding Preferred Stock. See "Dividend Policy." Upon
the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets of the Company that
are legally available for distribution, after payment of all debts and other
liabilities and payment of any liquidation preference, if any, associated with
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares of Common Stock being sold by the
Company in the Offering will be, when issued and delivered, validly issued,
fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors is authorized, subject to any limitations prescribed
by the laws of the State of Texas, but without further action by the Company's
shareholders, to provide for the issuance of Preferred Stock in one or more
series, to establish from time to time the number of shares to be included in
each such series, to fix the designations, powers, preferences and rights of
the shares of each such series and any qualifications, limitations or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding) without any further vote or action by the shareholders. The Board
of Directors may authorize and issue Preferred Stock with voting or conversion
rights that could adversely affect the voting power or other rights of the
holders of Common Stock. In addition, the issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no current plan to issue any shares of Preferred
Stock.

CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION

The Company's Articles of Incorporation eliminate, to the fullest extent
permitted by law, the liability of its directors to the Company and its
shareholders for monetary damages for acts or omissions in the director's
capacity as such, except for liability (i) for breach of a duty of loyalty to
the Company or its shareholders, (ii) for acts or omissions not in good faith,
or which involve intentional misconduct or a knowing violation of law, (iii)
for receipt of improper benefits, (iv) where liability is expressly provided
for by statute or (v) for unlawful stock repurchases or dividend payments.
This provision is intended to afford the Company's directors the benefit of
the Texas Business Corporation Act, which provides that directors of Texas
corporations may be relieved of these types of liabilities. The Articles of
Incorporation further provide that directors receive the benefit of any future
amendment to Texas statutes that further limits the liability of a director.

TRANSFER AGENT AND REGISTRAR

The Company has appointed Chase Mellon Shareholder Services L.L.C. as the
transfer agent and registrar for the Common Stock.

46
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 6,283,082 shares of
Common Stock outstanding. In addition to the shares of Common Stock that are
currently outstanding, options to acquire up to 624,224 shares of Common Stock
will be outstanding and immediately exercisable as of the completion of the
Offering under the Equity Appreciation Plan. See "Management--Equity
Appreciation Plan." In addition, a total of 357,755 shares of Common Stock
have been reserved for issuance under the Option Plan. The Company has not
granted any options under the Option Plan. See "Management--Stock Option
Plan." The Company plans to file Form S-8 registration statements for the
issuance of the shares issuable upon exercise of options granted under such
plans, with the result that shares so issued will be freely tradeable by the
holders thereof, subject, in certain cases, to the lock-up agreements
described below and, in the case of affiliates, to certain provisions of Rule
144. All of the 3,039,000 shares sold in the Offering (and any shares sold
upon exercise of the Underwriters' over-allotment option) will be freely
transferable by persons other than "affiliates" of the Company (as that term
is defined under the Securities Act) without restriction or further
registration under the Securities Act. The 187,500 shares of Common Stock
issued to BFGoodrich pursuant to the BFGoodrich Debt Conversion will, upon
expiration of the lock-up agreements, be freely tradeable, subject to certain
provisions of Rule 144.

However, pursuant to the terms of the Underwriting Agreement, the
Underwriters have required current holders of the Common Stock to execute
agreements ("lock-up agreements") providing that they will not sell Common
Stock in the public markets for a period of 180 days from the date of this
Prospectus without the consent of the Representatives of the Underwriters. In
addition, all employees who hold options to acquire Common Stock under the
Equity Appreciation Plan have entered into similar agreements indicating that
they will not, without the consent of the Representatives of the Underwriters,
sell shares of Common Stock for a period of 180 days from the date of this
Prospectus.

In general, under Rule 144 under the Securities Act ("Rule 144"), as
currently in effect, a person who has beneficially owned shares for at least
one year is entitled to sell, within any three-month period, a number of
"restricted" shares that does not exceed the greater of one percent of the
then outstanding shares of Common Stock (approximately 62,830 shares
immediately following the Offering) or the average weekly trading volume
during the four calendar weeks preceding such sale. Sales under Rule 144 also
are subject to certain manner of sale limitations, notice requirements and the
availability of current public information about the Company. Rule 144(k)
provides that a person who is not deemed an "affiliate" and who has
beneficially owned shares for at least two years is entitled to sell such
shares at any time under Rule 144 without regard to the limitations described
above. All of the shares outstanding prior to the Offering have met the two-
year holding period requirement under Rule 144 and will be eligible for sale
90 days after the Offering, subject to volume limitations applicable to sales
by affiliates. However, all existing shareholders have executed the lock-up
agreements described above.

The Company is unable to estimate the number of shares that may be sold in
the future by its existing shareholders or employees exercising stock options
or the effect, if any, that sales of shares by such shareholders or employees
will have on the market price of Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock by existing shareholders or
employees exercising options could adversely affect prevailing market prices.

