<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 (fee required) For the fiscal year ended December 31, 2000 or

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED) For the transition period from__ to __

                        Commission file number 0-20993

                                DTM CORPORATION
            (Exact Name of Registrant as Specified in its Charter)

                 Texas                                  74-2487065
    State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
     Incorporation or Organization)

    1611 Headway Circle, Building 2, Austin, Texas            78754
       (Address of Principal Executive Offices)             (Zip Code)

Registrant's telephone number, including area code: (512) 339-2922

Securities registered pursuant to Section 12(b) of the Act:
       Title of Each Class            Name of Each Exchange on Which Registered
       -------------------            -----------------------------------------

  Common Stock, $.0002 Par Value             The Nasdaq SmallCap Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or shorter period that the registrant was
required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No.
                                       ---    -

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

As of March 6, 2001, the aggregate market value of the voting stock held by non-
affiliates (affiliates for these purposes only being directors, executive
officers and holders of more than 5% of the Registrant's Common Stock) was
approximately $12.1 million based upon the closing price of the Registrant's
Common Stock on such date, $3.375 per share as reported by the The Nasdaq Stock
Market. As of March 6, 2001, the Registrant had 7,090,989 outstanding shares of
Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

Portions of the Proxy Statement for the Registrant's Year 2001 Annual Meeting of
Shareholders are incorporated by reference in Part III.

<PAGE>

DTM Corporation
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                         NUMBER
                                                                         ------
<S>                                                                      <C>
Part I

Item 1.     Business                                                         1

Item 2      Properties                                                      10

Item 3      Legal Proceedings                                               10

Item 4      Submission Of Matters To A Vote Of The Shareholders In The
            Fourth Quarter Of The Fiscal Year Covered By This Report        10


Part II

Item 5      Market For Registrant's Common Equity And Related
            Shareholder Matters                                             11

Item 6      Selected Financial Data                                         12

Item 7      Management's Discussion And Analysis Of Financial Condition
            And Results Of Operations                                       13

Item 7A     Quantitative And Qualitative Disclosures About Market Risk      27

Item 8      Financial Statements And Supplementary Data                     28

Item 9      Changes In And Disagreements With Accountants On Accounting
            And Financial Disclosure                                        46


Part III

Item 10     Directors And Executive Officers Of The Registrant              46

Item 11     Executive Compensation                                          46

Item 12     Security Ownership Of Certain Beneficial Owners And
            Management                                                      46

Item 13     Certain Relationships And Related Transactions                  46

Part III

Item 14     Exhibits, Financial Statement Schedules, And Reports On
            Form 8-K                                                        47

            Signatures                                                      49
</TABLE>
<PAGE>

                                    PART I

     This Annual Report contains forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995, with respect to the
financial condition, results of operations and business of DTM Corporation. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially and adversely from those set forth in the
forward-looking statements, including, without limitation: seasonality of
customer buying habits, principally a slower first and third quarter, may
adversely affect stock prices; the markets being developed by us may not
develop; price reductions, reduced margins and loss of market share may occur as
a result of competition; quarterly fluctuations in operating results and the
difficulty in predicting results of operations may adversely affect stock
prices; additional capital sufficient to finance the business may not be
available, when needed, or if available might cause significant dilution; our
dependence on a single product that is priced at the high end of the range for
today's rapid prototyping products has caused it to be adversely affected in a
soft market; our intellectual property and proprietary rights may not be valid
or infringe the rights of others; we have significant international operations
with the inherent exposures; actions by controlling shareholder could adversely
affect stock prices; potential liabilities could result from undetected errors
or defects in our products; and our stock price could be volatile, regardless of
our financial performance. We caution that the foregoing list of important
factors is not exclusive. We do not undertake to update any written or oral
forward-looking statement that may be made from time to time by or on behalf of
the DTM. See "Item 7. Risk Factors That May Affect Future Results and Safe
Harbor Statement."

ITEM 1.    BUSINESS

Overview

     We design, manufacture, market and support, on an international basis,
rapid prototyping and manufacturing systems and the related powdered materials.
Our systems are based on proprietary selective laser sintering technology
initially developed by The University of Texas. This technology uses laser
energy to melt and fuse ("sinter") powdered material to create a solid object.
We have an exclusive worldwide license from The University of Texas to practice
selective laser sintering.

     Historically, our product line of Sinterstation Systems has been used for
rapid prototyping in the design, development and market introduction of
products. Sinterstation Systems are increasingly being deployed for
manufacturing applications. Small runs of production-quality parts or custom
parts can be efficiently made in the Sinterstation System, allowing
manufacturers to better address low-volume/high value markets. Likewise, these
markets can be addressed with traditional casting or tooling made in the
Sinterstation for casting or molding processes to more quickly make short
production runs of plastic or metal parts. Our prototyping and manufacturing
customers represent a wide range of industries, including the automotive,
aerospace, medical, electronic, telecommunications, computer, appliance,
footwear, toy and power tool industries.

     We offer customers solutions to meet the following challenges:

            .  Streamlining prototyping and manufacturing processes
            .  Verifying product designs
            .  Creating functional prototypes
            .  Generating production-quality samples or final parts
            .  Creating tooling used to manufacture 50 to 10,000, or more end
               use parts.

                                       1
<PAGE>

     Our Selective Laser Sintering Technology

          The selective laser sintering process uses laser energy to sinter
powdered material to create solid objects from the powdered materials. The steps
to make a part, mold, pattern or tool in a Sinterstation System are as follows:

          1.   Start with an electronic file containing the product designer's
three-dimensional computer aided design ("CAD") data for the part.

          2.   Transfer the file into the Sinterstation system.

          3.   Spread a layer of powdered material. As the process begins, a
precision roller mechanism automatically spreads a thin layer of powdered SLS
material across the build platform.

          4.   From the CAD data, a CO\\2\\ laser selectively draws a cross
section of the object on the layer of powder. As the laser draws the cross
section, it selectively "sinters" (heats and fuses) the powder creating a solid
mass that represents one cross section of the part.

          5.   Repeat. The system spreads and sinters layer upon layer, largely
unattended, until the object is completed.

          6.   Remove the part. Once the part is complete, remove it from the
part build chamber and blow away any loose powder.

          7.   Finish as desired. Use the part as is--or sand, anneal, coat, or
paint it before using it for its intended application. If this is a metal part
or tool, a furnace cycle is required to replace the plastic binder with a metal
infiltrant.

Functional Models and Prototypes from the Sinterstation System

          Today, most of the Sinterstation Systems are primarily used to produce
functional prototypes for use in product development and design. Use of our
Sinterstation Systems in this manner can significantly reduce 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. Functional models and prototypes are produced
directly from powdered plastic sintering materials with a Sinterstation System.
We believe that selective laser sintering is the leading rapid-prototyping
technology in the world for the functional plastic prototype application.

          Sinterstation Systems are also used to produce metal functional
prototypes from a metal powder. In late 2000, we introduced LaserForm ST 100,
our third-generation metal powder system for creation of prototype tooling that
is also used to make metal functional parts.

Rapid Manufacturing of Low-volume/High-value Parts Directly in the Sinterstation
System

          Our Sinterstation Systems are increasingly used for the manufacture of
small lot quantities of plastic or metal parts directly in a DTM Sinterstation
for use as final products by end users in both the consumer and industrial
markets. Existing materials marketed for use in the Sinterstation by DTM are
being used to produce plastic and metal parts. Metal part production with a
Sinterstation requires processing with an additional furnace step.

Rapid Manufacturing of Parts with the Sinterstation in conjunction with
Traditional Manufacturing Methods

          Sinterstation Systems are used to create tools, molds or patterns that
are an intermediate step in most manufacturing processes employed to manufacture
low-volume/high-value end use parts.

          The Sinterstation System's investment casting pattern production
capability offers foundries the ability to automate the pattern-making step of
traditional investment casting processes to manufacture metal

                                       2
<PAGE>

parts. Parts investment cast from patterns produced with a Sinterstation System
are used in final product assemblies. With the early 1999 introduction of
CastForm, an improved pattern material, investment-casting applications are
becoming a more significant component of our product mix. A wide range of metal
parts can be cast from CastForm patterns, including titanium, magnesium,
aluminum and stainless steel. Foundries use our Sinterstation Systems to
automate and speed-up the manufacture of sand molds and cores. These sand cores
and molds are used for the sand casting of metal parts, primarily for use in
automotive and heavy equipment applications.

          Our tooling systems for plastic injection molding have been enhanced
over a number of years and currently offer the capability to quickly and
efficiently manufacture tooling for the injection molding of quantities of
plastic parts. Tools created in the Sinterstation System require an additional
furnace operation to ready them for use on injection molding machines. Tools
created for this purpose can be used to fabricate 50 to 10,000 parts, or more.

General

          We were incorporated in 1987 and in 1990 became a subsidiary of The
B.F.Goodrich Company ("BFGoodrich"). In May 1997, we completed our initial
public offering ("IPO"). On February 12, 1999, an investment partnership of
independent investors affiliated with Proactive Finance Group, LLC ("Proactive")
acquired BFGoodrich's remaining interest in DTM. Proactive currently holds a
49.7% interest in DTM.

          Our executive offices are located at 1611 Headway Circle, Building 2,
Austin, Texas 78754. Our telephone number is 512/339-2922 and web page is
www.dtm-corp.com. Information contained on our web site is not incorporated into
----------------
this Annual Report.

          "RapidSteel," "Sinterstation," and "SLS" are registered trademarks of
DTM in the United States. "DTM," "CastForm," "DuraForm," "LaserForm" and
"SandForm" are unregistered trademarks of DTM in the United States. "Somos" is a
registered trademark of DSM Desotech in the United States. "Windows" is a
registered trademark of Microsoft Corporation in the United States.

Products and Services

          We derive revenues from the sale and support of Sinterstation Systems
and the supply to the installed base of powdered sintering materials that are
consumed by these systems. Our sources of revenues and the percentage to total
revenues for the five years ended December 31, 2000 were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                        2000       1999       1998       1997       1996
                                     ---------------------------------------------------
         <S>                         <C>        <C>        <C>        <C>        <C>
          Machines and accessories   $21,418    $19,903    $17,928    $18,291    $18,829
          Sintering materials         12,376      8,652      6,240      4,239      3,241
          Services and support         6,216      4,494      3,627      2,778      2,309
                                     ---------------------------------------------------
          Total revenues             $40,010    $33,049    $27,795    $25,308    $24,379
                                     ===================================================

         Machines and accessories         53%        60%        65%        72%        78%
          Sintering materials             31         26         22         17         13
          Services and support            16         14         13         11          9
                                    ----------------------------------------------------
          Total revenues                 100%       100%       100%       100%       100%
                                     ===================================================
</TABLE>

                                       3
<PAGE>

Machines and Accessories

     Machines and accessories revenues include the base Sinterstation, material
handling equipment, secondary process equipment, documentation and software
licenses. The following table presents the cumulative number of Sinterstation
Systems sold of each of the three generations of Sinterstation Systems produced
through the end of each year in the five-year period ended December 31, 2000:

<TABLE>
<CAPTION>
                                          Year ended December 31,
                                        2000  1999  1998  1997  1996
                                        ----------------------------
    <S>                                 <C>   <C>   <C>   <C>   <C>

     Sinterstation Model 2500/plus/      166    87    21     -     -
     Sinterstation Model 2500             85    84    83    54    13
     Sinterstation Model 2000            137   136   132   127   119
                                        ----------------------------
     Cumulative Total                    388   307   236   181   132
                                        ============================
</TABLE>

     Our third-generation Sinterstation 2500/plus/ system, first available in
August 1998, features the SLS selective laser sintering process, which includes
the following capabilities:

     .    Easy to use application software for Windows NT Drag and drop part
          placement for easy build setup;

     .    Part stacking and nesting capabilities for more productivity;

     .    Ability to create complex parts aatures, with no support structures
          required;

     .    Fast part build rate;

     .    Unattended operation;

     .    Fast part breakout and clean up;

     .    Part stability; and

     .    Fast, easy material conversions.

     The Sinterstation is a flexible system that can be configured through
software for use with many different sintering powders, currently including
thermoplastic, foundry sands or metal sintering powders, addressing a range of
applications with a single system. 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. The build chamber
of the current Sinterstation measures 13" x 15" by 18" deep.

     We have developed a library of imbedded software designed to control the
selective laser sintering process. We have also designed application software to
aid in the setup of builds with each of our material systems. 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.

Sintering Materials

     We have developed a range of powdered materials for use in the
Sinterstation System to address a growing list of customer applications. Many of
these materials can be used in multiple customer applications. Selective laser
sintering powders are available through DTM for use in our Sinterstation
Systems. All of the DTM sintering materials we currently sell can be used in all
models of Sinterstation Systems that have been sold by us.

                                       4
<PAGE>

Services and Support

     We maintain a staff of field service and support personnel in Europe,
Pacific Rim and North America. The field service organization is responsible for
the installations of new Sinterstation Systems and warranty service and
maintenance programs.

     We also maintain a staff of applications support personnel in Europe and
North America. Our applications support personnel assist customers with system
operation, provide advice and assistance on building unusually complicated
parts, and keep customers informed of changes and advancements in the selective
laser sintering technology and Sinterstation System operating procedures. During
2000, a call center was established in Austin with the charter of being the
first response team and tracking all customer support instances to completion.

     Customers may extend factory support beyond the limited warranty period by
purchasing various levels of service contracts from us. For those customers
choosing not to purchase full-service contracts, We also provide repair and
maintenance services on a time and materials basis and sell replacement parts
and components for repairs performed by customer personnel. During 2000, a
management information system for the service department was implemented.

