<PAGE>

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

                                   FORM 10-Q


(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 For the quarterly period ended September 30, 1999
                                      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
     incorporation or organization)                      Identification No.)

1611 Headway Circle, Building 2, Austin, Texas                 78754
  (Address of principal executive offices)                  (Zip Code)

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



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
                                       ---    ---

As of October 15, 1999, the latest practicable date, the Registrant had
6,973,503 outstanding shares of Common Stock.


================================================================================
<PAGE>

                                     PART I
                             FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                DTM Corporation

          Condensed Consolidated Statements of Operations (unaudited)
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                               Three Months Ended               Nine Months Ended
                                                  September 30,                   September 30,
                                           --------------------------      ---------------------------
                                              1999            1998            1999             1998
                                           ----------      ----------      ----------       ----------
<S>                                        <C>             <C>             <C>              <C>
Revenues:
    Products                               $    6,568      $    5,063      $   20,216       $   16,624
    Service and support                         1,068             839           2,991            2,591
                                           ----------      ----------      ----------       ----------
                                                7,636           5,902          23,207           19,215
 Cost of sales:
    Products                                    3,090           2,779           9,171           10,289
    Service and support                           911             602           2,071            1,632
                                           ----------      ----------      ----------       ----------
                                                4,001           3,381          11,242           11,921
                                           ----------      ----------      ----------       ----------

 Gross Profit                                   3,635           2,521          11,965            7,294

 Operating expenses:
    Selling, general and                        2,654           2,876           8,845            8,227
    administrative
    Research and development                      706             850           2,156            2,693
    Provision for litigation settlement             -               -               -            1,700
                                           ----------      ----------      ----------       ----------
                                                3,360           3,726          11,001           12,620
                                           ----------      ----------      ----------       ----------

 Operating income (loss)                          275          (1,205)            964           (5,326)

 Other income (expense):
    Interest expense, net                         (26)            (10)            (54)             (30)
    Gain on sale of assets                          -             258             129              258
                                           ----------      ----------      ----------       ----------
                                                  (26)            248              75              228
                                           ----------      ----------      ----------       ----------

 Income (loss) before income taxes                249            (957)          1,039           (5,098)

 Income tax expense                               (68)              -            (289)               -
                                           ----------      ----------      ----------       ----------

 Net income (loss)                         $      181      $     (957)     $      750       $   (5,098)
                                           ==========      ==========      ==========       ==========

 Basic and diluted
   earnings (loss) per share               $     0.03      $    (0.15)     $     0.11       $    (0.81)
                                           ==========      ==========      ==========       ==========
 Weighted-average number of shares
    outstanding                             6,989,265       6,286,851       6,737,404        6,286,851
                                           ==========      ==========      ==========       ==========
</TABLE>

See accompanying notes.

                                       1
<PAGE>

                                DTM Corporation

               Condensed Consolidated Balance Sheets (unaudited)
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>

                                                                                            September 30,      December 31,
                                                                                                1999              1998
                                                                                            -------------      ------------
<S>                                                                                         <C>                <C>
Assets
Current assets:
     Cash                                                                                   $         671      $        429
     Accounts receivable, net                                                                       6,354             5,186
     Inventory                                                                                      3,492             3,456
     Prepaid expenses and other                                                                       466               262
                                                                                            -------------      ------------
 Total current assets                                                                              10,983             9,333
 Property, net                                                                                      1,331             1,388
 Capitalized software development costs, net                                                          457               629
 Patent and license fees, net                                                                         785               956
                                                                                            -------------      ------------
 Total assets                                                                               $      13,556      $     12,306
                                                                                            =============      ============

 Liabilities and shareholders' equity
 Current liabilities:
     Line of credit                                                                         $         925      $          -
     Accounts payable                                                                               2,884             3,090
     Due to shareholder                                                                                 -               909
     Deferred revenues and customer deposits                                                        2,140             2,185
     Employee and agent compensation                                                                  883               891
     Income taxes                                                                                     289                 -
     Accrued litigation settlement - stock portion                                                      -               400

 Total current liabilities                                                                          7,121             7,475

 Shareholders' equity:
     Common stock, 6,973,503 shares outstanding at September 30, 1999
        and 6,286,851a t December 31, 1998                                                              1                 1
     Additional paid-in capital                                                                    54,016            53,161
     Accumulated deficit                                                                          (47,585)          (48,335)
     Accumulated other comprehensive income                                                             3                 4
                                                                                            -------------      ------------
 Total shareholders' equity                                                                         6,435             4,831
                                                                                            -------------      ------------
 Total liabilities and shareholders' equity                                                 $      13,556      $     12,306
                                                                                            =============      ============
</TABLE>

See accompanying notes.

                                       2
<PAGE>

                                DTM Corporation

          Condensed Consolidated Statements of Cash Flows (unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                                             Nine Months Ended
                                                                                                September 30,
                                                                                           ---------------------
                                                                                             1999          1998
                                                                                           -------       -------
<S>                                                                                        <C>           <C>
Operating activities:
 Net income (loss)                                                                         $   750       $(5,098)
 Adjustments to reconcile net income (loss) to net cash provided by
    (used in) operating activities:
         Depreciation and amortization                                                       1,063         1,525
         Provision for doubtful accounts                                                        44             -
         Provision for obsolescence                                                             91           675
         Provision for litigation settlement                                                     -           400
         Gain on disposal of equipment                                                        (129)         (258)
         Changes in assets and liabilities used in operating activities:
             Accounts receivable                                                            (1,212)        1,001
             Inventory                                                                        (127)        1,056
             Prepaid expenses and current assets                                              (204)          203
             Accounts payable                                                                 (206)         (423)
             Due to shareholder                                                                  -            (2)
             Deferred revenues                                                                 (45)          562
             Income taxes                                                                      289             -
             Accrued litigation settlement                                                       -         1,244
             Employee and agent compensation                                                    (8)         (329)
                                                                                           -------       -------
 Net cash provided by operating activities                                                     306           556