47
<PAGE>

UNDERWRITING

The Underwriters named below have severally agreed with the Company and the
Selling Shareholder, subject to the terms and conditions of the Underwriting
Agreement, to purchase the respective numbers of shares of Common Stock set
forth opposite their names below.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
A.G. Edwards & Sons, Inc........................................ 979,500
Ladenburg Thalmann & Co. Inc.................................... 979,500
Alex. Brown & Sons Incorporated................................. 60,000
Dillon, Read & Co. Inc.......................................... 60,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 60,000
Goldman, Sachs & Co............................................. 60,000
Lehman Brothers................................................. 60,000
Natwest Securities Corp......................................... 60,000
Oppenheimer & Co. Inc........................................... 60,000
PaineWebber Incorporated........................................ 60,000
Robertson, Stephens & Company, L.L.C............................ 60,000
Adams, Harkness & Hill, Inc..................................... 30,000
Cruttenden Roth Incorporated.................................... 30,000
Fahnestock & Co. Inc............................................ 30,000
Gerard Klauer Mattison & Co., LLC............................... 30,000
Hanifen, Imhoff Inc............................................. 30,000
Edward Jones & Co., LP.......................................... 30,000
Legg Mason Wood Walker Incorporated............................. 30,000
McDonald & Company Securities, Inc.............................. 30,000
Morgan Keegan & Company Inc..................................... 30,000
Principal Financial Securities, Inc............................. 30,000
Rauscher Pierce Refsnes, Inc.................................... 30,000
Raymond James & Associates, Inc................................. 30,000
Southcoast Capital Corp......................................... 30,000
Sutro & Co. Incorporated........................................ 30,000
Unterberg Harris................................................ 30,000
Vector Securities International, Inc............................ 30,000
Brean Murray, Foster Securities Inc............................. 15,000
First Analysis Securities Corporation........................... 15,000
Sanders Morris Mundy Inc........................................ 15,000
Starr Securities, Inc........................................... 15,000
---------
Total....................................................... 3,039,000
=========
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock, if any are purchased.

The Company has been advised by A.G. Edwards & Sons, Inc. and Ladenburg
Thalmann & Co. Inc., the Representatives of the several Underwriters (the
"Representatives"), that the Underwriters propose to offer the Common Stock to
the public at the offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $.30 per share and that the Underwriters and such dealers may
reallow a discount of not in excess of $.10 per share to other dealers. The
public offering price and the concession and discount to dealers may be
changed by the Representatives after the Offering.

In the Underwriting Agreement, BFGoodrich has granted the Underwriters an
option, expiring at the close of business on the 30th day subsequent to the
date of the Underwriting Agreement, to purchase up to 303,900

48
<PAGE>

additional shares of Common Stock at the Offering price, less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise such option solely to cover over-allotments, if any, in the sale of
the shares. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of the option shares as the number
of shares to be purchased by it shown in the table above bears to 3,039,000,
and BFGoodrich will be obligated, pursuant to the option, to sell such shares
to the Underwriters.

The Company, BFGoodrich and the Selling Shareholder have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act. The liability of BFGoodrich under this indemnity is limited to
the amount of the proceeds received by the Company, plus any proceeds received
by BFGoodrich from the sale of shares under the over-allotment option. The
liability of the other Selling Shareholder under this indemnity is limited to
the amount of its proceeds.

The Company and all of its existing shareholders and SAR holders have agreed
that they will not, directly or indirectly, offer, sell or otherwise dispose
of any shares of Common Stock, other than the shares offered pursuant to this
Prospectus, for a period of 180 days from the date of this Prospectus without
the prior written consent of each of the Representatives. See "Shares Eligible
for Future Sale."

The Representatives have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company and the Selling
Shareholder, and in such case may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 303,900 shares of Common Stock, by exercising the
Underwriters' over-allotment option referred to above. In addition, A.G.
Edwards & Sons, Inc., on behalf of the Underwriters, may impose "penalty bids"
under contractual arrangements with the Underwriters whereby it may reclaim
from an Underwriter (or dealer participating in the offering) for the account
of the other Underwriters, the selling concession with respect to Common Stock
that is distributed in the Offering but subsequently purchased for the account
of the Underwriters in the open market. Any of the transactions described in
this paragraph may result in the maintenance of the price of the Common Stock
at a level above that which might otherwise prevail in the open market. None
of the transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the Common Stock.
The Offering price for the Common Stock was determined by negotiation among
the Company and the Representatives. Among the factors considered in
determining the Offering price was the history of and the prospects for the
Company and the industry in which it operates, the past and present operating
results of the Company and the trends of such results, the future prospects of
the Company, an assessment of the Company's management, the general condition
for the securities markets at the time of the Offering and the prices for
similar securities of comparable companies.

49
<PAGE>

LEGAL MATTERS

The legality of the issuance of the shares of Common Stock offered hereby
under Texas law and certain other legal matters will be passed upon for the
Company by Vinson & Elkins L.L.P., Dallas, Texas. Certain legal matters will
be passed upon for the Underwriters by Gardere & Wynne, L.L.P., Dallas, Texas.

EXPERTS

The consolidated financial statements of DTM Corporation at December 31,
1995 and 1996, and for each of the three years in the period ended December
31, 1996, appearing in this Prospectus and the Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1 including amendments thereto relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission, Washington, D.C. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A
copy of the Registration Statement may be inspected by anyone without charge
at the Securities and Exchange Commission's principal office located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and the Chicago Regional Office located at Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661-2511 and copies of all or any
part thereof may be obtained from the Public Reference Section of the
Securities and Exchange Commission upon the payment of certain fees prescribed
by the Securities and Exchange Commission. The Registration Statement may also
be obtained from the Web site that the Commission maintains at www.sec.gov.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports for each of the first three quarters of
each fiscal year containing unaudited financial information.