Research and Development

     During 2000, 1999 and 1998, we expended approximately $3.3 million, $2.9
million, and $3.5 million, respectively, for research and development.

     Our research and development effort focuses on improving core technologies
that are critical to future growth. We believe that our future growth will
depend on new powdered sintering materials, as well as improved part accuracy
and processing speed. Our development efforts are augmented by development
arrangements with research institutions, key customers, materials suppliers and
hardware suppliers.

The chart below depicts the history of material introductions of our sintering
materials:

<TABLE>
<CAPTION>
                 1992      1994      1996      1998    2000     2001
                 <S>       <C>       <C>       <C>     <C>      <C>
                  .Polycarbonate

                  .Wax               .TrueForm         .Castform
                                             .Sandform
                  .Nylon   .Fine Nylon         .Duraform
                             .Nylon GF           .DuraForm GF
                                               .Somos 201
                             .RapidSteel 1       .RapidSteel 2
                                                 .LaserForm .ST-100
</TABLE>

     In addition to the specific developments depicted above, the research and
development efforts over the past three years have resulted in a doubling of
part accuracy and the build speed. At the same time, the system platform cost
has been reduced, which has allowed system gross margins to attain targeted
levels.

     Longer term, we believe that the selective laser sintering technology is
capable of processing an even wider range of materials, thereby improving the
performance of our products in current applications and advancing the technology
into new applications. We are developing new materials for production of metal
parts in a range of metal powders.

                                       5
<PAGE>

     There can be no assurance that we will be able to develop these new
materials or that, if developed, that these materials can be successfully
marketed. The materials and specialized hardware technologies used in the
Sinterstation Systems are based upon materials and hardware developed for other
industries. We rely upon the materials research of companies in the specialty
chemicals industry for formulations of powdered materials and suppliers of
specialized hardware technologies to be used in our Sinterstation Systems.
Should we find it necessary to internally research, develop or manufacture our
own unique powdered materials or specialized-hardware technologies we could find
the costs to be much higher.

Customers

     Manufacturers, service bureaus, universities, and military and defense
organizations purchase our Sinterstation Systems. Commercial and university-
based service bureaus utilize rapid prototyping equipment and often other
equipment to provide services to other organizations involved in product
development. Much of our historical growth has come from the sale of products to
service bureaus around the world. Many of our manufacturing customers were first
introduced to SLS selective laser sintering by these service providers. We have
also found that establishment of service bureau activity has been instrumental
to the introduction of new applications and to the development of new sales
territories.

     We do not consider ourselves dependent on any particular customer. In 2000,
1999 and 1998, no customer represented 10% or more of our revenues.

Marketing and Sales; Product Distribution; Foreign Operations

     We distribute our products globally. The table below presents the revenues
derived from customers located in the area indicated for each of the five years
in the period ended December 31, 2000 (In thousands).

<TABLE>
<CAPTION>
                                         Year ended December 31,
                              2000       1999       1998       1997       1996
                           ---------------------------------------------------
     <S>                   <C>       <C>        <C>        <C>        <C>
      North America        $19,372    $15,059    $13,015    $10,064    $12,371
      Europe                14,636     12,254     10,407      8,615      7,822
      Pacific Rim            6,002      5,736      4,373      6,629      4,186
                           ---------------------------------------------------
        Total revenues     $40,010    $33,049    $27,795    $25,308    $24,379
                           ===================================================
      North America             48%        46%        47%        40%        51%
      Europe                    37         37         37         34         32
      Pacific Rim               15         17         16         26         17
                           ---------------------------------------------------
        Total revenues         100%       100%       100%       100%       100%
                           ===================================================
</TABLE>

     We field a direct sales force based in Germany, the United States and the
United Kingdom. We employ in-region sales personnel to manage agent networks in
other European countries and in the Pacific Rim countries. Our independent
agents are located in France, Italy, Portugal, Spain, Sweden, Turkey, China,
Japan, Singapore, South Korea, Taiwan and Brazil.

     Our marketing programs utilize a mix of seminars, trade shows, advertising,
direct mailings, literature, web presence, videos, press releases, brochures and
customer and application profiles to identify prospects that match a typical
Sinterstation System user profile.

     An internal staff of application specialists is a key part of the marketing
organization effort to provide pre-sales support and to help existing customers
take advantage of the latest materials and techniques to improve part quality
and machine productivity. This group also leverages its customer contact to help
identify new application opportunities that utilize our proprietary selective
laser sintering process.

                                       6
<PAGE>

     We have also developed a telemarketing capability that enhances the
efficiency of our sales management process by quickly identifying application
need and budget availability and by subsequently routing the qualified lead to
the appropriate sales and/or applications personnel within DTM.

     Our web site has been extensively upgraded. With this improved web site, we
hope to provide prospective customers with valuable insights into how our
existing customers are using the technology to fill their needs, including in-
depth case studies and briefs. We intend to further develop the web site as an
essential mechanism to deliver selective laser sintering knowledge and to
support our customers and customers of rapid-prototyping service providers.

Seasonality

     North American capital spending patterns have contributed to relatively
stronger fourth quarter sales and sometimes to slower first quarter sales. We
typically experience slowdowns in sales of Sinterstation Systems during the
third quarter as the result of capital spending patterns in the European
markets. The following table presents the quarterly revenues as a percentage of
calendar year revenues:

<TABLE>
<CAPTION>
                                   Quarter ended
                  March 31    June 30   September 30   December 31
                  ------------------------------------------------
          <S>     <C>         <C>       <C>            <C>
          2000        20%       26%          24%           30%
          1999        24        23           23            30
          1998        21        27           21            31
</TABLE>

Manufacturing

     We currently utilize outside suppliers to produce certain of the major sub-
assemblies of the Sinterstation Systems. Procurement lead-time for the major
sub-assemblies of the Sinterstation Systems can be up to twelve weeks. Assembly
and final testing at our site comprises a three-week cycle.

     Due to the long lead-time for major sub-assemblies, we place orders for
such parts on a forecast basis for scheduled deliveries of up to six months
ahead. We subcontract for the manufacture of Sinterstation System components,
powdered sintering materials and accessories from single-source, third-party
suppliers, some of which are the only available suppliers.

     We believe that we will have sufficient manufacturing capacity to fulfill
demand for our Sinterstation Systems in 2001. See "Item 2. Properties."
Intellectual Property

     Researchers at The University of Texas initially developed the selective
laser sintering technology commercialized by DTM. The first selective laser-
sintering patent was issued to The University of Texas in 1989. Currently, we
have exclusive rights to 17 U.S. patents issued to The University of Texas. The
main University of Texas patents covering selective laser sintering expire in
2006. Patents granted on improvements to the original patent as well as new
patents obtained by us extend some protections to at least 2010. We have an
exclusive worldwide license from The University of Texas to use the selective
laser sintering technology, the term of which continues until expiration of the
patent rights that are the subject of the UT License. The UT License includes
the original patents plus a right of first refusal for all improvements thereon.
The UT License required that we commercialize the technology, which we have done
and continue to do in key markets. Under the UT License, we are required to make
royalty payments equal to 4% of applicable Net Sales (as defined in the License
Agreement).

     In 1999, the Company became a licensee under two U.S. patents, which cover
certain metal sintering powders developed by Rockwell Science Center, a key
customer. To date there have been no sales subject to royalties under this
license.

                                       7
<PAGE>

     As of December 31, 2000, we owned 13 U.S. patents and had exclusive
licenses to 19 U.S. patents. As of the same date we owned or had exclusive
licenses under eight European patents. We owned or had exclusive rights to 25
other issued international patents and had patent applications pending. The
technology covered by such patents included the following:

          .  Fundamental elements of the selective laser sintering process;

          .  Related inventions on powder delivery, beam delivery, laser control
             and thermal control;

          .  Use of certain sintering powders in the selective laser sintering
             process; and

          .  Certain post-processing steps for part finishing.

     New technology developments are continuing and new patent applications are
anticipated. We have six trademarks registered with the U.S. Patent and
Trademark Office.

     We can give no assurance that the issued patents to which we hold rights
will be adequate to protect our interests or, if challenged, held valid. Our
competitors could develop non-infringing systems, materials or technologies that
are equivalent or superior to those of ours. A competitor currently does and
others may practice technology covered by our patents or other legal or
contractual protections regardless of the fact that it is legally protected,
forcing us to engage in costly litigation to defend our interests. While we
defend our intellectual property vigorously, there can be no assurance that we
will be successful in our various litigation in many countries. A failure by us
to protect our intellectual property position could have a material adverse
effect on our business, financial condition and results of operations.

Competition

     The Company's principal competition for functional prototype and
manufacturing applications are the suppliers of traditional machining, milling
and grinding equipment. Such suppliers are numerous, both international and
regional in scope, and have mature product lines that compete with the Company
in essentially all of its served and targeted markets. Conventional machining
and milling techniques continue to be the most common methods by which plastic
and metal functional prototypes and metal tool inserts are manufactured.
Conventional pattern manufacturing techniques continue to be the most common
methods to custom manufacture metal parts and by which patterns are made for use
in the casting of metal functional prototypes.

     We believe that selective laser sintering has become established as the
leading rapid-prototyping technology for the production of functional plastic
prototypes and that we have the largest installed base of selective laser
sintering machines in the world. We face direct competition for selective laser
sintering equipment and materials outside the United States from EOS GmbH of
Planegg, Germany. We have brought patent infringement actions against EOS in
various international jurisdictions. See "Item 3 Legal Proceedings." Our
Sinterstation Systems are capable of processing a range of materials, including
plastic, metal, or sand material. Whereas, EOS offers selective laser sintering
machines that are designed to process a specific class of materials - plastic,
metal or sand material. The EOS sand and polystyrene machines are offered with
build chambers that are larger than those in our multiple-purpose machines.
Under certain circumstances, EOS successfully utilizes this size advantage of
its machines to compete for prospective customers.

     3D Systems Corporation of Valencia, California offers rapid-prototyping
equipment based upon stereolithography that utilizes ultraviolet light sources
to polymerize liquid monomers into a solid object. Stratasys, Inc. of Eden
Prairie, Minnesota offers rapid prototyping equipment based upon plastic
extrusion. Both 3D Systems and Stratasys offer other equipment that is targeted
at the production of visualization models for product design applications. These
systems, which are based on inkjet technology, are generally

                                       8
<PAGE>

lower in price and targeted for engineering design groups within large
companies. Both 3D Systems and Stratasys have greater financial resources than
DTM.

Executive Officers

     The executive officers of DTM and their ages as of March 1, 2001 are as
follows:

<TABLE>
<CAPTION>
        Executive Officers        Age                        Position
        ------------------        ---                        ---------
     <S>                          <C>          <C>
     John S. Murchison, III        60          Chief Executive Officer and President
     Geoffrey W. Kreiger           51          Chief Financial Officer, Treasurer and Secretary
     Kevin McAlea                  42          Vice President, Marketing and Business
                                               Development
     Ronald K. Skaggs              39          Vice President, Worldwide Services
     Patrick Lordi                 50          Vice President Worldwide Sales
     Craig Wadham                  57          Vice President Engineering
</TABLE>

     John S. Murchison, III joined us as Chief Executive Officer and President
in September 1990. Prior to joining us, Mr. Murchison was 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.

     Kevin McAlea, Ph.D. was appointed Vice President, Marketing and Business
Development in 1997. He had been Director of Process and Materials Research
since joining DTM in 1993. Before joining DTM, Dr. McAlea spent more than eight
years in materials research and development for General Electric Company. His
last position was managing the Polymer Physics Program at GE's Corporate
Research and Development Center.

     Geoffrey W. Kreiger was appointed Chief Financial Officer, Treasurer and
Secretary in 1999. He had been Controller since joining DTM in 1997. Before
joining us, Mr. Kreiger was Executive Vice President of Austin Software Foundry,
Inc., from 1996 to 1997. Prior to that, he was President, Datamarine Unit, and
Chief Financial Officer and Director of Datamarine International, Inc., a
manufacturer of communications equipment and consumer electronics, from 1988 to
1995. Mr. Kreiger is a Certified Public Accountant.

     Ronald K. Skaggs joined us in September 2000 as Vice President, Global
Services. Before joining DTM, Mr. Skaggs was Director of Customer Service for
North America at Gretag Imaging, a professional imaging manufacturer. He held a
similar position with Cymbolic Sciences International from 1995 to 1998

     Patrick Lordi joined us in November 2000 as Vice President, Worldwide
Sales. Prior to joining the Company, Mr. Lordi was Vice President of Global
Sales & Services at Cymbolic Sciences International, a professional imaging
equipment manufacturer from 1998 to 2000. Prior to that, he was Vice President
of Sales and Marketing of Photometrics, Ltd, a scientific digital imaging
equipment manufacturer from 1993 to 1998. He also held sales and management
positions with Nicolet Instruments Corporation and Beckman Instruments.

     Craig Wadham was appointed Vice President Engineering in 2000. He has
resigned his employment with us to be effective March 31, 2001. He had been a
Director of Product Development since 1995 and a Controls Engineer with us since
1990.

                                       9
<PAGE>

Employees

     At December 31, 2000, we had 132 employees, compared to 113 at the end of
1999 and 116 at the end of 1998. At December 31, 2000, 85 employees were located
at the corporate offices in Austin, Texas, 14 employees were located at other
U.S. sales and services offices and 33 employees were located in sales and
service offices in Germany, the United Kingdom, Japan and Singapore. The Company
has no prior experience with a work stoppage and considers its relations with
its employees to be good.

ITEM 2.   PROPERTIES

     We currently lease a 50,000-square foot facility at 1611 Headway Circle,
Buildings 1 and 2, Austin, Texas. We also lease off-site sales and/or service
offices located in various areas of the United States and in Tokyo, Japan, in
Singapore, in Birmingham, England and in Hilden, Germany. DTM expects that such
facilities will be sufficient to support the Company's operations through the
remainder of 2001. See "Item 1.  Business--Manufacturing."