 Investing activities:
 Purchases of property                                                                        (667)       (1,184)
 Capitalized software development costs                                                        (99)         (231)
 Patent and license expenditures                                                               (49)         (121)
 Proceeds from sale of equipment                                                               281         1,016
                                                                                           -------       -------

 Net cash (used in) investing activities                                                      (534)         (520)

 Financing activities:
 Proceeds from short-term borrowings                                                         3,025           500
 Repayments of short-term borrowings                                                        (2,100)         (675)
 Repayments of due to shareholder                                                             (454)            -
                                                                                           -------       -------

 Net cash provided by (used in) financing activities                                           471          (175)

 Effect of foreign exchange rate changes                                                        (1)          100
                                                                                           -------       -------

 Net change in cash                                                                            242           (39)
 Cash at the beginning of the period                                                           429         2,050
                                                                                           -------       -------
 Cash at the end of the period                                                             $   671       $ 2,011
                                                                                           =======       =======
 Noncash items:
    Conversion of settlement liability into common stock                                   $   400       $     -
    Conversion of portion of due to shareholder into common stock                          $   455       $     -
</TABLE>

See accompanying notes.

                                       3
<PAGE>

                                DTM Corporation

                    Notes to Condensed Financial Statements
                                  (Unaudited)

1.   Basis of Presentation


     The accompanying unaudited condensed consolidated financial statements of
DTM Corporation ("DTM" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months and nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and related footnotes of the Company for the year ended
December 31, 1998 as disclosed in the Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1999.

2.   Inventory

Inventory consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                            September 30,     December 31,
                                                               1999              1998
                                                          ---------------------------------
<S>                                                       <C>                 <C>
           Raw materials and purchased parts                $     2,996         $    1,809
           Finished goods                                           691              1,776
                                                          ---------------------------------
                                                                  3,687              3,585
           Reserve for obsolesence                                 (195)              (129)
                                                          ---------------------------------
                                                            $      3,492        $     3,456
                                                          =================================
</TABLE>

3.   Financing Arrangements

     In June 1999, the Company entered into a $2.5 million credit facility with
a bank. 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
2% and mature in June 2000. 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 September 30, 1999, the borrowing base
was approximately $2.4 million and the outstanding loan balance was
approximately $925,000.

     This line of credit requires the Company to maintain at least $3.2 million
in tangible net worth. At September 30, 1999, the Company's tangible net worth,
as defined in the loan agreement, was approximately $5.2 million.

4.   Contingencies

     In the ordinary course of business, the Company becomes involved in legal
proceedings and claims. The Company also has been involved in litigation with
regards to its patents. In one such instance, the Company has initiated patent
infringement litigation in France, Germany and Italy against a competitor and
against one of that competitor's customers. The Company also initiated patent
infringement litigation in Japan against the competitor's distributor in the
Pacific Rim. In each of these cases, the Company alleges that the competitor is
selling rapid prototyping systems in Europe and Japan that make unauthorized use
of selective laser sintering technology covered by the European and Japanese
patents under which the Company has exclusive rights, and in each case the
Company is seeking injunctive relief and damages. It is anticipated that this
litigation will be pursued in conjunction with European and Japanese proceedings
in

                                       4
<PAGE>

                                DTM Corporation

                    Notes to Condensed Financial Statements
                                  (Unaudited)


which the competitor has opposed the validity of those European and Japanese
patents. Hearings have begun in the German, French, Italian and Japanese
lawsuits. It is not possible at this time to predict the outcome of these
proceedings.

     In September 1999, the Japanese court issued a preliminary injunction
against this competitor's distributor in the Pacific Rim which bars the sale of
the competitor's infringing rapid prototyping system in Japan. The Japanese
court also seized an infringing system in the distributor's possession. Prior to
this ruling, DTM was required to place 20 million Yen, approximately $200,000,
on deposit with the court in case the ruling was reversed and damages caused by
the preliminary injunction could be proved. The competitor has informed DTM that
it intends to file motions to appeal the preliminary injunction and to begin the
main trial on the infringement claim. It is not possible at this time to predict
the impact, if any, the recent events may have on the outcome of these
proceedings.

     DTM has been informed by this competitor that it has obtained the worldwide
right to enforce certain U.S. patents and that it may bring patent infringement
litigation against the Company in U.S. courts. It is not possible at this time
to predict the outcome of this possible action, although the Company has
conducted a review of the patents in question and believes that it is not
infringing or would have valid defenses to claims such competitor may make
regarding selective laser sintering. If such a lawsuit is filed, the Company
intends to defend itself vigorously. However, a ruling that would have the
effect of allowing the competitor to sell rapid prototyping systems in the U.S.
without a license from DTM could have a material adverse effect on the Company's
business and financial performance.

5.   Common Stock


     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.

     At September 30, 1999, the Company had reserved 1,260,493 shares of common
stock for issuance in connection with the 1999 Stock Option Plan (907,755
shares) and for exercise of outstanding options issued in connection with the
IPO in May 1997 under a prior plan (352,738 shares). The 1999 Stock Option Plan
was approved by Shareholders at the May 25, 1999 Annual Meeting.

6.   Stock Option Plans


     At September 30, 1999, there were 940,838 option shares outstanding at a
weighted average exercise price of $2.39 per share. A summary of information
about stock options outstanding and exercisable at September 30, 1999 is as
follows:

<TABLE>
<CAPTION>
               Weighted-Average         Options           Options
                Exercise Price        Outstanding       Exercisable
                --------------        -----------       -----------
<S>                                   <C>               <C>
                   $  1.25              322,000              -

                   $  1.47               54,000              -

                   $  2.00              100,000            35,000

                   $  2.06               59,100            20,685

                   $  2.23              332,334           332,334

                   $  8.03               53,000            37,100

                   $ 13.53               17,264            17,264

                   $ 14.67                3,140             3,140
                                        -------           -------

                   Total                940,838           445,523
                                        =======           =======

</TABLE>


                                       5
<PAGE>

                                DTM Corporation

                    Notes to Condensed Financial Statements
                                  (Unaudited)


     During the nine months ended September 30, 1999, 382,500 option shares were
granted to employees and a Director at a weighted average exercise price of
$1.28 per share. The 1999 grants were made at exercise prices equal to the
market value of the DTM common stock on the date of the grant and vest over
three years. In this same period, no options were exercised and 76,883 option
shares were canceled.