50
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............. F-3
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996..................................................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1994, 1995 and 1996.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
DTM Corporation

We have audited the consolidated balance sheets of DTM Corporation (a
majority-owned subsidiary of The B.F.Goodrich Company) and its subsidiary as
of December 31, 1995 and 1996, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of DTM
Corporation and its subsidiary at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Austin, Texas
February 13, 1997,
except for the stock split
information
in Note 1, as to which the
date is
April 2, 1997

F-2
<PAGE>

DTM CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 756 $ 329
Accounts receivable, net of allowance for doubtful
accounts of $263 in 1995 and $640 in 1996............... 2,941 7,205
Due from BFGoodrich...................................... 381 --
Inventory................................................ 2,143 4,835
Prepaid expenses and other............................... 372 595
-------- -------
Total current assets....................................... 6,593 12,964
Furniture and equipment, net............................... 2,647 3,057
Capitalized software development costs, net of accumulated
amortization of $388 in 1995 and $292 in 1996............. 843 848
Patent and license fees, net of accumulated amortization of
$470 in 1995 and $766 in 1996............................. 406 791
Other noncurrent assets.................................... 150 237
-------- -------
Total assets............................................... $ 10,639 $17,897
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 2,502 $ 5,845
Due to BFGoodrich........................................ -- 614
Deferred revenues........................................ 905 1,474
Accrued expenses and other liabilities................... 2,074 2,640
Short-term borrowings.................................... 676 769
-------- -------
Total current liabilities.................................. 6,157 11,342
Borrowings under line of credit from BFGoodrich............ 200 4,000
Notes payable to banks..................................... 8,200 11,040
Commitments and contingencies (Note 10)....................
Shareholders' equity (deficit):
Preferred stock, $.001 par value, 3,000,000 shares
authorized, no shares issued and outstanding............ -- --
Common stock, $.0002 par value, 60,000,000 shares
authorized;
3,243,391 shares issued and outstanding................. 1 1
Additional paid-in capital............................... 28,019 28,019
Accumulated deficit...................................... (31,980) (36,469)
Cumulative translation adjustment........................ 42 (36)
-------- -------
Total shareholders' equity (deficit)....................... (3,918) (8,485)
-------- -------
Total liabilities and shareholders' equity (deficit)....... $ 10,639 $17,897
======== =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

DTM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- ------- ----------
<S> <C> <C> <C>
Revenue:
Products...................................... $ 8,127 $12,632 $ 22,070
Service and support........................... 1,112 1,579 2,309
------- ------- ----------
9,239 14,211 24,379
Cost of sales:
Products...................................... 5,370 8,803 13,021
Service and support........................... 511 873 1,424
------- ------- ----------
5,881 9,676 14,445
------- ------- ----------
Gross profit.................................... 3,358 4,535 9,934
Operating expenses:
Selling, general and administrative........... 5,249 6,620 9,980
Research and development...................... 3,840 3,521 4,292
------- ------- ----------
9,089 10,141 14,272
------- ------- ----------
Operating loss.................................. (5,731) (5,606) (4,338)
Other income (expense):
Interest expense, net......................... (178) (530) (1,066)
Cost of discontinued registration............. -- -- (752)
------- ------- ----------
(178) (530) (1,818)
------- ------- ----------
Loss before income tax benefit allocated from
BFGoodrich..................................... (5,909) (6,136) (6,156)
Income tax benefit allocated from BFGoodrich.... 1,825 2,138 1,667
------- ------- ----------
Net loss........................................ $(4,084) $(3,998) $ (4,489)
======= ======= ==========
Pro forma, giving effect to stand-alone taxa-
tion:
Net loss...................................... $ (6,156)
==========
Net loss per share............................ $ (1.71)
==========
Number of shares used......................... 3,609,211
==========
</TABLE>

See accompanying notes.

F-4
<PAGE>

DTM CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION
SHARES STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994................... 3,243,391 $ 1 $28,019 $(23,898) $(44) $ 4,078
Net loss.............. -- -- -- (4,084) -- (4,084)
Translation adjust-
ment................. -- -- -- -- 50 50
--------- --- ------- -------- ---- -------
Balance at December 31,
1994................... 3,243,391 1 28,019 (27,982) 6 44
Net loss.............. -- -- -- (3,998) -- (3,998)
Translation adjust-
ment................. -- -- -- -- 36 36
--------- --- ------- -------- ---- -------
Balance at December 31,
1995................... 3,243,391 1 28,019 (31,980) 42 (3,918)
Net loss.............. -- -- -- (4,489) -- (4,489)
Translation adjust-
ment................. -- -- -- -- (78) (78)
--------- --- ------- -------- ---- -------
Balance at December 31,
1996................... 3,243,391 $ 1 $28,019 $(36,469) $(36) $(8,485)
========= === ======= ======== ==== =======
</TABLE>

See accompanying notes.