ITEM 3.   LEGAL PROCEEDINGS

     We have initiated legal proceedings against EOS GmbH Electro Optical
Systems  (EOS), to enforce its patent rights in various jurisdictions. The
plastic sintering patent infringement actions against EOS were begun in France,
Germany, and Italy in 1996.  In 1997, we initiated action against Hitachi Zosen
Joho Systems, the EOS distributor in Japan.  We are pursuing injunctive relief
and damages where applicable.

     In September 1999, the Tokyo court ruled in our favor and granted a
preliminary injunction prohibiting further importation and selling of the
infringing plastic sintering EOS machine. EOS has initiated invalidation trials
against the patents used in that injunction.

     The legal actions in the three European countries are proceeding.  EOS had
challenged the validity of the plastic patents in the European Patent Office
(EPO).  Both of those patents have now survived the opposition appeals and the
infringement hearings have been re-started.

     In 2000, EOS filed a patent infringement suit against us in federal court
in California. EOS alleges that we have infringed and continue to infringe
certain U.S. patents licensed to EOS by 3D Systems. We believe that our systems
do not infringe any valid claims of these patents, which cover liquid based
photo-polymer systems. These proceeding are in the pre-discovery stage.

     There can be no assurance that the foregoing actions will not have a
disruptive effect upon the operations of our business or that the resolution of
the foregoing actions will not have a material adverse effect upon us. See "Item
1.  Business--Intellectual Property."

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS DURING THE FOURTH
QUARTER OF THE FISCAL YEAR COVERED BY THIS REPORT

     None.

                                       10
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Stock Prices

     Our common stock is traded on The Nasdaq SmallCap Market under the symbol
"DTMC." The high and low transaction prices for each calendar quarter of the
previous two years are set forth below.

<TABLE>
<CAPTION>
                                                    Stock Prices
                                                 High          Low
                                                 ----          ---
          <S>                                    <C>           <C>
          1999
          ----
          First Quarter                            $2.125  $0.813
          Second Quarter                           $2.000  $0.875
          Third Quarter                            $1.813  $1.188
          Fourth Quarter                           $1.750  $0.750

          2000
          ----
          First Quarter                            $4.250  $1.375
          Second Quarter                           $3.000  $2.000
          Third Quarter                            $6.250  $2.250
          Fourth Quarter                           $6.000  $2.375
</TABLE>

     As of February 21, 2001, we had 7,090,989 shares of common stock
outstanding, which were held by approximately 1,300 beneficial owners,
represented by 53 shareholders of record.

Dividend Policy

     We have never declared or paid cash dividends on our common stock and do
not anticipate that we will pay dividends in the foreseeable future. We intend
to reinvest any earnings in the development and expansion of our business.
Furthermore, we are now restricted from paying dividends by the terms of our
loan agreement with a bank and we expect that this restriction will be part of
future borrowing arrangements.

                                       11
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following table of selected financial data should be read in conjunction
with the Financial Statements required by Item 8 and Management's Discussion and
Analysis of Financial Condition and Results of Operation included in Item 7.

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                      2000        1999        1998         1997         1996
                                                 ---------------------------------------------------------------
<S>                                              <C>           <C>         <C>          <C>          <C>
Statements of Operations Data:
   Revenues                                        $ 40,010    $ 33,049    $ 27,795     $ 25,308     $ 24,379

      Cost of sales                                  19,340      15,892      16,094       14,721       14,445
      Gross margin                                     51.7%       51.9%       42.1%        41.8%        40.7%
      Selling, general and administrative            13,007      12,091      11,387       10,579        9,980
      Research and development                        3,254       2,865       3,538        4,871        4,292
      Provision for litigation settlement                -           -        1,700           -            -
      Stock compensation                                 -           -           -         2,927           -
      Interest expense, net                             110          96          48          325        1,066
      Net gain on sale of assets                         -          129         424           -            -
      Cost of discontinued registration                  -           -           -            -           752
      Tax expense (benefit)                             971         515          30         (827)      (1,667)
                                                 ---------------------------------------------------------------
   Net income (loss)                               $  3,328    $  1,719                 $ (4,578) $ ($ (4,489)
                                                 ===============================================================
   Net income (loss) per common share -
       Basic                                       $   0.47    $   0.25    $  (0.73)    $  (1.45)    $  (1.38)
                                                 ===============================================================
       Diluted                                     $   0.45    $   0.25    $  (0.73)    $  (1.45)    $  (1.38)
                                                 ===============================================================
   Weighted-average number of shares:
      Basic                                           7,042       6,785       6,287        5,034        3,243
      Diluted                                         7,327       6,858       6,287        5,034        3,243

Balance Sheet Data (at period end):
   Working capital                                 $  8,119    $  4,765    $  1,858     $  4,964     $  1,622
   Total assets                                      18,387      13,681      12,306       17,548       17,897
   Total debt                                            -           -           -           175       15,809
   Total liabilities                                  7,577       6,358       7,475        8,310       26,382
   Shareholders' equity (deficit)                    10,810       7,323       4,831        9,238       (8,485)
</TABLE>

                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Business Environment and Risk Factors

     The following discussion and analysis should be read in conjunction with
the information set forth under "Selected Financial Data" and ours Consolidated
Financial Statements and notes thereto, as well as the section below under the
heading "Risk Factors That May Affect Future Results." Ours future operating
results may be affected by various trends and factors, which are beyond our
control. These include, among other factors, changes in general economic
conditions, rapid or unexpected changes in technologies and uncertain business
conditions that affect the rapid prototyping and rapid tooling industry.
Accordingly, past results and trends should not be used by investors to
anticipate future results or trends.

     With the exception of historical information, the matters discussed below
under the heading "Results of Operations" and "Liquidity and Capital Resources"
may include forward-looking statements that involve risks and uncertainties. All
statements, trends and other information contained in this Annual Report on Form
10-K relative to markets for our products and trends in revenue, gross margin
and anticipated expense levels constitute forward-looking statements. These
forward-looking statements generally can be identified by the use of words such
as "anticipate," "believe," "plan," "estimate," "expect," "intend," "may,"
"should" and other similar terminology. We wish to caution readers that a number
of important factors, including those identified in the section entitled "Risk
Factors That May Affect Future Results" as well as factors discussed elsewhere
in this report and in our other reports filed with the Securities and Exchange
Commission, could affect our actual results and cause actual results to differ
materially from those forward-looking statements. See the discussion at the
beginning of Part I.

Overview

     We market a system called the Sinterstation(R). It uses computer-generated
3-dimensional drawings to quickly produce accurate, durable parts by fusing
powdered materials into solid objects with a laser.  The parts are used in a
number of ways: including as models, prototypes, molds, tooling, and patterns -
and even as final products.

     With a Sinterstation, our customers like Boeing, Daimler Chrysler,
Whirlpool and others can go from their design files to plastic, metal, or
ceramic parts in hours or days, rather than weeks or months. By creating parts
directly from computer drawings, they can test, produce, and market their new
products sooner--and often with less cost.

     Our customers indicate they prefer the Sinterstation to other options
because it is the fastest, most flexible, adaptable "rapid prototyping" solution
on the market today for functional parts and small volume manufacturing
applications.

     Functional Plastic Prototype Market

     Today, customers primarily use Sinterstation Systems and SLS materials to
create functional plastic prototypes. We believe DTM's SLS process, in
combination with our DuraForm SLS material system, is currently the world's
leading rapid-prototyping technology used for functional plastic prototype
applications.

     Approximately 80% of our 1999 and 2000 product sales involved DuraForm
prototyping applications.  Unit volume growth, driven primarily by this
application, has been about 30% per year and revenues have grown by
approximately 20% per year since 1997.  The primary reason revenues have grown
at a lower rate than unit volume is a combination of price competition with EOS
in Europe and the weakness of the Euro relative to the U.S. dollar.

                                       13
<PAGE>

     Keys to maintaining growth and protecting our functional plastic prototype
market share include: (1) continuing to improve the DuraForm material system
used in this application; and (2) developing new and/or enhanced selective laser
sintering machines for this application.

     LaserForm ST-100 Metal Powder Opportunity for Tooling

     In 2000, we introduced a new and significantly improved metal powder system
for the production of prototype tools. Our process involves creating a green
part in the Sinterstation System and then utilizing an oven to make it a fully
dense metal tool. The new process uses a new material, is faster, is simpler
than our previous process, and involves a more reliable furnace.

     Of the Sinterstation(R) 2500plus systems sold in the second half of 2000,
about 35% were configured to process the new LaserForm ST-100 material.
Customers attracted to the LaserForm product represent a market segment that we
have previously had limited success in penetrating.  These customers have
businesses that involve quickly manufacturing small quantities of injection-
molded plastic parts in materials specified by their customers. They will use
their Sinterstation(R) 2500plus systems with LaserForm ST-100 to produce
prototype tools for use on internally operated injection molding machines. The
new LaserForm ST-100 material system allows these customers to proceed to
injection molding faster by speeding up the prototype tool preparation phase of
their product delivery process.

     The combination of a successful beta test, third and fourth quarter sales,
and increasing prospect activity leads us to believe we can grow the prototype
mold application with LaserForm ST-100 more successfully than with earlier metal
powder systems.

     LaserForm ST-100 Metal Powder Opportunity for Functional Parts

     Results of our internal LaserForm ST-100 development program indicate this
new metal powder material system also holds promise for the production of
functional metal prototype parts.  Consequently, in the third quarter of 2000,
we initiated a second beta program to test LaserForm ST-100 in that application.
Five SLS service providers are participating in this test.

     We will use the beta program as a first step in developing a network of
service providers who will use our technology to produce functional metal
prototypes.  We believe this network will prepare the market for functional
metal parts by promoting them to major end users.

     A second phase of market development will begin as major users: (1) become
more comfortable with functional metal SLS parts made by service providers and
(2) begin purchasing the technology for internal purposes. We believe the market
for one-off prototype metal parts is comparable in size to our current plastic
functional prototype market.

     In addition to the above, we have entered into other programs with Rockwell
Science Center and Penn State to further develop stainless steel and aluminum
powders that can be processed into metal parts using a combination of our
technology and Rockwell technology.  Rockwell is focusing on development of a
stainless steel material system, while Penn State is focusing on aluminum.

                                       14
<PAGE>

     Low-volume Manufacturing Opportunity

     Sinterstation's are being increasingly used for manufacturing low-
volume/high-value parts, either directly in the Sinterstation or in conjunction
with traditional casting and molding processes. While companies widely employ
hand fabrication techniques and tooling-based processes to manufacture parts for
these applications, these conventional techniques have several limitations
including:

       .  The high cost of tooling and lead-time;

       .  Inconsistent results with hand fabrication;

       .  The high cost of skilled labor; and

       .  The challenges associated with finding and hiring skilled workers.

     Aerospace, medical, motor sports, and centrifugal pumps are examples of
low-volume/high-value manufacturing applications that require in the range of
500 to 5000 parts per year. SLS offers a way to eliminate hand fabrication
techniques, lower costs, and reduce lead-time for tooling. Since a
Sinterstation(R) 2500plus can run unattended and produce multiple parts in a
single run, it is a good candidate for small volume manufacturing operations.

     We are working with several customers to develop small-volume manufacturing
opportunities. To facilitate success, we have dedicated elements of our sales,
applications, and service support to these customers. By doing this, we hope to
learn more about supporting and penetrating this market opportunity. As our
confidence in the viability of this application grows, we will add marketing and
sales resources dedicated to identifying additional low-volume manufacturing
opportunities.

Low- volume Manufacturing Requirements

     We recently completed a market study designed to help us better understand
how to make our SLS products more acceptable for low-volume manufacturing. With
guidance from an external consultant, a team of our employees performed the
study. The team included representatives from marketing, sales, manufacturing,
and engineering.

     This team interviewed companies in depth and surveyed many others in order
to better understand the requirements of low-volume manufacturing and to
identify improvements customers would like to see in our technology before they
will accept it as a viable low-volume manufacturing method.

     We believe developing Sinterstation systems which meet the more stringent
requirements of low-volume manufacturing application will also enhance the
overall value and acceptability of our products in other market segments,
including prototype tooling and functional plastic prototypes.

     We have redirected our engineering program to focus on developing and
designing products capable of meeting the low-volume manufacturing application.

Continuing revenues

     At the end of 2000, we had an installed base of 388 Sinterstation Systems:
44% were in the Americas, 37% were in Europe, and 19% were in Pacific Rim
Countries. Approximately 43% of the installed base is comprised of our highly
productive third-generation Sinterstation(R) 2500plus Systems.

     This installed base generates recurring revenue in the range of $53,600 per
machine per year, which amounted to 47% of our total revenues in 2000. About 67%
of the total recurring stream comes from the sale of SLS materials and DuraForm
accounts for approximately 80% of that total.

                                       15
<PAGE>

     We plan to continue to expand our recurring revenue stream by:

       .  Increasing our installed base through the sales of the
          Sinterstation(R) 2500plus;

       .  Enhancing and protecting our DuraForm market position by developing
          and introducing improved products;

       .  Increasing CastForm sales for investment casting applications;

       .  Expanding metal material system sales in the near term through the
          commercialization of LaserForm ST-100 for tooling and functional metal
          prototypes;

       .  Accelerating the growth in metal material sales in 2002 by introducing
          aluminum and stainless steel powders for tooling and functional metal
          prototype applications; and

       .  Enhancing service and support through better responsiveness and
          training.