7.   Earnings Per Share

     The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except share and per share amounts):

<TABLE>
<CAPTION>
                                                  Three Months Ended                Nine Months Ended
                                                    September 30,                     September 30,
                                              --------------------------      --------------------------
                                                 1999            1998            1999            1998
                                              ----------      ----------      ----------      ----------
<S>                                           <C>             <C>             <C>             <C>
Numerator for both basic and
diluted earnings per share:
     Net income (loss)                        $      181      $     (957)     $      750      $   (5,098)
                                              ==========      ==========      ==========      ==========

 Denominator:
     Denominator for basic earnings
       per share -- weighted average
       shares                                  6,973,503       6,286,851       6,721,642       6,286,851

     Effect of dilutive securities:
       Employee stock options                     15,762               -          15,762               -

     Dilutive potential common shares
       Denominator for diluted earnings
       per share -- weighted average
       shares and assumed conversions          6,989,265       6,286,851       6,737,404       6,286,851
                                              ==========      ==========      ==========      ==========

 Basic earnings (loss) per share              $     0.03      $    (0.15)     $     0.11      $    (0.81)
                                              ==========      ==========      ==========      ==========
 Diluted earnings (loss) per share            $     0.03      $    (0.15)     $     0.11      $    (0.81)
                                              ==========      ==========      ==========      ==========
</TABLE>

8.   Geographic and Customer Information


     The following is a summary of geographic area data for the interim periods
(in thousands):
<TABLE>
<CAPTION>
                                                  Three Months Ended                Nine Months Ended
                                                    September 30,                     September 30,
                                              --------------------------      --------------------------
                                                 1999            1998            1999            1998
                                              ----------      ----------      ----------      ----------
<S>                                           <C>             <C>             <C>             <C>
Revenues from external
 customers:
    North America                             $    3,206      $    3,133      $   10,727      $    9,186
    Europe                                    $    2,951      $    1,905           8,036           6,853
    PacRim                                    $    1,479      $      864           4,444           3,176
                                              ----------      ----------      ----------      ----------
                                              $    7,636      $    5,902      $   23,207      $   19,215
                                              ==========      ==========      ==========      ==========
</TABLE>

                                       6
<PAGE>

                                DTM Corporation

                    Notes to Condensed Financial Statements
                                  (Unaudited)

9.   Comprehensive Income

     The difference between comprehensive income (loss) and net income (loss)
for the periods presented is comprised of the effect of currency translation
adjustments and hedging activity in accordance with Financial Accounting
Standards Board Statement No. 52, "Foreign Currency Translation." The
accumulated balance of foreign currency and hedging activity, excluded from net
income (loss), is presented in the Condensed Consolidated Balance Sheets as
"Accumulated other comprehensive income." The following table sets forth the
computation of comprehensive income (loss) for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
                                                  Three Months Ended                Nine Months Ended
                                                    September 30,                     September 30,
                                              --------------------------      --------------------------
                                                 1999            1998            1999            1998
                                              ----------      ----------      ----------      ----------
<S>                                           <C>             <C>             <C>             <C>
Net income (loss)                             $      181      $     (957)     $      750      $   (5,098)

Cummulative translation
  adjustment:
      Beginning of period                           (156)           (166)              4            (167)
      End of period                                    3             (67)              3             (67)
                                              ----------      ----------      ----------      ----------
      Change in period                               159              99              (1)            100
                                              ----------      ----------      ----------      ----------

Comprehensive income (loss)                   $      340      $     (858)     $      749      $   (4,998)
                                              ==========      ==========      ==========      ==========
</TABLE>

10.  New Accounting Standards

     In June 1999, the Accounting Standards Board issued Statement of Financial
Accounting Standards Statement No. 137, "Accounting for Derivative Instruments
and Hedging Activities- Deferral of the Effective Date of Financial Accounting
Standards Board ("FASB") Statement No. 133." This Statement defers adoption of
FASB Statement No. 133 until January 1, 2001.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair market value of
the derivative will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings.

     The Company has not yet determined what the effect of Statement of
Financial Accounting Standards No. 133 will be on its earnings and financial
position and has not yet determined the timing or method of adoption. However,
the Statement could increase volatility in earnings and comprehensive income.

                                       7
<PAGE>

ITEM 2.  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 the Company's Unaudited Condensed Consolidated
Financial Statements and notes thereto, as well as the section below under the
heading "Risk Factors That May Affect Future Results and Safe Harbor Statement."
The Company's future operating results may be affected by various trends and
factors, which are beyond the Company's 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 Quarterly Report on
Form 10-Q relative to markets for the Company's 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", and "should" and other similar terminology. The Company wishes
to caution readers that a number of important factors, including those
identified in the section entitled "Risk Factors That May Affect Future Results
and Safe Harbor Statement" as well as factors discussed elsewhere in this report
and in the Company's other reports filed with the Securities and Exchange
Commission, could affect the Company's actual results and cause actual results
to differ materially from those forward-looking statements.

Overview


     DTM Corporation designs, develops, manufactures, markets and supports, on
an international basis, rapid prototyping and rapid tooling systems and related
powdered sintering materials and services. The Company's Sinterstation Systems
and powdered sintering materials are based on proprietary and patented selective
laser sintering technology. DTM was incorporated in 1987 and completed its
initial public offering ("IPO") of Common Stock in May 1997. Since 1992, DTM has
shipped over 275 Sinterstation Systems worldwide.

     The Company's selective laser sintering process uses laser energy to sinter
powdered material to create solid objects that aid in the design and manufacture
of products. The Company's Sinterstation Systems employ a combination of
software and hardware to produce functional models, patterns, injection-molding
tooling and metal parts from a variety of powdered materials. Customers input
designs into the Sinterstation Systems in the form of CAD drawings. The
functional models are used to verify a design's form and fit. The patterns can,
in turn, be used for secondary processes such as the production of non-durable
molds and investment casting. The Company's RapidTool process employs selective
laser sintering along with a furnace cycle to produce steel/copper composite
mold inserts that are used by the injection molder to produce production parts
in quantity. A variant of the RapidTool process is the production of mold
inserts in the Sinterstation System from a copper-reinforced thermoplastic-based
material system, without the need for a furnace cycle. These inserts produced
with this product are used by the injection molder to produce short-run
production parts. Sinterstation Systems also can be used in combination with the
Company's RapidTool process with a furnace cycle to produce metal parts.