F-5
<PAGE>

DTM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $(4,084) $(3,998) $(4,489)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 2,292 2,487 2,170
Loss on disposal of equipment.................... 34 32 --
Changes in assets and liabilities used in
operating activities:
Accounts receivable............................ 854 (1,314) (4,264)
Inventory...................................... (182) 157 (2,692)
Due to/from BFGoodrich......................... 326 (1,064) 995
Prepaid expenses and other assets.............. 19 (90) (310)
Accounts payable............................... (302) 1,469 3,343
Deferred revenues.............................. (64) 103 569
Accrued expenses and other liabilities......... (656) 654 566
------- ------- -------
Net cash used in operating activities.............. (1,763) (1,564) (4,112)
INVESTING ACTIVITIES
Purchases of furniture and equipment............... (757) (1,674) (1,898)
Capitalized software development costs............. (325) (440) (374)
Patent and license expenditures.................... (362) (247) (698)
------- ------- -------
Net cash used in investing activities.............. (1,444) (2,361) (2,970)
FINANCING ACTIVITIES
Proceeds from notes payable........................ 1,600 3,600 --
Proceeds from short-term borrowings................ -- 2,681 3,448
Repayments of short-term borrowings ............... -- (2,005) (3,355)
Draws on line of credit from financial
institutions...................................... -- -- 2,840
Draws on line of credit from BFGoodrich............ -- 200 3,800
------- ------- -------
Net cash provided by financing activities.......... 1,600 4,476 6,733
Effect of foreign exchange rate changes on cash.... 50 36 (78)
------- ------- -------
Net increase (decrease) in cash.................... (1,557) 587 (427)
Cash at beginning of year.......................... 1,726 169 756
------- ------- -------
Cash at end of year................................ $ 169 $ 756 $ 329
======= ======= =======
</TABLE>

See accompanying notes.

F-6
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

DTM Corporation ("DTM" or the "Company") was formed in November 1987.
Through the proprietary and patented selective laser sintering process, the
Company is engaged in the development, design, manufacture, marketing and
support of rapid prototyping and rapid tooling systems. This technology,
exclusively licensed to DTM by The University of Texas, enables the
fabrication of three-dimensional solid models, prototypes or tool inserts
directly from three-dimensional computer aided design ("CAD") data. The
Company's products, related materials and maintenance and support services are
available to the worldwide, rapid prototyping market. The financial statements
include the accounts of DTM GmbH, a wholly-owned German subsidiary. All
significant intercompany accounts and transactions have been eliminated.

At December 31, 1996, DTM was approximately 92 percent owned by The
B.F.Goodrich Company ("BFGoodrich"). DTM has continued to incur operating
losses and cash flow deficiencies. As a result, DTM is substantially reliant
upon BFGoodrich for capital funding or other financial assistance to enable
DTM to meet its financial obligations. DTM has been advised by management of
BFGoodrich that it is BFGoodrich's current intention to assure that DTM
secures financial resources on an as-needed basis to meet its financial
obligations, until the successful completion of an initial public offering
("IPO") of the Company's common stock or the Company otherwise develops
financial resources to meet its current financial obligations.

BFGoodrich provides DTM with tax administration services, participation in a
group program for various types of insurance and certain other assistance,
including legal services. These arrangements are provided either at no cost to
the Company or on terms that could be considered more favorable to the Company
than those that would be available to DTM in arms-length transactions. The
cost of these services is not reflected in the accompanying financial
statements as estimates of these costs are insignificant to the results of
operations of each period presented.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Inventory

Inventories are carried at the lower of cost or market, with cost determined
using the first-in, first-out (FIFO)
method.

Furniture and Equipment

Furniture and equipment is carried at cost less accumulated depreciation.
Depreciation expense is calculated on the straight-line method over the useful
life of each asset, which lives range from three to five years. Leasehold
improvements are amortized on the straight-line method over the life of the
related lease or the useful life of the respective asset, whichever is
shorter.

Capitalized Software Development Costs

The Company's principal products include a software component. Costs
incurred in the development of software, once technological feasibility has
been established but prior to general release to customers, are capitalized.
Technological feasibility is established when a product design and working
model of the software product have been completed and when the completeness of
the working model and its consistency with the

F-7
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

product design have been confirmed by testing. Amortization is provided on a
product by product basis at the greater of amortization based on the estimated
revenues of the products or the straight-line amortization over their
estimated economic lives of not more than three years. DTM capitalized
software development costs of $325,000 in 1994, $440,000 in 1995 and $374,000
in 1996. Amortization of capitalized software development costs totaled
$537,000 in 1994, $561,000 in 1995 and $369,000 in 1996. Amortization is
included in cost of product sales in the consolidated statements of
operations.

Patent and License Fees

Patent and license fees represent the costs associated with filing and
maintaining patent applications and obtaining, maintaining and defending
rights under patents under which DTM operates. DTM capitalized patent and
license fees of $362,000 in 1994, $247,000 in 1995 and $698,000 in 1996. These
fees are amortized for accounting purposes over a five-year estimated economic
useful life utilizing the straight-line method and are included in selling,
general and administrative expense.

Translation of Foreign Subsidiary Financial Statements

The financial statements of DTM GmbH (a wholly-owned subsidiary located in
Germany) are translated to U.S. dollars substantially as follows: all assets
and liabilities at year-end exchange rates; sales and expenses at average
exchange rates; and shareholders' equity at historical exchange rates. Gains
and losses from translating the financial statements of DTM GmbH are recorded
directly in shareholders' equity.