Revenue Recognition Policies Summary

     We recognize revenue only when finished products are shipped, title and
risks of ownership have transferred to the buyer, the remaining obligations are
insignificant and collection of the related receivable is probable. We recognize
service and support revenues when performed, or in the case of service
contracts, over the contract period. Deferred revenue equal to the estimated
cost of warranty is recorded on each system sale and recognized as service and
support revenue over the warranty period.

                                       16
<PAGE>

Results of Operations

     Key operating results for the year ended December 31, 2000 versus 1999 are
summarized as follows:

<TABLE>
<CAPTION>
                                     2000        1999             2000 vs. 1999
                                     ----        ----             -------------
                                        (in thousands, except per share amounts)
<S>                                 <C>        <C>          <C>             <C>
Revenues                            $ 40,010   $ 33,049     Up $6,961       Up   21.1%
Operating income                    $  4,409   $  2,201     Up $2,208       Up  100.3%
Net income                          $  3,328   $  1,719     Up $1,619       Up   94.2%

Diluted earnings per share          $   0.45   $   0.25     Up $ 0.20       Up   80.0%
</TABLE>

     The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support revenues.

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                                   2000        1999         1998
                                                               ---------------------------------------
               <S>                                             <C>             <C>          <C>
               Revenues:
                   Products                                       84.5 %        86.4 %       87.0 %
                   Service and support                            15.5          13.6         13.0
                                                               ---------------------------------------
                                                                 100.0         100.0        100.0
               Gross Profit:
                   Products margin                                55.4          54.6         42.6
                   Service and support margin                     31.3          34.9         38.9
                                                               ---------------------------------------
                   Gross profit                                   51.7          51.9         42.1
                                                               ---------------------------------------
               Operating expenses:
                   Selling, general and administrative            32.5          36.5         41.0
                   Research and development                        8.2           8.7         12.7
                   Provision for litigation settlement             -             -            6.1
                                                               ---------------------------------------
                                                                  40.7          45.2         59.8
                                                               ---------------------------------------
               Operating income (loss)                            11.0           6.7        (17.7)

               Other income (expense):
                   Interest expense, net                          (0.3)         (0.3)        (0.2)
                   Gain on sale of assets, net                     -             0.4          1.5
                                                               ---------------------------------------
                                                                  (0.3)          0.1          1.3
                                                               ---------------------------------------

               Income (loss) before income tax                    10.7           6.8        (16.4)

               Income tax expense                                  2.4           1.6          0.1
                                                               ---------------------------------------
               Net income (loss)                                   8.3 %         5.2 %      (16.5)%
                                                               =======================================
</TABLE>

                                       17
<PAGE>

     Revenues. The following table presents the components of revenues for the
years ended December 31, 2000, 1999 and 1998 and certain other information (in
thousands, except units):

<TABLE>
<CAPTION>
                                               2000 vs.                     1999 vs.
                                               ---- ---                     ---- ---
                                   2000          1999           1999          1998           1998
                                   ----          ----           ----          ----           ----
<S>                        <C>                 <C>            <C>           <C>            <C>
Machines and accessories          $21,418      Up  7.6%       $19,903       Up 11.0%       $17,928
Sintering materials                12,376      Up 43.0%         8,652       Up 38.7%         6,240
Services and support                6,216      Up 38.3%         4,494       Up 23.9%         3,627
                           -----------------------------------------------------------------------
Total Revenues                    $40,010      Up 21.1%       $33,049       Up 18.9%       $27,795
                           =======================================================================

System volume in machine
 and accessories revenues              83      Up 18.6%            70       Up 29.6%            54

Machine and accessories                          Down                          Down
 revenues per system sold         $   258.0      9.2%           $ 284.3       14.4%          $ 332.0

Average systems in the                347      Up 27.6%           272       Up 30.1%           209
 field

Average continuing
 revenues                         $    53.6    Up 11.0%         $  48.3     Up   2.3%        $  47.2
</TABLE>

     The increases in revenues in both 2000 and 1999 were due to increased unit
sales and the resulting growth in systems in the field. The decline in average
machine and accessories revenues moderated somewhat in 2000 but continued a
trend to lower prices started in 1997. Revenues from the sale of sintering
materials to the installed base grew more rapidly than the installed base in
2000. We believe this may be due to greater utilization rates among customers
who own our latest generation of Sinterstation Systems, the Model 2500 /plus/.

     Our international revenues were $20.6 million, or 51.6%, of total revenues,
compared to 54.4% and 53.2% of total revenues in 1999 and 1998, respectively.
The following is a summary of revenues based upon the location of the customers
for the years ended December 31 (in thousands) and the period-to-period changes
in those revenues:

<TABLE>
<CAPTION>
                                                       2000             1999             1998
                                              ---------------------------------------------------
<S>                                           <C>                  <C>              <C>
Revenues from external customers:
  North America                                   $  19,372        $  15,059        $  13,015
  Europe                                             14,636           12,254           10,407
  Pacific Rim Countries                               6,002            5,736            4,373
                                              ---------------------------------------------------
                                                  $  40,010        $  33,049        $  27,795
                                              ===================================================

Period to period increase in revenues:
  North America                                        28.6%            15.7%
  Europe                                               19.4             17.8
  Pacific Rim Countries                                 4.6             31.2
    Total                                              21.1%            18.9%
</TABLE>

     Germany and Japan were the only foreign countries from which more than 10%
of our revenues were derived in the three years ended December 31, 2000.
Revenues derived from German customers amounted to 12%, 17% and 23% of total
revenues in 2000, 1999 and 1998, respectively. Revenues derived from Japanese
customers amounted to 10% of total revenues in 1999 and were less than 10% in
2000 and 1998. Beginning in 2000, system sales were offered throughout the
European Economic Union Countries denominated in euros instead of U. S. Dollars.
Also beginning in 2000, we began denominating our system sales in the United
Kingdom in pounds sterling. We do not hedge all of our foreign currency exchange
rate

                                       18
<PAGE>

risk. The effect of foreign exchange rate fluctuations on exchange transactions
and translation of foreign operations did not have a significant impact on
operating results in any period. However, in 2000, 1999 and 1998 we did
experience downward pressure on its international prices as the U.S. dollar
strengthened significantly against most European and Asian currencies. If this
strengthening continues, we expect continued downward pressure on our sales
prices in the international markets.

     Revenues in past periods may not be indicative of revenues in the future,
which may be affected by other business environment and risk factors previously
discussed, as well as other factors included elsewhere herein.

     Gross Profit.  Gross profit was $20.7 million, or 51.7%, of revenues in
2000, compared to $17.2 million, or 51.9%, of revenues in 1999, and $11.7
million, or 42.1%, of revenues in 1998. The gross profit increases in 2000 and
1999 were due to sequentially higher worldwide unit volume each year. The
introduction of a cost reduced platform in late 1998 and a premium material in
late 1997 affected the 1999 gross margins positively. The 1998 gross margin was
affected negatively by an inventory write down of $675,000 in the second quarter
of 1998 caused by product obsolescence.

     We believe there is a risk that gross margin percentages may decline in the
face of the strong U.S. dollar. Other factors, including pricing pressures
internationally and changes in material and labor costs, may also have an
adverse effect on gross margins. Past gross margins are not necessarily
indicative of future gross margins.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense was $13.0 million, or 32.5%, of revenues in 2000,
compared to $12.1 million, or 36.5%, of revenues and $11.4 million, or 41.0%, of
revenues in 1999 and 1998, respectively. The increased spending in both 2000 and
in 1999 was primarily related to the increased costs associated with sales and
sales support staffs and commission expense resulting from higher sales levels.
The decreases in percentage of revenues spent was primarily attributable to cost
containment programs and to more efficient utilization of the overhead
infrastructure. Selling, general and administrative expense may vary as a
percentage of revenues in the future.

     Research and Development Expense.  Research and development expense
increased by 12.0% over 1999 to $3.3 million in 2000, from $2.9 million in 1999
and $3.5 million in 1998. As a percentage of revenues, research and development
expense was 8.2%, 8.7% and 12.7% in 2000, 1999 and 1998, respectively. The
higher 1998 expense levels were primarily due to outsourcing costs associated
with the initial design and prototype cost associated with multiple significant
new product development projects that commenced in 1997 and culminated in 1998
with the introduction of several new material systems and the new Sinterstation
Model 2500plus. Also, over this period we increasingly relied on external
partnerships to develop powdered sintering materials and have realized
efficiencies with this approach.

     Research and development expense may increase in absolute dollars in future
periods, and such expenditures may vary as a percentage of sales. There can be
no assurance that our research and development efforts will result in
commercially successful new technology and products in the future, and those
efforts may be affected by other factors.

     Provision For Litigation Settlement. In 1998, we settled a shareholder
class action lawsuit. The charge to our second quarter statement of operations
in the amount of $1.7 million consisted of $3.0 million, the value of the
settlement, and $200,000 in other costs, net of the insurance recovery of $1.5
million.

     Interest Expense. Net interest expense was $110,000, $96,000 and $48,000
for 2000, 1999 and 1998, respectively. The increase in interest expense was a
result of increased borrowings in 2000 and in 1999.

     Gain on Sale of Assets. In the first quarter of 1999 and the fourth and
third quarters of 1998 we sold used Sinterstation Model 2500 and Model 2000
Systems under an announced program to sell systems

                                       19
<PAGE>

that had been used internally for development and support activities or under a
discontinued rental program. We recognized a net gain of $129,000 and $424,000
on those sales in 1999 and 1998, respectively.

     Income Taxes. We provided for income taxes at effective rates of 22.6% and
23.1% in 2000 and 1999, respectively. In both years the effective rates were
reduced through utilization of deferred tax assets not previously benefited. The
effective rates before such utilization was 40.8% and 36.9%.

     At December 31, 2000, we had approximately $6.8 million of federal net
operating loss carry forwards. These net operating loss carry forwards begin to
expire in 2003. As a result of the February 1999 change in control of DTM,
utilization of net operating loss carry forwards will be subject to additional
annual limits of approximately $500,000. We have not recognized any benefit from
the future use of loss carry forwards due to uncertainties regarding the
realization of deferred tax assets based upon the taxable earnings history. At
December 31, 2000, we also had $2.1 million of other non-current timing
differences. We have not recognized any benefit relating to these non-current
timing differences for the same reason as stated for the net operating loss
carry forwards. Since these items are not subject to the annual limits they can
be recognized as soon as the taxable earnings history indicates that it is
appropriate, possibly as early as next year.

     Net Income (Loss). Net income was $3.3 million in 2000. The $1.6 million
improvement from 1999 to 2000 was primarily due to increased revenues with
stable margins and control of operating expenses.

     We had net income of $1.7 million in 1999. The $3.9 million improvement
from 1998 (before special charges) to 1999 was primarily due to increased
product and service revenues, improved gross margins on a cost-reduced platform
and powdered sintering materials, reduced spending on research and development
and control of other operating expenses.

     Operating results for 1998 included a special charge of $1.7 million for
the estimated cost of settling the shareholder class action litigation and
$675,000 of an inventory write-off relating to new product introductions. Net
loss, including special charges, for 1998 was $4.6 million.

     Earnings per diluted share were $0.45 in 2000 and $0.25 in 1999. In 1998,
net loss per share was $0.73.

                                       20
<PAGE>

Selected Quarterly Results

     The following table sets forth certain unaudited quarterly results of
operations for the three-month periods ended March 31, 1999 through December 31,
2000. 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 our
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 (in thousands, except per share
amounts).

<TABLE>
<CAPTION>
                                                                         Quarter ended
                                                    March 31        June 30   September 30   December 31
                                                  --------------------------------------------------------
<S>                                               <C>               <C>       <C>            <C>
2000:
Revenues                                              $  8,153      $ 10,333      $  9,654      $ 11,870
     Cost of sales                                       4,038         4,867         4,608         5,827
     Gross margin                                         50.5%         52.9%         52.3%         50.9%
     Selling, general and administrative                 2,696         3,481         3,430         3,400
     Research and development                              874           840           655           885
     Interest expense, net                                  19            36            36            19
     Net gain on sale of assets                             -             -             -             -
     Tax expense                                           164           346           300           161
                                                  --------------------------------------------------------
Net income                                            $    362      $    763      $    625      $  1,578
                                                  ========================================================
Net income per common share - diluted (A)             $   0.05      $   0.11      $   0.09      $   0.21

1999:
Revenues                                              $  7,972      $  7,599      $  7,636      $  9,842
     Cost of sales                                       3,694         3,547         4,001         4,650
     Gross margin                                         53.7%         53.3%         47.6%         52.8%
     Selling, general and administrative                 3,278         2,913         2,654         3,246
     Research and development                              662           788           706           709
     Interest expense, net                                   7            21            26            42
     Net gain on sale of assets                             50            79            -             -
     Tax expense                                           107           114            68           226
                                                  --------------------------------------------------------
Net income                                            $    274      $    295      $    181      $    969
                                                  ========================================================
Net income per common share - diluted                 $   0.04      $   0.04      $   0.03      $   0.14
                                                  ========================================================
</TABLE>

     Note A. - The sum of quarterly calculations of net income per common share
($0.46) does not equal the annual calculation of net income per common share
($0.45).