     The Company's Sinterstation Systems are purchased by manufacturers,
universities, military and defense organizations and by service bureaus. These
service bureaus utilize rapid prototyping equipment to provide services to other
companies involved in product development. The Company distributes its products
in the United States, Canada, Western Europe and certain Pacific Rim and South
American countries. In the United States and Canada, the Company employs a
direct sales force. In Germany, DTM GmbH, a wholly owned subsidiary, distributes
DTM's products. DTM GmbH is a sales and service organization whose efforts are
augmented by sales agents in France, Italy, Portugal, Spain and Sweden. In

                                       8
<PAGE>

the United Kingdom, DTM (UK) LTD., a wholly owned subsidiary, distributes and
services DTM's products. The Company also distributes its goods and provides
services in the Pacific Rim and South America through a network of independent
agents, including agents in Brazil, China, India, Japan, Singapore, South Korea
and Taiwan.

     DTM's Sinterstation Systems typically include hardware, material handling
equipment, documentation, licenses for using DTM supplied software, licenses for
using DTM-supplied powdered sintering materials and installation. They can be
configured for use with a single sintering powder or for any combination of
thermoplastic, foundry sands or metal sintering powders. DTM typically offers
its Sinterstation Systems packaged with a 12-month warranty and preventive
maintenance contract, installation services, training services and an initial
supply of sintering materials. DTM offers a wide range of proprietary sintering
materials and software that optimizes their use in the Sinterstation System.

     The total value of a packaged offering is allocated among its various
components: systems and related equipment sintering materials, immediate
services and deferred services. Revenues from the sale of products are
recognized when title has transferred to the customer, the Company's remaining
obligations are insignificant and collection of the related receivable is
probable, which, typically, is upon shipment. The Company defers from three to
six percent of the revenues, excluding certain accessories, from each
Sinterstation System sale to cover the cost of a one-year warranty period. 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 12-month warranty period. Upon expiration of the
12-month warranty period discussed above, the Company offers for sale to its
customers an annual maintenance contract, the revenues from which are recognized
ratably as service and support revenue over the related support period.

     The introduction of the new Sinterstation 2500plusTM in August of 1998 was
the culmination of a year-long project to design a system with a lower
manufactured cost that would permit the Company to be more price competitive
while improving its gross margins. Mainly as a result of the Sinterstation 2500
plus, product gross margins improved to approximately 50% beginning in the
fourth quarter of 1998. These higher gross margins allowed the Company to become
profitable beginning in the fourth quarter of 1998.

     On February 12, 1999, an investment partnership of independent investors
affiliated with Proactive Finance Group, LLC ("Proactive") acquired BFGoodrich's
interest in DTM, which at that time represented a 47.7% interest. In June 1999,
Proactive increased its ownership interest in DTM to 50.3%.

                                       9
<PAGE>

Results Of Operations

     The following table sets forth for the three months and nine months ended
September 30, 1999 and 1998 certain income statement data as a percentage of our
total revenues and certain sales data.

<TABLE>
<CAPTION>

                                           Third             Third              Nine              Nine
                                          Quarter           Quarter            Months            Months
                                            1999              1998              1999              1998
                                            ----              ----              ----              ----

<S>                                       <C>               <C>               <C>               <C>
Revenues                                   100.0%            100.0%            100.0%            100.0%
Gross profit                                47.6              42.7              51.6              38.0
Selling, general and
 administrative                             34.8              48.7              38.1              42.8
Research and development                     9.2              14.4               9.3              14.0
Provision for litigation
 settlement                                    -                 -                 -               8.8
Operating income                             3.6             (20.4)              4.2             (27.7)
Gain on sales of equipment                     -               4.4               0.6               1.3
Interest expense                            (0.3)             (0.2)             (0.2)             (0.2)
Income (loss) before income taxes            3.3             (16.2)              4.5             (26.5)
Income tax expense                          (0.9)                -              (1.2)                -
Net income (loss)                            2.4             (16.2)              3.2             (26.5)

Revenues components:
  Product sales                             86.0              85.8              87.1              86.5
  Service and support revenues              14.0              14.2              12.9              13.5
  Total                                    100.0             100.0             100.0             100.0

Gross margin details:
  Products                                  53.0              45.1              55.6              38.1
  Service and support                       14.7              28.2              30.8              37.0
  Total                                     47.6              42.7              51.6              38.0

Revenues from external customers:
  North America                             42.0              53.1              46.2              47.8
  Europe                                    38.6              32.3              34.6              35.7
  Pacific Rim                               19.4              14.6              19.1              16.5
  Total                                    100.0             100.0             100.0             100.0

</TABLE>

Comparison of the Three Months and Nine Months Ended September 30, 1999 and 1998

     Revenues. Revenues increased 29.4% to $7.6 million in third quarter of
1999, compared to $5.9 million in the third quarter of 1998. For the first nine
months of 1999, revenues increased 20.8% to $23.2 million, compared to $19.2
million in the in the first nine months of 1998. The increase in revenues was
primarily due to higher unit volumes of Sinterstation Systems and powdered
materials.

     Unit shipments of Sinterstation Systems increased by 45.5% in the third
quarter of 1999 and increased by 23.1% in the first nine months of 1999,
compared to the comparable periods of 1998. Average machine and accessory
revenue per Sinterstation System sold decreased by 13.7% in the third quarter of
1999 and decreased by 9.9% in the first nine months of 1999, compared to the
comparable periods of 1998. These decreases in average revenues realized was
primarily due to a trend toward lower pricing overall, regional pricing
differences and a trend toward fewer accessories ordered from DTM.