Recognition of Revenue

Revenues from the sale of SLS systems are recognized when title has
transferred to the customer, when the Company's remaining obligations are
insignificant and when collectibility of the related receivable is probable,
which is upon shipment. The Company defers from three to six percent of the
revenues, excluding certain accessories, from each SLS system sale for
warranty service. This deferred amount represents the Company's estimate of
the cost of providing such warranty service and is recognized ratably as
service and support revenue over the 12-month warranty period.

Upon expiration of the 12-month warranty period discussed above, the Company
offers for sale to its customers an annual maintenance contract, the revenues
from which are recognized ratably as service and support revenue over the
related support period.

Pro Forma Net Loss Per Share

Pro forma net loss per share for the year ended December 31, 1996 was
calculated on a stand-alone basis without allocation of the income tax benefit
from BFGoodrich using the weighted average number of common shares outstanding
plus the number of shares under options (certain of which will have exercise
prices substantially less than the Offering price) that will be outstanding
under the Equity Appreciation Plan (see Note 11) upon completion of an initial
public offering of the Company's common stock (see Note 15). In addition, an
effective 1.022-for-1 stock split, effected by the Company as a series of
recapitalizations completed on April 2, 1997, has been retroactively applied
to all share and per share amounts. Historical per share amounts are not
presented because DTM is a majority-owned subsidiary of BFGoodrich.

Concentration of Credit Risk

The Company sells its products and services to companies in diversified
industries. Credit is extended based on an evaluation of each customer's
financial condition, generally without requiring collateral. The Company
monitors its exposure to credit losses and maintains allowances for potential
losses.

F-8
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Dependence on Third-Party Suppliers

The Company subcontracts for the manufacture of product sub-assemblies from
single-source, third-party suppliers. In addition, the Company has adopted a
"just-in-time" inventory system for product sub-assemblies and relies on
suppliers to provide components on a timely basis.

Advertising Costs

Advertising costs, which are expensed as incurred, were $346,000 in 1994,
$596,000 in 1995 and $757,000 in 1996.

Stock-Based Compensation

The Company accounts for stock-based employee compensation in accordance
with the provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations.

Income Taxes

The Company accounts for income taxes using Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Under Statement 109, the liability
method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

Fair Value of Financial Instruments

The Company believes that the carrying amount of its financial instruments,
including debt, approximates fair value. Fair value is estimated based on
quoted market prices for similar instruments.

2. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company maintains an allowance for doubtful accounts related to its
trade accounts receivable. The activity in this allowance account for the
years ended December 31, is as follows (in thousands):

<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994............................. $150 $75 $21 $204
1995............................. 204 60 1 263
1996............................. 263 389 12 640
</TABLE>

3. INVENTORY

Inventory at December 31 consisted of the following (in thousands):

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Raw materials and purchased parts.............................. $1,423 $3,187
Finished goods................................................. 720 1,648
------ ------
$2,143 $4,835
====== ======
</TABLE>

F-9
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996

4. FURNITURE AND EQUIPMENT

Furniture and equipment at December 31 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Equipment.................................................. $ 5,977 $ 7,437
Leasehold improvements..................................... 1,289 1,366
Office furniture........................................... 347 356
------- -------
7,613 9,159
Less accumulated depreciation and amortization............. (4,966) (6,102)
------- -------
$ 2,647 $ 3,057
======= =======
</TABLE>

5. PATENT AND LICENSE AGREEMENTS

On December 3, 1987, DTM entered into a patent license agreement with the
Board of Regents of The University of Texas System, whereby DTM is licensed to
make, have made and sell products utilizing the selective laser sintering
technology. In consideration of rights granted in the license agreement, DTM
issued 20,442 shares of its common stock to The University of Texas System.

The agreement provides for royalty payments in the amount of four percent of
DTM's net sales for products covered by the license agreement (gross receipts
net of commissions, returns, freight, discounts and sales taxes). Royalty
expense, included in cost of sales, was $296,000 in 1994, $424,000 in 1995 and
$676,000 in 1996.

The Company evaluates the carrying values of patents and licenses to
determine if the facts and circumstances suggest that they may be impaired. If
this review indicates that patents and licenses will not be recoverable, as
determined based on the undiscounted cash flows of the entity over the
remaining amortization period, the carrying value of the patents and licenses
will be reduced accordingly.

6. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following as of
December 31 (in thousands):

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Royalties..................................................... $ 491 $ 360
Payroll and related accruals.................................. 431 525
Other......................................................... 1,152 1,755
------ ------
$2,074 $2,640
====== ======
</TABLE>

7. FINANCING ARRANGEMENTS

Line of Credit with BFGoodrich

In November 1995, the Company entered into a line of credit agreement with
BFGoodrich under which the Company may borrow up to $2,000,000. During 1996,
the amount which the Company may borrow was increased to $4,000,000. The line
bears interest at the prime commercial lending rate of Citibank, N.A. (8.5
percent at December 31, 1996) and matures on the earlier of July 31, 1998 or
the date upon which the Company receives any proceeds from an IPO of the
Company's common stock. At December 31, 1995 and 1996, $200,000 and
$4,000,000, respectively, was outstanding under this agreement.