                                       21
<PAGE>

     The table below sets forth the components of revenues and cumulative
systems sold for the same quarterly periods (In thousands, except units):

<TABLE>
<CAPTION>
                                                            Quarter ended
                                           March 31       June 30      September 30      December 31
                                      -----------------------------------------------------------------
<S>                                   <C>                 <C>          <C>               <C>
2000:
Machines and accessories                   $   4,033      $  6,094     $  4,661          $   6,630
Sintering materials                            2,766         2,771        3,439              3,400
Services and support                           1,354         1,468        1,554              1,840
                                      -----------------------------------------------------------------
Total revenues                             $   8,153      $ 10,333     $  9,654          $  11,870
                                      =================================================================
Systems sold                                      17            25           19                 24
Cumulative units                                 322           346          364                388

1999:
Machines and accessories                   $   4,961      $  4,521     $  4,454          $   5,967
Sintering materials                            2,030         2,136        2,114              2,372
Services and support                             981           942        1,068              1,503
                                      -----------------------------------------------------------------
Total revenues                             $   7,972      $  7,599     $  7,636          $   9,842
                                      =================================================================
Systems sold                                      17            15           16                 22
Cumulative units                                 252           270          285                307
</TABLE>

Liquidity and Capital Resources

     Liquidity risk refers to the risk of DTM being unable to meet potential
cash outflows promptly and cost effectively. At December 31, 2000, we were debt
free, had working capital of $8.1 million and had generated $2.7 million and
$2.8 million in net cash flows from operations in 2000 and 1999, respectively.

     As is typical in the capital goods markets, many of our sales occur at the
end of a quarter. Since we are the integrator of the products that we sell, we
must make commitments to our manufacturing partners for approximately three
months of production. We have credit facilities with a bank to help us finance
our production in advance of sales collection. These credit facilities allow
borrowings of up to $3.5 million and were used and, generally, repaid within
each of the four quarters of 2000. To continue to borrow under these credit
facilities, our accounts receivable must be sufficient and of good quality to
support any loans and we must meet a tangible net worth requirement.

     Our net accounts receivable represented approximately 64 days of quarter
sales at December 31, 2000, compared to 58 and 54 days at the end of the prior
two years. Net inventory represented approximately 56 days on hand at December
31, 2000, compared to 51 and 75 days at the end of the prior two years.

     In 2000, we re-invested in fixed assets; mainly Sinterstations used
internally for product development and sales support. In the previous two years,
our depreciation exceeded our capital expenditures by a significant margin.
Capital expenditures were $1.6 million, $1.2 million and $1.7 million in the
years ended December 31, 2000, 1999 and 1998, respectively.  These investments
were funded from operations.

     We believe that we have the financial resources needed to meet business
requirements, including capital expenditures, working capital requirements and
operating lease commitments for facilities and equipment through December 31,
2001. However, there can be no assurance that this will be the case.

                                       22
<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

We Depend on Markets that Are in their Early Stages of Development

     The market for rapid prototyping products and services, such as those
marketed by DTM, remains in an early stage of development and includes multiple,
competing technologies, many of which are not yet fully developed. Participants
in this market are moving to address new applications, many of which may not yet
be known or accepted by potential users. Rapid prototyping requires that a
three-dimensional CAD file describe a design, and organizations which are not
currently using three-dimensional CAD are not, generally, potential customers
for rapid prototyping products and services. Significant education of the end
user in both three-dimensional CAD modeling and rapid prototyping in general has
in some cases been a prerequisite to product acceptance. It is not clear at this
time which of the competing technologies will gain broad market acceptance.

     The markets for rapid manufacturing products and rapid tooling products,
such as those marketed by DTM, are in an even earlier stage of development than
rapid prototyping. Participants in these markets, including DTM, are moving to
address new applications, many of which may not yet be known or accepted by
potential users. The companies who use traditional casting methods for metal
parts and traditional-machining methods to make injection-molding tooling have
made large capital investments in traditional equipment and have mature
infrastructures for doing so. They may be highly resistant to adopting new
technologies. There can be no assurance that rapid manufacturing technologies
and rapid tooling technologies will evolve to the point that the perceived value
will overcome perceived risks.

Our Market Is Highly Competitive

     The market for rapid prototyping systems is competitive. In marketing our
Sinterstation Systems, we experience competition from many sources. Certain of
our competitors are better known and have greater financial, research and
development, production and marketing resources than us. Currently, the design
and manufacturing applications that our products address are primarily
accomplished using machining, milling and grinding equipment. The suppliers of
such traditional equipment are large and numerous. Large amounts of capital have
already been expended on such traditional equipment, and there exists a cultural
bias to its use in many manufacturing organizations. The principal worldwide
competitors in rapid prototyping are 3D Systems Corporation and Stratasys, Inc.
EOS GmbH Electro Optical Systems is a significant competitor in Europe and in
the Pacific Rim countries. Competition has increased as a result of the
introduction of new products or product enhancements by these competitors and
the entry into the industry by other companies. Increased competition has in the
past resulted, and may in the future continue to result, in price reductions,
reduced margins and loss of market share, all of which have materially adversely
affected our business and financial results.

     While we historically have not faced competition in the supply of powdered
sintering materials and services to Sinterstation users, we eventually face
competition upon suitability and upon price. We already experience competition
for technical services to our installed base as many of our customers have
technical skills and resources to effectively support the equipment without
factory assistance. We may also face external competition for such technical
services from other service organizations, and such competition for services
will likely be based upon capability and price.

Our Operating Results Have Fluctuated Substantially from Quarter to Quarter and
Are Likely to Continue

     In prior years, our revenues and operating results have varied at times
substantially from quarter to quarter and may continue to do so. We typically
experience a relatively long lead-time, often from six to 24 months, to complete
a Sinterstation System sale. Our combined procurement and manufacturing cycle is
currently three months. Furthermore, new product introductions, seasonality of
customer buying patterns and other factors can cause fluctuations in quarterly
results. In prior years, these fluctuations have precluded, and may preclude
again, us from managing inventories effectively from quarter to quarter.

                                       23
<PAGE>

     The failure to complete a particular Sinterstation System sale in any given
quarter may have a material adverse effect on our business and financial
performance for that quarter, and quarterly fluctuations could cause a material
adverse effect on the price at which our common stock trades. The tendency for a
large number of our sales made during a quarter to be completed at or near the
end of the quarter also hinders our ability to predict sales, control sales
prices and enforce our standard terms.

We May Not Obtain Sufficient Capital to Fund Our Needs and Additional Funding
May Be Dilutive to Current Security Holders

     Our future capital requirements will depend on a number of factors,
including our profitability, growth rate, working capital requirements, expenses
associated with protection of our patents and other intellectual property, and
costs of future research and development activities. We currently plan to fund
these activities through operations.

     Future operating results will depend, in part, on our ability to obtain and
manage capital sufficient to finance our business. To the extent that funds
expected to be generated from operations are not sufficient to meet current or
planned operating requirements, we will seek to obtain additional funds through
bank credit facilities, equity or debt financing, collaborative or other
arrangements with corporate partners and from other sources.  Additional funding
may not be available when needed or on acceptable terms, which could have a
material adverse effect on our business, financial condition and results of
operations.  If adequate funds are not available, we may be required to delay or
to eliminate certain expenditures or to license to third parties the rights to
commercialize technologies that we would otherwise seek to develop ourselves.
In addition, in the event that we obtain any additional funding, such financing
may have a substantially dilutive effect on the holders of our securities.

We have Limited Product Offerings

     We currently offer one model of Sinterstation Systems for sale. The sale of
Sinterstation Systems comprised the majority of our annual revenues. The
Sinterstation Systems are priced in excess of $250,000, and a new purchaser must
also consider the ongoing operating expense commitment associated with the
acquisition of such a system. In a downturn or a soft market, our dependence
upon a limited range of products, as opposed to a wide range of products at
different price points, has caused our financial performance to be adversely
affected and may do so again.

We are Heavily Dependent on Our Intellectual Property and Proprietary Rights and
We are Currently Involved in Litigation Regarding these Rights

     In pursuing protection for our proprietary rights in our Sinterstation
Systems, materials and related technology, we currently rely on a combination of
patent, copyright, trademark and trade secret rights, as well as contractual
provisions. We seek patent protection for our selective laser sintering
technology. However, patent protection may not always be available. There can be
no assurance that patents will be issued under any or all of the patent
applications to which we have rights. In addition, the laws of various countries
in which our products may be sold may not protect our products and intellectual
property rights to the same extent as the laws of the United States.

     We are currently involved in significant litigation with EOS GmbH Electro
Optical Systems in Germany, France, Italy and Japan, with regard to our
proprietary rights to selective laser sintering technology. If we are
unsuccessful in this litigation, our competitive position may be adversely
affected in those countries.

     In addition, we can give no assurance that the issued patents to which we
hold rights will be adequate to protect our interests or, if challenged, held
valid. Our competitors could develop non-infringing systems, materials or
technologies that are equivalent or superior to ours. Others may also practice
technology believed by us to be covered by our patents or other legal or
contractual protections regardless of the fact that it may be legally protected.
Any litigation to enforce our intellectual property rights would be expensive
and time-consuming.  While we defend our intellectual property vigorously, there
can be no

                                       24
<PAGE>

assurance that we will be successful in our various litigation in many
countries. If we were unsuccessful in enforcing our intellectual property rights
or other contractual rights in the context of third-party offers to sell
selective laser sintering systems or sintering powders or if we were found to
have violated state or federal antitrust laws, our future revenues might be
adversely affected.

     Furthermore, unrelated third parties hold many patents and pending patent
applications under which we are not a licensee that relate to the design and
manufacture of rapid prototyping systems and materials. If such a third party
brought infringement litigation against us, and if we were not successful in
defending such litigation or in obtaining a license, the business and financial
performance could be materially adversely affected. EOS has filed a patent
infringement suit against us in federal court in California.

     The University of Texas System licenses certain key intellectual property
used in the selective laser sintering process to us. As a licensee, our rights
to practice the technology are not absolute. Earlier this year we gave notice to
The University of Texas System of changes we had made in our royalty
calculations to reflect business practices we adopted in the fall of 1999. We
informed them that these changes had the effect of reducing the average royalty
due them per machine sold. They have communicated in writing to us that they do
not accept these changes. We met with representatives of The University of Texas
System to provide them a better understanding of our position and of the
methodologies that we now use in our calculation of royalties due them. We are
currently in discussions with them to resolve our differences. The University of
Texas could terminate, attempt to terminate or amend the license if we could be
shown to be in material default of the terms of the license. Even if we had a
basis for objection, defense of our rights as a licensee could be costly, and
the outcome would be uncertain. Loss of significant rights as a licensee under
this license could have a material adverse effect on our business and financial
performance.

We Depend on a Limited Number of Management and Key Personnel

     Our success depends to a substantial extent on a relatively few key
management employees. Losing the services of one or more key employees could
have a material adverse effect on our business and financial performance. Our
success also depends on our ability to continue to attract highly talented
technical personnel. Candidates with appropriate training and expertise may be
in short supply in the geographic areas where we are attempting to recruit
personnel. We have put in place incentive compensation plans intended to provide
motivation for continued employment of key employees. We can give no assurance
that we will be able to retain employees or continue to attract, assimilate and
retain other skilled personnel.

We Depend on a Limited Number of Third-Party Suppliers

     We subcontract for manufacture of major Sinterstation System components,
powdered sintering materials and accessories from single-source, third-party
suppliers. A disruption in supply or failure of a supplier to remain competitive
in functionality or price could have a material adverse effect on our sales or
reputation for timely delivery, and, hence, on our business, financial
performance and results of operations.

     Customer demand for DuraForma(R), our popular powdered sintering materials,
has at times come close to exceeding the supply. We have worked with our
supplier to modify the suppliers manufacturing process to increase the amounts
available to our customers. However, until such time that raw stock capacity is
increased, which is not expected until late 2001, demand may outstrip the
supply.

Our Operating Results Are Heavily Dependent on Sales to Customers Located
Outside the U.S.

     Revenues from customers located outside the U.S. represented the majority
of our total revenues in the recent three years. We believe that continued
growth and profitability requires expansion of sales in international markets.
This expansion may be costly and time-consuming and may not generate returns for
a significant period of time, if at all.

                                       25
<PAGE>

     Fluctuations in exchange rates as well as interest rates have significantly
affected our sales in foreign markets. In particular, a strengthening U.S.
dollar has adversely affected the price competitiveness against a major foreign
competitor of our products and services in the international markets.  A
significant and increasing portion of international sales are denominated in
currencies other than U.S. dollars, thereby exposing the Company to gains and
losses on non-U.S. currency transactions. There can be no assurance that any
hedging activity by us to limit currency exchange risk will be successful in
avoiding exchange-related losses. Nor can there be assurance that the exposure
to risks associated with international operations will not continue to have a
material adverse effect on our liquidity, capital resources and results of
operations. The regulatory environment, including import/export laws, protective
trade policies and currency controls of foreign governments, also could
materially adversely affect our business and financial performance.

Proactive Finance Group, LLC has Significant Influence on All Shareholder Votes

     Proactive Finance Group, LLC and its affiliates currently controls
approximately 49.7% of our outstanding common stock. At this percentage,
Proactive could control elections of the board of directors and could control or
substantially affect the outcome of most matters submitted to the shareholders
for their vote or consent. Proactive could also cause, prevent or delay a change
in control.

We May Be Subject to Product Liability Claims

     Products as complex as those we offer may contain undetected defects or
errors when first introduced or as enhancements are released that, despite our
testing, are not discovered until after the product has been installed and used
by customers, which could result in delayed market acceptance of the product or
damage to our reputation and business. We attempt to include provisions in our
agreements with customers that are designed to limit the exposure to potential
liability for damages arising out of defects or errors in our products. However,
the nature and extent of such limitations vary from customer to customer, and it
is possible that such limitations may not be effective as a result of
unfavorable judicial decisions or laws enacted in the future. The sale and
support of our products entails the risk of product liability claims. Any such
claim brought against us, regardless of its merit, could result in material
expense to us, diversion of management time and attention, and damage to our
business reputation and ability to retain existing customers or attract new
customers.