     Shipments of Sinterstation Systems increased the installed base by 30.6% in
the third quarter of 1999 and by 31.8% in the first nine months of 1999 over the
average installed base in the comparable periods of 1998. Revenues derived from
Sintering Materials increased by 39.6% in the third quarter of 1999 and
increased by 55.0% in the first nine months of 1999, compared to the comparable
periods of

                                       10
<PAGE>

1998. The volume of Sintering materials sold in these periods has increased in
line with the growth in the installed base. Revenues derived from these
consumables have increased by more than the increase in the installed base. This
reflects the higher pricing associated with the 1997-1998 introduction of high
performance materials for durable plastic parts that are also believed to be
more productive for the user.

     Revenues derived from services provided to the installed base increased by
27.3% in the third quarter of 1999 and increased by 15.4% in the first nine
months of 1999, compared to the comparable prior year periods of 1998. Year-to-
date, DTM's services revenues have not increased in line with the growth in the
installed base. It is believed that this continuing trend reflects the election
of customers, especially service bureaus, to perform the repair and maintenance
of the machines themselves.

     In the third quarter of 1999, revenues derived from customers in North
America comprised 42.0% of total revenues and increased 2.3% to $3.2 million,
compared to $3.1 million in the third quarter of 1998. For the first nine months
of 1999, revenues derived from customers in North America comprised 46.2% of
total revenues and increased 16.8% to $10.7 million, compared to $9.1 million in
the first nine months of 1998.

     In the third quarter of 1999, international revenues comprised 58% of total
revenues and increased 60.0% to $4.4 million, compared to $2.8 million in the
third quarter of 1998. For the first nine months of 1999, international revenues
comprised 53.8% of total revenues and increased 24.4% to $12.5 million, compared
to $10.0 million in the first nine months of 1998.

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

     Gross Profit.  Gross profit was $3.6 million, or 47.6% of revenues, in the
third quarter of 1999, compared to $2.5 million, or 42.7% of total revenues, in
the third quarter of 1998. . For the first nine months of 1999, gross profit was
$12.0 million, or 51.6% of total revenues, compared to $7.3 million, or 38.0% of
total revenues, in the first nine months of 1998. For the third quarter of 1999
and for the first nine months of 1999, the increase in gross profit primarily
was due to higher unit volumes of Sinterstation Systems and sintering materials.
For the third quarter of 1999 and for the first nine months of 1999 the increase
in product gross margin to over 50% was primarily due to the decrease in the
cost of materials to manufacture the Sinterstation 2500plusTM, compared to the
model that it replaced. Product gross profit for the third quarter of 1999 was
approximately $100,000 lower than expected primarily due to a supplier quality
issue that has since been corrected. Services gross profit was $160,000 lower
than expected in the third quarter of 1999 and services gross margin dropped
below 30% to 14.7%, primarily due to an unusual grouping of repairs on older
models.

     Past gross margins are not necessarily indicative of future gross margins.
Currency changes, changes in mix and changes in material and labor costs, may
have an adverse effect on gross margins

     Selling, General and Administrative Expense.  Selling, general and
administrative expense was $2.7 million, or 34.8% of revenues, in the third
quarter of 1999, compared to $2.9 million, or 48.7% of revenues, in the third
quarter of 1998. The decrease as a percentage of total revenues during the third
quarter of 1999 primarily was due to the growth in total revenues, while
decreasing selling, general and administrative expense by 7.7%. Selling, general
and administrative expense was $8.8 million, or 38.1% of revenues, in the first
nine months of 1999, compared to $8.2 million, or 42.8% of revenues, in the
first nine months of 1998. The decrease as a percentage of total revenues during
the first nine months of 1999 primarily was due to a proportionately higher
growth in total revenues, while limiting selling, general and administrative
expense to a 7.5% increase. Selling, general and administrative expense may vary
as a percentage of revenues in the future.

     Research and Development Expense. Research and development expense was
$706,000, or 9.2% of revenues, in the third quarter of 1999, compared to
$850,000, or 14.4% of revenues, in the third quarter of 1998. Research and
development expense was $2.2 million, or 9.3% of revenues, in the first nine
months of 1999, compared to $2.7 million, or 14.0% of revenues, in the first
nine months of 1998. The higher 1998 expense levels were primarily due to costs
associated with multiple significant new product development

                                       11
<PAGE>

projects that were commenced in 1997 and culminated in 1998 with the
introduction of several new material systems and the new Sinterstation Model
2500plusTM. The Company plans to continue its commitment to research and
development at approximately 10% of revenues, as the Company believes that the
markets for its products are characterized by technological innovation for
hardware, software and powdered materials. 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 the Company's research and development
efforts will result in commercially successful new technology and products in
the future, and those efforts may be already affected by other factors which are
beyond the Company's control.

     Provision For Litigation Settlement. In 1998, DTM settled the shareholder
class action lawsuit pending against it. The charge to its second quarter of
1998 statement of operations in the amount of $1.7 million, consisted of $3.0
million, the proposed value of the settlement, and $200,000 in other costs, net
of the insurance recovery of $1.5 million. There was no corresponding charge in
1999.

    Gain on Sale of Assets. In the third quarter of 1998, the Company announced
a program to sell used Sinterstation 2500 and 2000 systems that had been used
internally for development and support activities or under a discontinued rental
program. That program was completed in the second quarter of 1999 and realized
gains of $553,000 and proceeds from the sales of $1.1 million. In the third
quarter of 1999, the Company recognized no gains from the sale of assets,
compared to $258,000 in gains recognized the third quarter of 1998. For the
first nine months of 1999, gains recognized were $129,000, compared to $258,000
in the first nine months of 1998.

     Interest Expense. Net interest expense for the third quarter of 1999 was
$26,000, compared to $10,000 for the third quarter of 1998. Net interest expense
for the first nine months of 1999 was $54,000, compared to $30,000 in the first
nine months of 1998.

     Income Taxes. As a result of the February 1999 change in control of DTM,
utilization of net operating loss carryforwards will be subject to additional
annual limits of approximately $600,000. In the first nine months of 1999, the
Company provided for income taxes at an estimated  28% annual effective rate.
There was no tax provision in the first nine months of 1998.