F-10
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996
7. FINANCING ARRANGEMENTS (CONTINUED)

Short-Term Borrowings

At December 31, 1995 and 1996, DTM had a total of $676,000 and $769,000,
respectively, of short-term debt outstanding under the terms of a financing
arrangement with a leasing company. The weighted average interest rates on
outstanding short-term borrowings were 19 and 20 percent at December 31, 1995
and 1996, respectively. The weighted average interest rates during 1995 and
1996 were 18 and 21 percent, respectively. The debt is collateralized by
certain equipment and accounts receivable.

Notes Payable to Banks

At December 31, 1995, DTM had lines of credit with two banks under unsecured
promissory notes with available borrowings of $8,200,000. During 1996, DTM
obtained a third line of credit with a third bank under an unsecured
promissory note with available borrowings of $4,000,000. The combined
available borrowings for these lines of credit is $12,200,000, of which
$11,040,000 was outstanding as of December 31, 1996. BFGoodrich has provided
letters of comfort to each of these banks upon which the banks have relied in
providing credit to DTM. The notes mature on July 31, 1998 but the Company has
committed to pay them on the successful completion of an IPO. Interest on the
notes is payable monthly, determined on an advance-by-advance basis; and, at
the Company's election, may be based on each bank's then current prime rate,
CD rate or Eurodollar rate. Interest rates and outstanding balances on notes
payable at December 31, 1995 and 1996 were as follows:

<TABLE>
<CAPTION>
1995 1996
-------------------------------- --------------------------------------
INTEREST OUTSTANDING INTEREST OUTSTANDING
RATES BORROWINGS RATES BORROWINGS
-------- ----------- -------- -----------
<S> <C> <C> <C>
6.5% $4,700,000 6.2% $ 4,700,000
6.4% 2,800,000 6.2% 3,500,000
8.5% 700,000 -- --
-- 6.2% 2,840,000
---------- -----------
$8,200,000 $11,040,000
========== ===========
</TABLE>

Interest paid in connection with all of the above financing arrangements was
approximately $212,000 in 1994, $451,000 in 1995 and $1,079,000 in 1996
(approximately $153,000 of which was paid to BFGoodrich in 1996).

8. COST OF DISCONTINUED REGISTRATION

During 1996, DTM attempted an IPO. However, due to market volatility and
other issues the IPO was postponed. The Company incurred approximately
$752,000 of legal, accounting and other professional services related to the
unsuccessful IPO which were expensed in the fourth quarter.

9. INCOME TAXES

Since October 31, 1990, DTM has been included in the consolidated federal
tax return of BFGoodrich. Accordingly, for all periods since that date, the
Company has recorded the tax benefit allocated to it by BFGoodrich, which
credits the Company with a tax benefit approximating the benefit that
BFGoodrich derives from the consolidation of the Company. Such benefits are
generally paid to the Company by BFGoodrich on a current basis. Should
BFGoodrich's ownership interest fall below 80 percent, such benefits will no
longer be available to the Company. Based on the tax sharing agreement, if
BFGoodrich loses part of the tax benefit of any losses previously utilized or
has to report additional income as the result of a federal tax audit of DTM,
DTM will be required to reimburse BFGoodrich for any additional taxes paid.

F-11
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996
9. INCOME TAXES (CONTINUED)

DTM has net operating loss carryforwards totaling approximately $4,200,000
for federal income tax purposes, incurred from inception to October 31, 1990.
These carryforwards expire in the years 2002 to 2004 and, although available
to DTM, should DTM subsequently file a federal income tax return separate from
BFGoodrich, are subject to significant annual limitations due to substantial
changes in DTM's ownership.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities of DTM for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of December
31, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation and amortization............ $ 91 $ 206
Allowance for doubtful accounts........................ 92 224
Net operating loss carryforwards (for periods prior to
October 31, 1990)..................................... 1,470 1,470
Other.................................................. 115 106
------- -------
Total deferred tax assets................................ 1,768 2,006
Valuation allowance for deferred tax assets.............. (1,478) (1,599)
------- -------
290 407
Deferred tax liabilities:
Deferred revenue....................................... 290 407
------- -------
Total deferred tax liabilities........................... 290 407
------- -------
Net deferred tax assets.................................. $ -- $ --
======= =======
</TABLE>

A reconciliation of income tax benefit calculated at the statutory rate and
the provision for income tax benefit is as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax benefit at the federal statutory rate
(34%).......................................... $ 2,009 $ 2,086 $ 2,093
Net operating loss not utilized by the Company.. (2,009) (2,086) (2,093)
Income tax benefit allocated from BFGoodrich.... 1,825 2,138 1,667
-------- -------- --------
$ 1,825 $ 2,138 $ 1,667
======== ======== ========
</TABLE>

BFGoodrich files a consolidated federal income tax return which includes all
of its eligible subsidiaries, including the Company. If federal taxes were
computed assuming the Company filed a separate federal income tax return, no
benefit would be available to the Company. Accordingly, without the tax
benefit allocated from BFGoodrich, the Company's net loss for the year ended
December 31, 1996 would have been $6,156,000, or a loss of $1.71 per share,
and has been reflected in the pro forma amounts presented in the consolidated
statements of operations.