Our Stock Price May Be Affected when Additional Shares Are Sold

     Sales of shares of our common stock into the market by Proactive or
employees exercising options could cause a decline in the price of our stock.
All of the 3,513,357 shares of our common stock currently owned by Proactive are
tradable, subject to the resale limitations of Rule 144, as promulgated by the
U.S. Securities and Exchange Commission that are applicable to an affiliate of a
company. In addition, we have granted Proactive certain demand registration
rights. Also, if we propose to register any of our securities under the
Securities Act of 1933, whether for our own account, for the account of other
shareholders or for both, Proactive is entitled to notice of such registration
and is entitled to include its shares of common stock in the registration.

     Our employees hold immediately exercisable options to purchase 501,143
shares of our common stock. We registered the issuance and the sale of the
shares of common stock that would be issued upon exercise of options under the
stock option plans on a Form S-8 Registration Statements. As a result, the
common stock acquired by employees upon exercise of options outstanding under
the stock option plans will be freely tradable (subject to compliance with
certain provisions of Rule 144, in the case of our affiliates).

Our Market Price Is Volatile

     Our common stock is listed on The Nasdaq SmallCap Stock Market.
Historically, the stock market has experienced volatility that has particularly
affected the market price of common stock of technology-related companies. That
volatility sometimes has been unrelated to the operating performance of such

                                       26
<PAGE>

companies. Moreover, our stock is thinly traded, and we have a relatively small
public float of only approximately 3.6 million shares. These factors may cause
our stock price to be even more variable.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


     Information related to quantitative and qualitative disclosures regarding
market risk is set forth in Management's Discussion and Analysis of Financial
Condition and Results of Operations and the risk factors under Item 7 above.
Such information is incorporated by reference herein.

                                       27
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                    <C>
Report of Independent Auditors                                                                           29

Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998               30

Consolidated Balance Sheets as of December 31, 2000 and 1999                                             31

Consolidated Statements of Shareholders' Equity for the years ended December 31,
  2000, 1999 and 1998                                                                                    33

Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998               34

Notes to Consolidated Financial Statements                                                               35
</TABLE>

                                       28
<PAGE>

                        Report of Independent Auditors



Board of Directors and Shareholders
DTM Corporation

We have audited the consolidated balance sheets of DTM Corporation and its
subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. 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 standards generally accepted in the
United States. 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 subsidiaries at December 31, 2000 and 1999, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with standards generally accepted
in the United States.



                                                               ERNST & YOUNG LLP



Austin, Texas
January 19, 2001

                                       29
<PAGE>

                                DTM Corporation

                     Consolidated Statements of Operations
                     (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                   2000                 1999                 1998
                                                   --------------------------------------------------------------
<S>                                                <C>                          <C>                  <C>
Revenues:
  Products                                                 $     33,794         $     28,555         $     24,168
  Service and support                                             6,216                4,494                3,627
                                                   --------------------------------------------------------------
                                                                 40,010               33,049               27,795
Cost of sales:
  Products                                                       15,071               12,968               13,878
  Service and support                                             4,269                2,924                2,216
                                                   --------------------------------------------------------------
                                                                 19,340               15,892               16,094
                                                   --------------------------------------------------------------
Gross profit                                                     20,670               17,157               11,701

Operating expenses:
  Selling, general and administrative                            13,007               12,091               11,387
  Research and development                                        3,254                2,865                3,538
  Provision for litigation settlement                                 -                    -                1,700
                                                   --------------------------------------------------------------
                                                                 16,261               14,956               16,625
                                                   --------------------------------------------------------------
Operating income (loss)                                           4,409                2,201               (4,924)

Other income (expense):
  Interest expense, net                                            (110)                 (96)                 (48)
  Gain on sale of assets - net                                        -                  129                  424
                                                   --------------------------------------------------------------
                                                                   (110)                  33                  376
                                                   --------------------------------------------------------------

Income (loss) before income taxes                                 4,299                2,234               (4,548)
Income tax expense                                                  971                  515                   30
                                                   --------------------------------------------------------------
Net income (loss)                                          $      3,328         $      1,719         $     (4,578)
                                                   ==============================================================

Net income (loss) per common share:
  - Basic                                                  $       0.47         $       0.25         $      (0.73)
  - Diluted                                                $       0.45         $       0.25         $      (0.73)

Weighted-average number of shares outstanding:
  - Basic                                                     7,042,233            6,785,125            6,286,851
  - Diluted                                                   7,327,070            6,857,975            6,286,851
</TABLE>

See accompanying notes.

                                       30
<PAGE>

                                DTM Corporation

                          Consolidated Balance Sheets
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                   2000               1999
                                                                    --------------------------------------
<S>                                                                   <C>                <C>
Assets
Current assets:
  Cash                                                                      $     2,529        $     1,505
  Accounts receivable, less allowance of $420 in 2000 and $420 in
    1999                                                                          8,411              6,377
  Inventory                                                                       3,643              2,652
  Prepaid expenses and other                                                        502                589
  Deferred income taxes                                                             611                  -
                                                                    --------------------------------------
Total current assets                                                             15,696             11,123

Property, plant and equipment:
  Sinterstation systems                                                           2,382              2,248
  Other machinery and equipment                                                   4,407              4,191
  Leasehold improvements                                                          1,406              1,442
  Office furniture                                                                  382                389
                                                                    --------------------------------------
                                                                                  8,577              8,270
Accumulated depreciation and amortization                                         6,735              6,864
                                                                    --------------------------------------
                                                                                  1,842              1,406

Capitalized software development costs, net of accumulated
  amortization of $1,110 in 2000 and $864 in 1999                                   360                418
Patent and license fees, net of accumulated amortization of $1,101
  in 2000 and $792 in 1999                                                          489                734




                                                                    --------------------------------------
Total assets                                                                $    18,387        $    13,681
                                                                    ======================================
</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                  2000                1999
                                                                      ---------------------------------------
<S>                                                                   <C>                        <C>
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                                                           $      3,062        $      2,219
  Deferred service revenues                                                         2,432               2,028
  Other deferred revenues                                                               -                 100
  Employee and agent compensation                                                   1,582               1,502
  Income taxes payable                                                                501                 509
                                                                      ---------------------------------------
Total current liabilities                                                           7,577               6,358




Shareholders' equity:
  Preferred stock, $.001 par value; 3,000,000 shares authorized; none
   issued or outstanding                                                                -                   -

  Common Stock, $.0002 par value: 60,000,000 shares authorized;
   7,076,780 and 6,973,503 issued and outstanding at December 31,
   2000 and 1999, respectively                                                          1                   1
  Additional paid-in capital                                                       54,241              54,016
  Accumulated deficit                                                             (43,288)            (46,616)
  Accumulated other comprehensive income (loss)                                      (144)                (78)
                                                                      ---------------------------------------
Total shareholders' equity                                                         10,810               7,323
                                                                      ---------------------------------------


Total liabilities and shareholders' equity                                   $     18,387        $     13,681
                                                                      =======================================
</TABLE>

See accompanying notes.

                                       32
<PAGE>

                                DTM Corporation

                Consolidated Statements of Shareholders' Equity
                    (In thousands, except share amounts) '

<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                                         Additional                          Other
                                                            Common         Paid-in        Accumulated    Comprehensive
                                            Shares           Stock         Capital           Deficit     Income (Loss)     Total
                                         ------------------------------------------------------------------------------------------
<S>                                        <C>        <C>           <C>              <C>               <C>                 <C>
Balance at December 31, 1997               6,286,851         $ 1           $ 53,161        $ (43,757)       $ (167)         $ 9,238
  Net loss                                         -           -                  -           (4,578)            -           (4,578)
  Translation adjustment                           -           -                  -                -           171              171
                                                                                                                        -----------
  Comprehensive loss                                                                                                         (4,407)
                                                                                                                  -     -----------

                                         ------------------------------------------------------------------------------------------
Balance at December 31, 1998               6,286,851           1             53,161          (48,335)            4            4,831
  Net income                                       -           -                  -            1,719             -            1,719
  Translation adjustment                           -           -                  -                -           (82)             (82)
                                                                                                                        -----------
  Comprehensive income                                                                                                        1,637
                                                                                                                        -----------

  Issuance of common stock                   334,485                            400                                             400
  Conversion of shareholder debt             352,167                            455                                             455
                                         ------------------------------------------------------------------------------------------
Balance at December 31, 1999               6,973,503           1             54,016          (46,616)          (78)           7,323
  Net income                                       -           -                  -            3,328             -            3,328
  Translation adjustment                           -           -                  -                -           (66)             (66)
                                                                                                                        -----------
  Comprehensive income                                                                                                        3,262
                                                                                                                        -----------

  Proceeds from exercise of stock options    103,277                            225                                             225
                                         ------------------------------------------------------------------------------------------
Balance at December 31, 2000               7,076,780         $ 1           $ 54,241        $ (43,288)       $ (144)         $10,810
                                         ==========================================================================================
</TABLE>

See accompanying notes.

                                       33
<PAGE>

                                DTM Corporation

                     Consolidated Statements of Cash Flows
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                         2000                1999                1998
                                                            ---------------------------------------------------------------
<S>                                                         <C>                             <C>                 <C>
Operating activities
Net income (loss)                                                       $ 3,328             $ 1,719             $(4,578)
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
    Depreciation and amortization                                         1,484               1,447               1,929
    Provision for doubtful accounts                                          29                  55                   -
    Provision for obsolescence                                              123                 128                 675
    Foreign currency exchange losses                                        262                 318                 184
    Provision for litigation settlement - noncash
      portion                                                                 -                   -                 400
    Deferred income taxes                                                  (611)                  -                   -
    Gain on disposal of equipment                                             -                (129)               (424)
    Changes in assets and liabilities provided by
      (used in) operating activities:
         Accounts receivable                                             (2,063)             (1,246)               (205)
         Inventory                                                       (1,114)                676               1,708
         Prepaid expenses and other assets                                   87                (327)                284
         Accounts payable and accrued expenses                              843                (871)             (1,773)
         Deferred service revenues                                          404                 198                 226
         Other deferred revenues                                           (100)               (100)                200
         Customer deposits                                                    -                (155)                155
         Income taxes                                                        (8)                509                   -
         Employee and agent compensation                                     80                 611                 132
                                                            ---------------------------------------------------------------
Net cash provided by (used in) operating activities                       2,744               2,833              (1,087)

Investing activities
Purchases of machinery and equipment                                     (1,366)               (959)             (1,339)
Capitalized software development costs                                     (187)               (151)               (231)
Patent and license expenditures                                             (64)                (74)               (152)
Proceeds from sale of machinery and equipment                                 -                 281               1,376
                                                            ---------------------------------------------------------------
Net cash used in investing activities                                    (1,617)               (903)               (346)

Financing activities
Proceeds from exercise of stock options                                     225                   -                   -
Repayments of short-term borrowings                                           -                   -                (175)
Draws on line of credit from financial institutions                       5,439               3,875               1,800
Repayment on line of credit from financial
  institutions                                                           (5,439)             (3,875)             (1,800)

Repayments of shareholder debt                                                -                (454)                  -
                                                            ---------------------------------------------------------------
Net cash provided by (used in) financing activities                         225                (454)               (175)

Effect of foreign exchange rate changes                                    (328)               (400)                (13)
                                                            ---------------------------------------------------------------
Net change in cash                                                        1,024               1,076              (1,621)

Cash at beginning of year                                                 1,505                 429               2,050
                                                            ---------------------------------------------------------------
Cash at end of year                                                     $ 2,529             $ 1,505             $   429
                                                            ===============================================================
Noncash items:
  Issuance of common stock in settlement                                $     -             $   400             $     -
  Conversion of shareholder debt to equity                              $     -             $   455             $     -
</TABLE>

See accompanying notes.

                                       34
<PAGE>

                                DTM Corporation

                  Notes to Consolidated Financial Statements

                               December 31, 2000


1. Organization and Significant Accounting Policies

Organization

DTM Corporation (the "Company") designs, develops, manufactures, markets and
supports, on an international basis, rapid prototyping, manufacturing and
tooling systems and related powdered sintering materials and services. The DTM
Corporation Sinterstation Systems and powdered sintering materials are based on
proprietary and patented selective laser sintering technology. DTM Corporation
was formed in November 1987, became a subsidiary of a large specialty chemicals
company in 1990 and completed its initial public offering ("IPO") in May 1997.
On February 12, 1999, the large specialty chemical company, referred to above,
divested its remaining interest in DTM to a partnership of independent
investors.

The consolidated financial statements include the accounts of DTM and its
subsidiaries, both of which are wholly owned sales and service operations
domiciled in Europe. All significant inter-company accounts and transactions
have been eliminated.

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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Inventory

Inventories are carried at the lower of cost or market, with cost determined
using the average cost method.

Long-lived Assets

The Company evaluates the carrying values of long-lived assets to determine if
the facts and circumstances suggest that they may be impaired. If this review
indicates that long-lived assets 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 long-lived assets will be reduced accordingly.
No impairment adjustments have been necessary in 2000 or in previous years.

Property, Plant and Equipment

Internally used Sinterstation Systems and other machinery and equipment are
stated at cost. Depreciation is computed on the straight-line method over the
useful life of each asset, which 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.

                                       35
<PAGE>

Capitalized Software Development Costs

The Company's principal products include a software component. Costs incurred in
the development of software are capitalized, once technological feasibility has
been established but prior to general release to customers. 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 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 $187,000, $151,000 and
$231,000 during 2000, 1999 and 1998, respectively. Amortization expense of
capitalized software development costs is included in cost of product sales in
the consolidated statements of operations and amounted to $245,000, $362,000 and
$355,000 during 2000, 1999 and 1998, respectively.

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 $64,000, $74,000 and $152,000 during 2000, 1999 and 1998, respectively. 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 expenses.