     At September 30, 1999, DTM had approximately $9.1 million of federal net
operating loss carryforwards. These net operating loss carryforwards begin to
expire in 2002. DTM has not recognized any benefit from the future use of loss
carryforwards for these periods due to uncertainties regarding the realization
of deferred tax assets based upon the taxable earnings history.

     Net Income (Loss). The Company had net income of $181,000 in the third
quarter of 1999, compared to a net loss of $957,000 in the third quarter of
1998. This $1.1 million favorable change was primarily due to increased unit
volumes, substantially improved product gross margins and lower operating
expenses in 1999. For the first nine months of 1999, the Company had net income
of $750,000, compared to a net loss of $5.1 million in the first nine months of
1998. This $5.8 million favorable change was primarily due to increased unit
volumes, substantially improved gross margins and flat operating expenses in
1999 and the 1998 provision for litigation of $1.7 million. Net income as a
percentage of revenue was 2.4% for the third quarter of 1999 and 3.2% for the
first nine months of 1999, compared to losses in the comparable periods of 1998.

     Earnings per share were $0.03 in the third quarter of 1999, compared to a
loss per share of $0.15 in the third quarter of 1998. Earnings per share were
$0.11 in the first nine months of 1999, compared to a loss per share of $0.81 in
the first nine months of 1998.

                                       12
<PAGE>

Liquidity and Capital Resources


     During the first nine months of 1999, operating activities provided
$306,000 in net cash, compared to $556,000 provided in the comparable period of
1998.

     Accounts receivable, less allowance, represented approximately 75 days of
quarter sales at September 30, 1999, compared to 54 days at December 31, 1998.
This increase in days of quarter sales outstanding was primarily due to third
quarter sales being heavily weighted to the end of the quarter. Inventory, less
allowance, represented approximately 79 days quarter costs on hand at September
30, 1999, compared to 75 at December 31, 1998. This was a planned increase to
allow for higher expected production activity in the fourth quarter.

     At September 30, 1999, the Company had sold out of Sinterstation Systems
and had a backlog of $1.6 million.

     The Company's investing activities include expenditures for patents and
licenses, capitalized software costs and furniture and equipment, principally
consisting of the Company's Sinterstation Systems built for internal use.
Capital expenditures for the nine months ended September 30, 1999 were $815,000.
No significant investments are planned for the balance of 1999.

     DTM obtained a $2.5 million credit facility with Silicon Valley Bank in the
second quarter of 1999. The one-year credit facility accrues interest at prime
plus 2% per annum and is secured by the corporate assets of DTM. At September
30, 1999, approximately $925,000 was outstanding under this facility and
approximately $1.5 million was available to be borrowed.

     In the second quarter of 1999, DTM repaid a due to shareholder liability of
approximately $909,000. DTM satisfied this liability by making a payment of
$454,274 in cash borrowed under the new credit facility with Silicon Valley Bank
and by issuing 352,167 additional shares of DTM common stock. After the
transaction, DTM Acquisition Company, L.P. owns approximately 50.3% of the
outstanding capital stock of DTM.

     The Company believes that it has the financial resources needed to meet
business requirements, including capital expenditures, working capital
requirements, the debt obligations outstanding and operating lease commitments
for facilities and equipment through December 31, 1999. However, there can be no
assurance that this will be the case.

New Accounting Standard

     In June 1998, the Accounting Standards Board issued Statement of Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which is required to be adopted in years beginning
after June 15, 1999. The Statement permits early adoption as of the beginning of
any fiscal quarter after its issuance. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair market value of the derivative
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings.

     The Company has not yet determined what the effect of Statement of
Financial Accounting Standards Statement No. 133 will be on its earnings and
financial position and has not yet determined the timing or method of adoption.
However, the Statement could increase volatility in earnings and comprehensive
income.

                                       13
<PAGE>

Year 2000 Plan


    Many currently installed computer systems and software products are coded to
accept only two-digit entries in date code fields. These date code fields will
need to accept four-digit entries to distinguish 21st century dates from 20th
century dates. As a result, computer systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists concerning the potential effects associated with
such compliance.

     The Company has evaluated its Sinterstation Systems and believes that it
will have no exposures with respect to the Year 2000 issue.

     The Company has replaced its internal information technology with packaged
software solutions which purport to comply with Year 2000 requirements. This
project cost approximately $150,000. This cost includes internal costs, but
excludes the costs to upgrade and replace systems in the normal course of
business.

     The Company has performed an evaluation of its non-information systems
(embedded technology such as microcontrollers) and does not believe that it has
material exposures in this area with respect to the Year 2000 issue.

     The Company has not made inquires of its key venders as to their status
with respect to the Year 2000 compliance issues. There can be no assurance that
Year 2000 compliance issues at these venders may not cause these venders to
disrupt the Company's production plans.

     Based upon available information, the Company does not believe any material
exposure to significant business interruption exists as a result of Year 2000
compliance issues, or that the cost of the remedial actions will have a material
adverse effect on its business, financial condition or results of operations of
the Company. Accordingly, the Company has not adopted any formal contingency
plan in the event its Year 2000 compliance project is not completed in a timely
manner.

     The estimates and conclusions set forth herein regarding Year 2000
compliance contain certain forward-looking statements and are based on
management's estimates of future events and information provided by third
parties.  There can be no assurance that such estimates and information provided
will prove to be accurate.  Risks to completing the Year 2000 compliance project
include the availability of resources, the Company's ability to discover and
correct potential Year 2000 problems and the ability of suppliers and other
third parties to bring their systems into Year 2000 compliance.

                                       14
<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND SAFE HARBOR STATEMENT

     Investors are cautioned that this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties, including the
following: (i) the Company's plans, strategies, objectives, expectations and
intentions are subject to change at any time at the discretion of management and
the Board of Directors; (ii) the Company's plans and results of operations will
be affected by the Company's ability to manage its growth and working capital;
and (iii) the Company's business is highly competitive and the entrance of new
competitors or the expansion of the operations by existing competitors in the
Company's markets could adversely affect the Company's plans and results of
operations. In addition, the Company identifies the risk factors discussed below
which may affect the Company's actual results and may cause actual results to
differ materially from those contained in forward looking statements.