As a result of the Offering described herein, the ownership of outstanding
Common Stock by BFGoodrich will decrease to less than 80 percent. Effective as
of the date that such decrease occurs, BFGoodrich will no

F-12
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996
9. INCOME TAXES (CONTINUED)

longer be able to include DTM'S income or loss in BFGoodrich's consolidated
federal income tax return; consequently, DTM will lose the benefit of the tax
allocation agreement between DTM and BFGoodrich. BFGoodrich credits to the
Company the amount of any benefits realized by BFGoodrich as a result of the
inclusion of DTM'S losses and/or tax credits in BFGoodrich's consolidated
federal income tax return.

10. COMMITMENTS AND CONTINGENCIES

DTM leases facilities and equipment under noncancelable operating leases,
expiring primarily in 1997. Total rent expense incurred under these leases was
approximately $246,000 in 1994, $252,000 in 1995 and $332,000 in 1996. Future
minimum payments under these leases are as follows (in thousands):

As of December 31, 1996, the Company had purchase commitments for inventory
totaling approximately $3,257,000.

In the ordinary course of business, the Company is subject to legal
proceedings and claims. In one such instance, DTM filed an action in the
United States District Court for the Eastern District of Wisconsin in October
1995 against three parties who are operating an SLS System. DTM alleges that
the defendants willfully infringed a DTM patent. In June 1996, DTM amended its
lawsuit to also assert that one of the defendants breached an oral settlement
agreement. The Company seeks injunctive relief, damages and attorneys fees.
The defendants have denied infringement and the existence of an oral
settlement agreement, and the defendants seek attorneys fees. The defendants
have also asserted the affirmative defenses of patent invalidity, implied
license, failure to mark patented articles, patent unenforceability and
invalidity of the oral settlement agreement. Discovery commenced in late 1995.
In a subsequent filing, one of the defendants also has asserted claims against
DTM and BFGoodrich for violation of state and federal antitrust laws. That
defendant seeks injunctive relief as well as damages and attorneys fees. It is
not possible at this time to predict the outcome of this proceeding, although
DTM and BFGoodrich have indicated that they believe that the subsequent
counter and cross claims for violation of antitrust laws are without merit.
However, a ruling unfavorable to the Company could have a material adverse
effect on the Company's business and financial performance.

11. EQUITY APPRECIATION PLAN

In January 1995, the Board of Directors approved the DTM Corporation Equity
Appreciation Plan (the "SAR Plan"), which created 10,000,000 Phantom Stock
Units. Ten percent of the Phantom Stock Units were allocated for the issuance
of a like number of Phantom Stock Appreciation Rights ("SARs") under the SAR
Plan to eligible employees. Each SAR granted to a Participant will vest and
become exercisable upon, but not prior to, a "Change in Control" of DTM. A
Change in Control of DTM shall be deemed to have occurred either: (1) when
common stock of DTM is issued to the public in an IPO; or (2) BFGoodrich is no
longer the owner of at least 50 percent of the outstanding common stock of DTM
as a result of an arms-length sale of all or a part of its interest in DTM to
a third party not affiliated or associated with BFGoodrich. If the Change in
Control results from an IPO, the SARs will immediately convert to fully vested
options to purchase common stock of the Company. If the Change in Control
occurs as the result of a sale of all or a part of BFGoodrich's interest in
DTM to a third party, the SARs will become immediately exercisable; and, a
Participant may exercise an SAR by providing written notice to DTM whereupon
the Participant will receive a cash amount equal to the

F-13
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996
11. EQUITY APPRECIATION PLAN (CONTINUED)

appreciation in value of a Phantom Stock Unit from its value on the date the
SAR was granted to its value on the date it is exercised based upon the
applicable valuation of the Company. From and after, but not prior to, the
occurrence of a Change in Control, the SARs or stock options granted to the
Participants will become exercisable by the Participants for a period of 10
years from the date on which the SARs or stock options are granted. As of
December 31, 1995 and 1996, there were 998,000 and 840,500 SARs outstanding,
respectively. The SARs granted during 1995 were granted at a fair value of
$1.40 per SAR. During 1996, 29,000 SARs were granted at a fair value of $9.22
per SAR. In addition, 185,500 SARs were forfeited in 1996. Subsequent to
December 31, 1996, the Company granted an additional 157,500 SARs at a fair
value of $8.50 per SAR and 4,500 SARs were forfeited. Assuming an initial
public offering of 2,852,191 shares by the Company at a price of $8.00 per
share, the SARs granted in 1995, 1996 and subsequent to December 31, 1996 will
be converted to stock options with exercise prices of approximately $2.23 per
share, $14.67 per share and $13.53 per share, respectively.

Due to the terms and conditions of the SAR Plan, the SARs or stock options
outstanding thereunder will be accounted for by the Company as compensation
expense when it becomes probable that a Change in Control of DTM will occur.
The amount of compensation expense so recognized will be equal to the number
of SARs or stock options outstanding multiplied by the difference between the
exercise price of each SAR or stock option and the value of each SAR or stock
option at the date of the Change in Control. The exercise price and value at
the date of Change in Control of the SARs or stock options is determined by a
complex formula. However, upon the closing of an IPO, the Company will
recognize a non-cash charge (compensation) of approximately $2.9 million
(assuming an initial public offering price of $8.00 per share) to record the
appreciation in value of the SARs. The Company has reserved 800,000 shares of
Common Stock for future issuance under the SAR Plan.

The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for its
employee incentive plan. The required additional disclosures under the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," are not provided as no compensation
expense would be recognized on a pro forma basis.