Foreign Currency Translation

The financial statements of foreign subsidiaries have been translated into U.S.
dollars in accordance with FASB Statement No. 52, Foreign Currency Translation.
All balance sheet accounts have been translated using the exchange rates in
effect at the balance sheet date. Income statement amounts have been translated
using the average exchange rate for the year. The gains and losses resulting
from changes in exchange rates from year to year have been reported in other
comprehensive income. The effect on the statements of income of transaction
gains and losses is insignificant for all years presented.

Foreign Currency Forwards

DTM enters into export sales of Sinterstation Systems to third-party customers
that are denominated in foreign currencies. To hedge against exposures to
changes in foreign currency exchange rates on such committed sales, the Company
enters into foreign currency exchange contracts. This is currently done only on
a sale-by-sale basis and only for contract periods that match the expected
foreign currency collections from the sale.

A forward foreign exchange contract obligates the Company to exchange
predetermined amounts of specified foreign currencies at specified exchange
rates on specified dates or to make an equivalent U.S. dollar payment equal to
the value of such exchange. For contracts that are designated and effective as
hedges, discounts or premiums (the difference between the spot exchange rate and
the forward exchange rate at inception of the contract) are recognized in
revenues when the sale is recorded. Unrealized gains and losses from foreign
currency exchange contracts resulting from changes in the spot exchange rate are
included in the cumulative translation adjustment account as part of other
comprehensive income.

Recognition of Revenue

Revenues from the sale of products 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 not before
shipment. The Company defers an amount from each Sinterstation System

                                       36
<PAGE>

sale for warranty and preventive maintenance service. This deferred amount
represents the Company's estimate of the cost of providing such warranty and
preventive maintenance service and is recognized ratably as service and support
revenue over the initial service and warranty period, which is typically twelve
months. Revenue related to installation services and training services are also
deferred until performed.

Upon expiration of the initial service and warranty period discussed above, the
Company offers for sale to its customers an annual maintenance contract. The
deferred revenues from such maintenance contracts are recognized ratably as
service and support revenue over the related support period.

Net Income Per Share

The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128). Basic net income per share is
computed by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding during the period. The
computation of diluted net income per share is similar to basic net income per
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially
dilutive common shares had been issued.

For 2000 and 1999, the Company had potentially dilutive securities related to
in-the-money employee stock options of 284,837 and 72,850, respectively. There
were no securities with a dilutive effect in 1998.

Accumulated Other Comprehensive Income

The sole component of accumulated other comprehensive income for all periods
presented were currency translation adjustments.

Advertising Costs

The cost of advertising is expensed as incurred. The Company incurred $643,000,
$787,000 and $675,000 in advertising costs during 2000, 1999 and 1998,
respectively.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair market value of the shares at the date of
the grant. The Company accounts for stock option grants in accordance with the
provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"), and related Interpretation. The Company has chosen this method because the
Company believes that the alternative fair value accounting provided for under
FASB Statement No. 123, Accounting for Stock-Based Compensation, requires the
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock option grants equals the market price of the underlying
stock on the date of the grant, no compensation expense is recognized.

Impact of Recently Issued Accounting Standards

In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company adopted the new Statement
effective January 1, 2000. The Statement required the Company to recognize all
derivatives on the balance sheets at fair value. The adoption of this Statement
did not have a significant effect on results of operations or financial
position.

In December 1999, the SEC staff issued Staff Accounting Bulletin 101 "Revenue
Recognition in Financial Statements" which provides guidance on revenue
recognition issues. The Company implemented the provisions of SAB 101 for the
period ended December 31, 2000. The adoption of SAB 101 did not have a material
impact on the Company's financial position or results of operations.

                                       37
<PAGE>

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation," which further clarifies APB Opinion
No. 25, "Accounting for Stock Issued to Employees." This interpretation did not
have a material impact on the Company's financial position or results of
operations.

2. Allowances 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
                                      Beginning of        Costs and                           Balance at End
                                         Period            Expenses          Write-Offs          of Period
                                  ----------------------------------------------------------------------------
<S>                               <C>                    <C>                 <C>              <C>
1998                                      $495                $ -                $79                $416
1999                                       416                 55                 51                 420
2000                                       420                 29                 29                 420
</TABLE>

3. Inventory

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

<TABLE>
<CAPTION>
                                                                      2000                1999
                                                               ---------------------------------------
<S>                                                            <C>                 <C>
Raw materials and purchased parts                                  $  2,869            $  2,050
Finished goods                                                        1,129                 834
                                                               ---------------------------------------
                                                                      3,998               2,884
Reserve for inventory obsolescence                                     (355)               (232)
                                                               ---------------------------------------
                                                                   $  3,643            $  2,652
                                                               =======================================
</TABLE>

4. Patent and License Agreements

On December 3, 1987, the Company entered into a patent license agreement with
the Board of Regents of The University of Texas System, whereby the Company is
licensed to make, have made and sell products utilizing the selective laser
sintering technology. In consideration of rights granted in the license
agreement, the Company 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 the
Company'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 $548,000, $630,000 and $618,000
during 2000, 1999 and 1998, respectively.

5. Financing Arrangements

DTM has a credit facility with a bank through June 2001. This line of credit is
collateralized solely by the Company's assets. Borrowings under this line of
credit bear interest at the bank's prime rate plus one and one half percent. All
customer remittances are applied against any outstanding borrowings. The
borrowing base includes a percentage of eligible domestic and international
trade accounts receivable and finished goods inventories of the parent company.
The inclusion of inventories in the borrowing base is further limited to
$500,000. At December 31, 2000, the borrowing base exceeded the loan limit of
$3.5 million and there was no outstanding loan balance.

This line of credit requires the Company to maintain at least $5.0 million in
tangible net worth. At December 31, 2000, the Company's tangible net worth, as
defined in the loan agreement, was approximately $10.0 million. This line of
credit prohibits the payment of dividends.

                                       38
<PAGE>

Interest paid was approximately $120,000 in 2000, $100,000 in 1999 and $32,000
in 1998.

6. Commitments and Contingencies

DTM leases facilities and equipment under non-cancelable operating leases. Total
rent expense incurred under these leases was approximately $490,000, $462,000
and $462,000 during 2000, 1999 and 1998, respectively. Future minimum payments
under these leases are as follows (in thousands):

<TABLE>
                <S>                                  <C>
                2001                                       $   511
                2002                                           275
                2003                                           275
                2004                                           313
                2005                                           313
                Thereafter                                     313
                                                     -----------------
                                                           $ 2,000
                                                     =================
</TABLE>

As of December 31, 2000 and 1999, the Company had purchase commitments for
inventory totaling approximately $3,536,000 and $3,300,000, respectively.

In the ordinary course of business, the Company becomes involved in legal
proceedings and claims. Beginning in 1996, the Company initiated patent
infringement litigation in France, Germany and Italy against a competitor and
against one of that competitor's customers. In 1997, the Company also initiated
patent infringement litigation in Japan against the competitor's distributor in
the Pacific Rim. The Company seeks injunctive relief plus damages. Hearings have
begun in each of these lawsuits. In September 1999, the Japanese court issued a
preliminary injunction barring sale of the competitor's infringing product in
Japan. It is not possible at this time to predict the outcome of these
proceedings.

In 2000, this competitor initiated litigation in the U.S. courts alleging
infringement of three U.S. patents. The Company does not believe that it has
infringed any valid claims of the U.S. patents as asserted by the competitor. It
is not possible at this time to predict the outcome of this proceeding. However,
an adverse ruling could have a material adverse effect on the Company's business
and financial performance.

7. Common Stock

At December 31, 2000, the Company had reserved 1,129,269 shares of common stock
for issuance in connection with the 1999 Stock Incentive Plan (884,975 shares)
and for exercise of outstanding options issued in connection with the IPO in May
1997 under a prior plan (244,294 shares).

On February 4, 1999, the Company issued 334,485 shares of common stock in
satisfaction of the final $400,000 portion of the 1998 settlement of the
shareholder class action litigation.

On June 11, 1999, the Company issued 352,167 shares of common stock in
satisfaction of a $455,000 portion of its Due to Shareholder obligation.

Beginning in March 1999, the Company has retained an affiliate of its majority
shareholder to perform certain financial advisory services. These related party
fees and are included in selling, general and administrative expenses and
amounted to $121,500 in 2000 and $108,000 in 1999.

                                       39
<PAGE>

8.Financial Instruments

Off-Balance Sheet Risk

The Company enters into forward exchange contracts to hedge certain firm sales
commitments denominated in foreign currencies. The purpose of the Company's
foreign currency-hedging activities is to protect the Company from risk that the
eventual dollar cash flows resulting from the sale of products to international
customers will be adversely affected by changes in exchange rates. At December
31, 2000, the Company had forward exchange contracts, all having maturities of
less than three months, to exchange various foreign currencies for U.S. dollars
in the amount of $1,361,000. The table below summarizes, by currency,
contractual amounts of the Company's forward exchange contracts at December 31,
2000 (in thousands):

<TABLE>
<CAPTION>
                                                             2000
                                              --------------------------------
                                                     Forward       Unrealized
                                                    Contract          Loss
                                              --------------------------------
<S>                                           <C>                  <C>
Currency
  Euro                                                $1,361         $(12)
                                              --------------------------------
Total                                                 $1,361         $(12)
                                              ================================
</TABLE>

There were no realized gains or losses deferred from hedging firm sales
commitments at December 31, 2000, 1999 or 1998.

The Company is exposed to credit loss in the event of nonperformance by counter
parties on foreign exchange contracts, but the Company does not anticipate
nonperformance by any of these counter parties. The amount of such exposure is
generally the unrealized gains in such contracts.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant credit
risk consist principally of cash investments and trade accounts receivable.

The Company maintains cash with various financial institutions. These financial
institutions are located in the United States, Germany and the United Kingdom.
The Company performs periodic evaluations of the relative credit standing of
those financial institutions that are considered in the Company's investment
strategy.

Concentrations of credit risk with respect to trade accounts receivable is
somewhat limited due to the number of entities comprising the Company's customer
base and the diverse industries in which they operate. However, the value of a
single sale of a Sinterstation System is material to the Company. It is the
Company's policy to perform a credit evaluation at the time of each sale of a
Sinterstation System. The Company relies upon customer provided deposits and
financial statements; reports from external credit reporting agencies and
comfort letters from financial institutions providing customer finance. The
Company also employs Uniform Commercial Code liens on certain equipment sold
into North America, and confirmed letters of credit on certain export sales.

Fair Value of Financial Investments

The Company believes that the carrying amount of its financial instruments,
including cash, accounts receivable, accounts payable, short-term debt and
forward currency exchange contracts, approximates fair value. Fair value for
forward currency exchange contracts is estimated based on quoted market prices
for similar instruments.

                                       40
<PAGE>

9. Stock Option Plans

Options that are granted under the 1999 Stock Incentive Plan are exercisable at
market price at the date of the grant. The options, subject to termination of
employment, expire ten years from the date of grant, are not transferable other
than on death, and are generally exercisable in three annual installments
commencing one year from the date of grant.

Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of the grant using a Black-
Scholes option-pricing model. The following weighted average assumptions were
used in these calculations.

<TABLE>
<CAPTION>
                                                                  2000                1999                1998
                                                         -----------------------------------------------------------
<S>                                                      <C>                         <C>                 <C>
Expected volatility                                              0.921               0.732               0.732
Expected life (years)                                                4                   4                   4
Expected dividend rate                                            0.00%               0.00%               0.00%
Risk-free interest rate                                           6.00%               6.00%               6.00%
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require input of highly
subjective assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):

<TABLE>
<CAPTION>
                                                               2000               1999               1998
                                                        ---------------------------------------------------------
<S>                                                     <C>                     <C>               <C>
Pro forma net income (loss)                                  $   3,192          $   1,517         $   (4,834)
                                                        =========================================================
Pro forma net income (loss) per common share -
 basic                                                       $    0.45          $    0.22         $    (0.77)
                                                        =========================================================
Pro forma net income (loss) per common share -
 diluted                                                     $    0.45          $    0.22         $    (0.77)
                                                        =========================================================
</TABLE>

                                       41
<PAGE>

A summary of the Company's stock option activity, and related information for
the years ended December 31, follows (options in thousands):

<TABLE>
<CAPTION>
                                            2000                            1999                                1998
                                 --------------------------------------------------------------------------------------------------
                                                    Weighted                         Weighted                          Weighted
                                     Stock          Average           Stock          Average            Stock          Average
                                    Options      Exercise Price      Options      Exercise Price       Options      Exercise Price
                                 --------------------------------------------------------------------------------------------------
<S>                              <C>             <C>                 <C>          <C>                  <C>          <C>
Outstanding at beginning of
  year                                 937          $  2.39            635           $  3.31               610         $  3.72

  Granted                              201             3.34            383              1.28               182            2.02
  Exercised                           (103)            1.74              -                 -                 -               -
  Canceled                             (81)            3.35            (81)             4.35              (157)           3.40
                                 --------------------------------------------------------------------------------------------------
Outstanding at end of year             954          $  2.58            937           $  2.39               635         $  3.31
                                 ==================================================================================================

Options exercisable at year
  -end                                 501          $  2.78            443           $  3.22               417         $  3.45

Weighted-average fair value
  of options granted during
  the year:

Granted at fair market value         $   1.70                        $   0.76                            $   2.02
</TABLE>

A summary of information about stock options outstanding and exercisable at
December 31, 2000 is as follows:

<TABLE>
<CAPTION>
                                                          Weighted-Average
    Weighted-Average          Options Outstanding       Remaining Contractual
     Exercise Price                                             Life                Options Exercisable
----------------------------------------------------------------------------------------------------------
<S>                      <C>                            <C>                    <C>
     $ 1.25 - $ 1.75                379,405                     8.3                       113,470
     $ 2.00 - $ 3.75                476,981                     7.4                       328,625
     $ 5.00 - $ 9.00                 87,400                     7.8                        49,000
     $13.00 - $15.00                 10,048                     6.4                        10,048
                         ---------------------------                           ---------------------------
                                    953,834                                               501,143
                         ===========================                           ===========================
</TABLE>

10. Employee Compensation Plans

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 10 to
50% of base salary and the Compensation Committee 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 and 200 percent of the participant's cash bonus target. The expense related
to the MIP Plan was $301,000 and $282,000 during 2000 and 1999, respectively. No
expense was recognized in connection with the MIP Plan in 1998.