Limited Operating History and Profitability

     The Company was incorporated in 1987 and shipped its first Sinterstation
Systems in 1992.  The Company realized its first profitable quarter in the
fourth quarter of 1998. Prior to the fourth quarter of 1998, the Company had
been unprofitable from its inception; most recently recognizing net losses of
approximately $7.3 million for the year ended December 31, 1997 and $5.1 million
for the nine months ended September 30, 1998. There can be no assurance that the
Company can maintain profitability in the future.

Possible Delisting of Securities from The Nasdaq National Market; Limited
Liquidity of Trading Market

     Shares of the Company's Common Stock are quoted on the National Market
System ("NMS") of The Nasdaq Stock Market ("Nasdaq").  Nasdaq has recently
promulgated new rules that make continued listing of companies on the NMS more
difficult and has significantly increased its enforcement efforts with regard to
the Nasdaq standards for such listing. The Company has been having difficulty
maintaining one such standard, the $5.0 million market value of public float
requirement. The Company is on notice from Nasdaq that it must come into
compliance with rule by November 30, 1999 or the listing of its securities on
NMS would not be continued. Public float is defined for purposes of this
calculation as shares that are not held directly or indirectly by any officer or
director of the Company or any person who is the beneficial owner of more than
10 percent of the total shares outstanding. On October 25, 1999, the Company's
public float was believed to be no less than 3,460,146 shares of Common Stock
and the minimum bid price was $1.031 per share. This resulted in a market value
of public float of $3,567,000, 29% below the required amount to meet the Nasdaq
NMS rule. At that time, the minimum bid price would have had to have been $1.445
to meet the Nasdaq NMS rule. The Company plans to seek an appeal of any attempt
by Nasdaq to delist the Company's securities from the NMS. However, there can be
no assurance that such an appeal would be successful.

     In addition, Nasdaq also requires companies whose stock is included for
quotation on the NMS maintain $4,000,000 in net tangible assets and a minimum
bid price of $1.00. As of September 30, 1999, the Company had net tangible
assets of $6,435,000, for such purpose and the minimum bid price was in excess
of $1.00. On October 18, 1999, the minimum bid price dipped below $1.00. While
the Company believes it is currently in compliance with these requirements, if
the Company fails to continue to satisfy these requirements, its Common Stock
may be delisted from the NMS.

     If the Company is delisted from the NMS, it may choose to list its Common
Stock on the Nasdaq SmallCap Market, the OTC Bulletin Board or some other
quotation medium, such as the Pink Sheets, depending on its ability to meet the
specific listing requirements.  If the Company is delisted from the NMS, it is
unlikely that the Company would be able to have its Common Stock included for
quotation on the Nasdaq SmallCap Market.  As a result, an investor would find it
more difficult to dispose of, or to obtain accurate quotations of the price of,
the Company's Common Stock.

     Additionally, if the Company's Common Stock is not traded on a national
securities exchange or on Nasdaq, it may be subject to so-called "penny stock"
rules that impose additional sales practice and market-making requirements on
broker-dealers who sell or make a market in such securities.

                                       15
<PAGE>

Consequently, the delisting of the Company's Common Stock from the NMS could
adversely affect the ability or willingness of broker-dealers who sell or make a
market in the Company's Common Stock and the ability of investors of the
Company's Common Stock to sell their securities in the secondary market. Such
delisting may also have the adverse effect of reducing the visibility, liquidity
and prestige of the Company's Common Stock.

Future Capital Needs; Uncertainty of Additional Financing; Possibility of
Significant Dilution

     The Company's future capital requirements will depend on a number of
factors, including its profitability, growth rate, working capital requirements,
expenses associated with protection of its patents and other intellectual
property and costs of future research and development activities. Developing
technology companies such as DTM typically need large amounts of capital to fund
growth. However, the Company's cash requirements may vary materially from those
now planned as a result of unforeseen changes that could consume a significant
portion of the available resources before that time.

     Future operating results will depend, in part, on the Company's ability to
obtain and manage capital sufficient to finance its business. To the extent that
funds expected to be generated from the Company's operations are insufficient to
meet current or planned operating requirements or to maintain its listing on the
Nasdaq NMS, the Company will seek to obtain additional funds through bank
facilities, equity or debt financing, collaborative or other arrangements with
corporate partners and others from other sources.  Additional funding may not be
available when needed or on terms acceptable to the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.  If adequate funds are not available, the Company may be
required to delay or to eliminate certain expenditures or to license to third
parties the rights to commercialize technologies that the Company would
otherwise seek to develop itself.  In addition, in the event that the Company
obtains any additional funding, such financing may have a substantially dilutive
effect on the holders of the Company's securities.  See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".

Quarterly Fluctuations in Operating Results

     The Company's revenues and operating results have varied substantially from
quarter to quarter and may continue to do so. DTM typically experiences a
relatively long lead-time, often from six to 24 months, to complete a
Sinterstation System sale and has historically experienced no backlog.
Furthermore, new product introductions, seasonality of customer buying patterns
and other factors can cause fluctuations in quarterly results. These
fluctuations have precluded, and may continue to preclude, the Company from
managing its inventories effectively from quarter to quarter. Further, a
majority of the sales of the Company's Sinterstation Systems occur at the end of
the quarter, often in the last weeks of the quarter. Accordingly, the Company's
ability to forecast the timing and amount of specific sales is limited, and the
deferral or loss of one or more significant sales could materially adversely
affect operating results in a particular quarter. The current 12-week
manufacturing cycle of the new Sinterstation System Model 2500plusTM also
negatively impacts the Company's ability to control its inventories. The failure
of the Company to complete a particular Sinterstation System sale in any given
quarter can have a material adverse effect on the Company's business and
financial performance for that quarter and quarterly fluctuations could cause a
material adverse effect on the price at which the Company's Common Stock trades.
The tendency for a large number of the Company's sales made during a quarter to
be completed at or near the end of the quarter also hinders the Company's
ability to predict sales, control sales prices and enforce its standard terms.