12. KEY EMPLOYEE STOCK OPTION PLAN

In January 1996, the Company's Board of Directors approved a DTM Corporation
Stock Option Plan (the "Option Plan"). Under the Option Plan, the Company set
aside 357,755 shares which may be awarded to key employees, as selected by
management and approved by the Compensation Committee of the Board of
Directors (the "Committee") through stock options, stock appreciation rights,
limited stock appreciation rights, restricted stock, performance shares, or
other awards as determined by the Committee. In the case of stock option
awards, the option price per share may not be less than the fair market value
of a share on the date the option is granted. Options granted under the Option
Plan will vest in three separate installments with 35 percent of the options
granted becoming exercisable on the first anniversary date of the option
grant, 35 percent becoming exercisable on the next succeeding anniversary date
and 30 percent becoming exercisable on the next succeeding anniversary date.
Options will be exercisable for a period of no more than 10 years from the
date of grant. The term of the Option Plan is five years unless terminated
earlier by the Board of Directors. There have been no grants made under the
Option Plan.

13. MANAGEMENT INCENTIVE PLAN

In January 1996, the Company's Board of Directors approved a DTM Corporation
Management Incentive Plan (the "MIP Plan"). The MIP Plan provides for the
grant of incentive compensation to key management employees who have the
potential to positively influence the performance of the Company as a reward
for levels of performance above the ordinary performance standards compensated
by base salary. Under the MIP Plan, each participant is assigned a "cash bonus
target" of 20 to 50 percent of base salary and the compensation committee

F-14
<PAGE>

DTM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1996
13. MANAGEMENT INCENTIVE PLAN (CONTINUED)

of the Board of Directors creates personal and corporate performance targets,
as well as minimum thresholds. If the minimum thresholds are met, the bonus
payable will be between 50 to 150 percent of the participant's cash bonus
target. No expense was recognized in connection with the MIP Plan in 1996.

14. GEOGRAPHIC AND CUSTOMER INFORMATION

The Company and its subsidiary, located in Germany, operate in one industry
segment: the development, manufacturing and service of SLS systems and related
products. Operations outside of the United States consist principally of
sales, marketing and customer support. Transfers between geographic areas are
accounted for at amounts which are generally above cost and consistent with
the rules and regulations of governing tax authorities. Such transfers are
eliminated in the consolidated financial statements. Identifiable assets are
those assets that can be directly associated with a particular geographic
area. The following is a summary of operations within each geographic area (in
thousands):

<TABLE>
<CAPTION>
NET REVENUES TRANSFERS
FROM BETWEEN TOTAL
UNAFFILIATED GEOGRAPHIC NET LOSS FROM IDENTIFIABLE
CUSTOMERS AREAS REVENUES OPERATIONS NET LOSS ASSETS
------------ ---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1994:
United States........... $ 6,689(a) $ 1,449 $ 8,138 $(5,743) $(4,096) $ 7,974
Germany................. 2,550 -- 2,550 12 12 1,656
Eliminations............ -- (1,449) (1,449) -- -- (1,070)
------- ------- ------- ------- ------- -------
$ 9,239 $ -- $ 9,239 $(5,731) $(4,084) $ 8,560
======= ======= ======= ======= ======= =======
1995:
United States........... $12,056(a) $ 2,102 $14,158 $(5,431) $(3,822) $10,446
Germany................. 2,155 -- 2,155 (175) (176) 2,386
Eliminations............ -- (2,102) (2,102) -- -- (2,193)
------- ------- ------- ------- ------- -------
$14,211 $ -- $14,211 $(5,606) $(3,998) $10,639
======= ======= ======= ======= ======= =======
1996:
United States........... $18,731(a) $ 4,184 $22,915 $(4,691) $(4,767) $16,906
Germany................. 5,648 -- 5,648 353 278 3,103
Eliminations............ -- (4,184) (4,184) -- -- (2,112)
------- ------- ------- ------- ------- -------
$24,379 $ -- $24,379 $(4,338) $(4,489) $17,897
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(a) The Company's United States net revenues from unaffiliated customers
include export sales (principally to the Pacific Rim) of $666,000 in 1994,
$2,611,000 in 1995 and $6,540,000 in 1996.

The Company's revenues are derived from sales to a wide range of
international customers. During 1995, $2,111,000, approximately 15 percent of
total revenues, were from sales to one customer.

15. SUBSEQUENT EVENT

On February 13, 1997, the Company's Board of Directors authorized management
of the Company to proceed with an IPO of the Company's common stock. Although
the success of such a proposed offering cannot be certain, management is
proceeding with activities relating to this process.

F-15
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHARE-
HOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OF-
FER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CRE-
ATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.

---------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
The Company.............................................................. 12
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Consolidated Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 24
Management............................................................... 37
Certain Transactions..................................................... 41
Principal and Selling Shareholders....................................... 45
Description of Capital Stock............................................. 46
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 48
Legal Matters............................................................ 50
Experts.................................................................. 50
Additional Information................................................... 50
Index to Financial Statements............................................ F-1
</TABLE>

---------------

UNTIL MAY 27, 1997 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPEC-
TUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

3,039,000 SHARES

COMMON STOCK

---------------

PROSPECTUS

---------------

A.G. EDWARDS & SONS, INC.

LADENBURG THALMANN & CO. INC.

MAY 2, 1997

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------