                                       42
<PAGE>

The Company maintains a 401K plan for its U.S. employees. Beginning in 2000, the
Company will match the elective deferrals of up to six percent of compensation
at the rate of $.25 per $1.00 deferred. This match expense was $60,000 in 2000.

11. Unusual Charges

In connection with the settlement of the shareholder class action lawsuit
against the Company, the Company charged operations $1,700,000 in the second
quarter of 1998.

12. Income Taxes

Pretax income (loss) for the years ended December 31 was taxed in the following
jurisdictions (in thousands):

<TABLE>
<CAPTION>
                                                           2000               1999               1998
                                                   ---------------------------------------------------------
<S>                                                <C>                      <C>               <C>
Domestic                                                 $  2,911           $  1,875          $  (4,963)
Foreign                                                     1,388                359                415
                                                   ---------------------------------------------------------
                                                         $  4,299           $  2,234          $  (4,548)
                                                   =========================================================
</TABLE>

Significant components of the provision for income tax expense are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                          2000                1999                1998
                                                   ------------------------------------------------------------
<S>                                                <C>                        <C>                <C>
Current:
  Federal                                                $    822             $   362            $      -
  Foreign                                                     688                 121                  30
  State                                                        72                  32                   -
                                                   ------------------------------------------------------------
Total current                                               1,582                 515                  30

Deferred:
  Federal                                                    (561)                  -                   -
  Foreign                                                       -                   -                   -
  State                                                       (50)                  -                   -
                                                   ------------------------------------------------------------

Total deferred                                               (611)                  -                   -

Total provision                                          $    971             $   515            $     30
                                                   ============================================================
</TABLE>

Significant components of the Company's deferred tax liabilities and assets are
comprised of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                2000             1999            1998
                                                          --------------------------------------------------
<S>                                                       <C>                  <C>             <C>
Deferred tax assets:
  Net operating loss carry forwards                           $  2,507         $  3,223        $  3,764
  Stock options                                                    500              774             774
  Book over tax depreciation and amortization                      543              465             370
  Deferred revenue                                                 476              705             693
  Allowance for doubtful accounts                                  147              127             144
  Other                                                            211              178             102
                                                          --------------------------------------------------
Total deferred tax assets                                        4,384            5,472           5,847
Valuation allowance for deferred tax assets                     (3,773)          (5,472)         (5,847)
                                                          --------------------------------------------------
Net deferred tax assets                                       $    611         $      -        $      -
                                                          ==================================================
</TABLE>

                                       43
<PAGE>

The Company's provision for income taxes differs from the expected tax expense
(benefit) amount computed by applying the statutory federal income tax rate of
34 percent to income before income taxes as a result of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                       -----------------------------------------------------------------------------------
                                                   2000                        1999                        1998
                                       -----------------------------------------------------------------------------------
                                           Amount        Percent       Amount        Percent       Amount        Percent
                                       -----------------------------------------------------------------------------------
<S>                                    <C>              <C>            <C>           <C>           <C>           <C>
Tax at U.S. statutory rates                $1,462          34.0%        $ 760          34.0%      $(1,592)         35.0%
Non-deductible settlement expenses              -             -             -             -           626         (13.8)
Higher effective income taxes of
  foreign countries                           216           5.0             -             -             -             -

Utilization of deferred tax assets
  not previously benefited                   (782)        (18.2)         (308)        (13.8)          925         (23.5)

Other                                          75           1.8            63           2.9            71           1.6
                                       -----------------------------------------------------------------------------------
                                           $  971          22.6%        $ 515          23.1%      $    30         (0.7)%
                                       ===================================================================================
</TABLE>

The Company has historically established a valuation allowance equal to the net
deferred tax asset due to uncertainties regarding the realization of deferred
tax assets. During 2000, the Company determined that the current portion of the
deferred tax assets will be more likely than not realized due to the
availability of carry back potential to prior years taxable income. Accordingly,
the Company has released the portion of the valuation allowance related to those
assets, approximately $611,000. The Company continues to hold a valuation
allowance equal to the long-term portion of the deferred tax assets due to
uncertainties regarding the realization of those assets. The valuation allowance
decreased by a total of approximately $1,699,000 during the year ended December
31, 2000.

During the period from October 31, 1990 to May 21, 1997, the Company was
included in the consolidated federal tax return of its then controlling
shareholder. Based on the tax sharing agreement, if the then controlling
shareholder 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 the
Company, the Company will be required to reimburse any additional taxes paid.

DTM has net operating loss carry forwards totaling approximately $3,130,000 for
federal income tax purposes that were incurred from inception to October 31,
1990. These carry forwards expire in 2003. In addition, the Company has net
operating loss carry forwards totaling approximately $3,644,000 for federal
income tax purposes that were incurred from May 1997 to December 1998. These
carry forwards begin to expire in the year 2012. Although available to the
Company, these carry forwards are subject to significant annual limitations of
approximately $500,000 due to changes in the Company's ownership.

Any undistributed foreign earnings of the Company are considered to be
permanently re-invested, and accordingly, no provision for U.S. federal and/or
state income taxes has been provided thereon.

                                       44
<PAGE>

13. Geographic and Customer Information

The Company and its subsidiaries operate in one industry segment: the
development, manufacturing and service of selective laser sintering systems and
related products. Operations outside of the United States consist principally of
sales, marketing and customer support. Revenues are attributed to geographic
areas based upon the location of the customers. Identifiable assets are those
assets that can be directly associated with a particular geographic area. The
following is a summary of geographic area data for the years ended December 31
(in thousands):

<TABLE>
<CAPTION>
                                                           2000               1999               1998
                                                   ---------------------------------------------------------
<S>                                                <C>                     <C>                <C>
Revenues from external customers:
  North America                                         $  19,372          $  15,059          $  13,015
  Europe                                                   14,636             12,254             10,407
  Pacific Rim Countries                                     6,002              5,736              4,373
                                                   ---------------------------------------------------------
                                                        $  40,010          $  33,049          $  27,795
                                                   =========================================================

Long-lived assets by area:
  North America                                         $   2,386          $   2,298          $   2,438
  Europe                                                      305                260                535
  Pacific Rim Countries                                         -                  -                  -
                                                   ---------------------------------------------------------
                                                        $   2,691          $   2,558          $   2,973
                                                   =========================================================
</TABLE>

                                       45
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.


                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information concerning our directors is set forth in the Proxy
Statement to be delivered to shareholders in connection with our Annual Meeting
of Shareholders to be held during 2001 (the "Proxy Statement") under the heading
"Nominees for Director," which information is incorporated herein by reference.

     The name, age and position of each of our executive officer's is set forth
under the heading "Executive Officers of the Registrant" in Item 1 of this
report, which information is incorporated herein by reference.

     The information required by Item 405 of Regulation S-K is set forth in the
Proxy Statement under the heading "Compliance with Section 16(a) of the
Securities Exchange Act of 1934", which information is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information concerning management compensation and transactions with
management is set forth in the Proxy Statement under the heading "Executive
Compensation and Other Information," which information is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Ownership
of Securities," which information is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information concerning certain relationships and related transactions
is set forth in the Proxy Statement under the heading "Executive Compensation
and Other Information," which information is incorporated herein by reference.

                                       46
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Annual Report on Form
     10-K:

     1.   Financial Statements:

          The financial statements filed as a part of this report are listed in
          the "Index to Consolidated Financial Statements and Financial
          Statement Schedules" at Item 8.

     2.   Financial Statement Schedules:

          None. Schedules have been omitted since the required information is
          not present, or not present in amounts sufficient to require
          submission of the schedule, or because the information is included in
          the above listed financial statements.

     3.   Exhibits:

          The exhibits filed as part of this report are listed under "Exhibits"
          at subsection (c) of this Item 14

(b)  Reports on Form 8-K:

          We filed no reports on Form 8-K during the last quarter of the year
          ended December 31, 2000.

(c)  Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number                                          Description of Exhibit
------                                          ----------------------
<S>         <C>
3.1         Amended and Restated Articles of Incorporation of Registrant. (Filed as exhibit 3.1 to
            Registration Statement on Form S-1/A, dated April 4, 1997 (Reg. No. 333-04173) and
            incorporated by reference hereto)

3.2         Amended and Restated Bylaws of Registrant. (Filed as exhibit 3.2 to Registration Statement on
            Form S-1, dated May 21, 1996 (Reg. No. 333-04173) (" Form S-1") and incorporated by reference
            hereto)

4.1         Form of Stock Certificate of Registrant. (Filed as exhibit 4.1 to Registration Statement on
            Form S-1 and incorporated by reference hereto)

4.2         Registration Rights Agreement between DTM Corporation and DTM Acquisition Company, L.P.,
            dated June 11, 1999. (Filed as exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for
            the period ended June 30, 1999 and incorporated by reference hereto)

10.1        DTM Corporation Equity Appreciation Plan. (Filed as exhibit 10.1 to Registration Statement on
            Form S-1 and incorporated by reference hereto)

10.2        Form of Supplemental Phantom Stock Appreciation Rights Agreement. (Filed as exhibit 10.2 to
            Registration Statement on Form S-1 and incorporated by reference hereto)

10.3        Patent License Agreement between DTM Corporation and the Board of Regents, The University of
            Texas, effective as of December 3, 1987. (Filed as exhibit 10.5 to Registration
</TABLE>

                                       47
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                          Description of Exhibit
------                                          ----------------------
<S>         <C>
            Statement Form S-1 and incorporated by reference hereto)

10.4        Supplement to Patent License Agreement between DTM Corporation and the Board of Regents, The
            University of Texas, dated March 20, 1992. (Filed as exhibit 10.6 to Registration Statement
            on Form S-1 and incorporated by reference hereto)

10.5        Amendment to Patent License Agreement between DTM Corporation and the Board of Regents of The
            University of Texas, dated as of October 27, 1994 (Filed as exhibit 10.13 to Registration
            Statement on Form S-1 and incorporated by reference hereto)

10.6        Agreement between DTM Corporation and John S. Murchison, III, dated October 9, 1997. (Filed
            as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended September
            30, 1997 and incorporated by reference hereto)

10.7        Lease Agreement between DTM Corporation and Glenborough Properties, L.P. for facilities in
            Austin, Texas. dated as of March 26, 1998. (Filed as exhibit 10.12 to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1998 and incorporated by reference
            hereto).

10.8        1999 Management Incentive Plan adopted March 17, 1999. (Filed as exhibit 10.22 to the
            Company's Quarterly Report on Form 10-Q for the period ended June 30, 1999 and incorporated
            hereto)

10.9        DTM 1999 Employee Stock Incentive Plan adopted by the Shareholders on May 25, 1999. (Filed as
            exhibit 99.1 to the Company's Registration Statement on Form S-8 filed November 5, 1999)

10.10       Loan and Security Agreement (Domestic) between DTM Corporation and Silicon Valley Bank, dated
            June 8, 1999. (Filed as exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the
            period ended September 30, 1999 and incorporated hereto)

10.11       Loan and Security Agreement (EXIM) between DTM Corporation and Silicon Valley Bank, dated
            June 8, 1999. (Filed as exhibit 10.22 to the Company's Quarterly Report on Form 10-Q for the
            period ended September 30, 1999 and incorporated hereto)

10.12       Amendment to Loan Agreements between DTM Corporation and Silicon Valley Bank dated May 30,
            2000. (Filed as exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period
            ended June 30, 2000 and incorporated hereto)

21.1*       Subsidiaries of the Registrant.

23.1*       Consent of Independent Auditors, Ernst & Young LLP.
</TABLE>

__________________________
*           Filed herewith

                                       48
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Austin,
Texas, on March 7, 2001.

                         DTM Corporation

                         By:        /s/ John S. Murchison, III
                             -----------------------------------
                               Chief Executive Officer and President

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the following persons on behalf of the registrant and in the capacities and on
the dates indicated have signed this report below.

<TABLE>
<CAPTION>
Signature                                      Title                                      Date
---------                                      -----                                      ----
<S>                                            <C>                                        <C>
/s/ Lawrence Goldstein                         Director                                   March 7, 2001
----------------------
Lawrence Goldstein


/s/ Anthony Mariotti                           Director                                   March 7, 2001
--------------------
Anthony Mariotti


/s/ John S. Murchison, III                     Chief Executive Officer,                   March 7, 2001
--------------------------                     President and Director (Principal
John S. Murchison, III                         Executive Officer)


/s/ Paul W. Murrill                            Director                                   March 7, 2001
-------------------
Paul W. Murrill


/s/ Thomas G. Ricks                            Director                                   March 7, 2001
-------------------
Thomas G. Ricks


/s/ James B. Skaggs                            Director                                   March 7, 2001
-------------------
James B. Skaggs


/s/ Geoffrey W. Kreiger                        Vice President Finance and                 March 7, 2001
-----------------------                        Administration, Treasurer and
Geoffrey W. Kreiger                            Secretary
                                               (Principal Financial and
                                               Accounting Officer)
</TABLE>

                                       49