Emerging Rapid Prototyping Market

     The market for rapid prototyping products and services, such as those
marketed by the Company, 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 CAD file describe a design and organizations who are not
currently using CAD are not, generally, potential customers for rapid
prototyping products and services. Significant education of the end user in both
CAD modeling and rapid prototyping in general has in some cases been a
prerequisite to product acceptance. It is

                                       16
<PAGE>

not clear at this time which one or more technologies will gain broad market
acceptance. There can be no assurance that DTM will emerge as a market leader,
or even a major market participant, as the market evolves and matures.

Emerging Rapid Tooling Market

     The market for rapid tooling products and services, such as those marketed
by the Company, is in an even earlier stage of development than rapid
prototyping. Participants in this market, including the Company, are moving to
address new applications, many of which may not yet be known or accepted by
potential users. The companies who use traditional-machining methods to make
tooling have made large capital investments in traditional equipment and have
mature infrastructures for doing so. They may be highly resistant both on
financial and cultural bases to adopting new technologies. There can be no
assurance that rapid tooling technologies will evolve to the point that the
perceived value will overcome those obstacles.  There can be no assurance that
DTM will emerge as a market leader, or even a major market participant, as the
market evolves and matures.

Competition

     The market for rapid prototyping systems is intensely competitive. In
marketing its Sinterstation Systems, the Company experiences competition from
many sources. Certain of the Company's competitors are better known and have
greater financial, research and development, production and marketing resources
than DTM. The principal worldwide competitors are 3D Systems Corporation and
Stratasys, Inc. EOS GmbH Electro Optical Systems is a significant competitor
outside of North America. 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 the Company's business and financial results.

Limited Product Company

     The Company currently offers one model of Sinterstation Systems for sale.
The sale of Sinterstation Systems comprised 61% of revenues in the year ended
December 31, 1998 and 66% of revenues in each of the years ended December 31,
1997 and 1996.  The remaining revenues were comprised of sales of powdered
sintering materials, spare parts and services to the installed base of
Sinterstation owners. The Company's Sinterstation Systems are priced at the
premium end of the range of today's rapid prototyping products and are sold on
the basis of performance and suitability to specific applications. In a downturn
or a soft market, the Company's dependence upon a limited range of products, as
opposed to a wide range of products at different price points, has caused the
Company's financial performance to be adversely affected and may continue to do
so.

Intellectual Property And Proprietary Rights

     In pursuing protection for its proprietary rights in its Sinterstation
Systems, materials and related technology, the Company currently relies on a
combination of patent, copyright, trademark and trade secret rights, as well as
contractual provisions. The Company typically seeks patent protection for its
selective laser sintering technology, including, where deemed appropriate, the
selective laser sintering process, its Sinterstation Systems and the materials
used in its Sinterstation Systems. 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 the Company has rights. In addition, the
laws of various countries in which the Company's products may be sold may not
protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.

     The Company is currently involved in significant litigation with a
competitor, EOS GmbH Electro Optical Systems in Germany, France, Italy and
Japan, with regard to the Company's proprietary rights. If DTM is unsuccessful
in their litigation, its competitive position would harmed.

     In addition, the Company can give no assurance that the issued patents to
which it holds rights will be adequate to protect its interests or, if
challenged, held valid. The Company's competitors could develop

                                       17
<PAGE>

non-infringing systems, materials or technologies that are equivalent or
superior to those of the Company. A competitors currently does and others also
may practice technology covered by DTM's patents or other legal or contractual
protections regardless of the fact that it is legally protected. Any litigation
to enforce the Company's intellectual property rights would be expensive, time-
consuming, may divert management resources and may not be adequate to protect
the Company's business. While DTM defends its intellectual property vigorously,
there can be no assurance that it will be successful in its various litigation
in many countries. If the Company were unsuccessful in enforcing its
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 the Company were found to have violated state or federal antitrust
laws, the Company's future revenues might be adversely affected. For example, a
court granted a temporary summary judgment against the Company in 1997, ruling
that a customer had been given an implied personal license by DTM to one of
DTM's patented sintering materials. Although the summary judgment was stayed in
connection with a settlement agreement in this case, there can be no assurance
that intellectual property claims against the Company in the future will not
have a material adverse effect on the Company's business, financial performance
and results of operations.

     Furthermore, unrelated third parties hold many patents and pending patent
applications under which the Company is 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 the Company, and if the Company
was not successful in defending such litigation or in obtaining a license, the
Company's business and financial performance could be materially adversely
affected. The Company has been threatened with such litigation by a competitor.

     Certain key intellectual property used in the selective laser sintering
process is licensed to the Company by The University of Texas System. As a
licensee, the Company's rights to practice the technology are not absolute. The
University of Texas could terminate, attempt to terminate or amend the license
if the Company could be shown to be in material default of the terms of the
license. Even if DTM has a basis for objection, defense of its 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
the Company's business and financial performance.

Dependence on Key Personnel

    The Company's 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 the Company's business and financial
performance. The Company's success also depends on its 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 the
Company is attempting to recruit personnel. The Company has put in place
incentive compensation plans intended to provide motivation for continued
employment of key employees. The Company can give no assurance that it will be
able to retain employees or continue to attract, assimilate and retain other
skilled personnel.

Dependence on Third Party Suppliers

    The Company subcontracts for manufacture of 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 the Company's
sales or reputation for timely delivery, and, hence, on the Company's business,
financial performance and results of operations.

International Operations

     Revenues from customers located outside the U.S. represented 58%, 53%, 60%
and 50% of the Company's total revenues in the first nine months of 1999 and the
years 1998, 1997 and 1996, respectively. The Company believes that continued
growth and profitability will require expansion of its 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.

                                       18
<PAGE>

     Fluctuations in exchange rates as well as interest rates have significantly
affected DTM's sales in foreign markets. In particular, a strengthening U.S.
dollar has adversely affected the price competitiveness of DTM's 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 the Company
to limit currency exchange risk  will be successful in avoiding exchange-related
losses. Nor can there be assurance that the Company's exposure to risks
associated with international operations will not continue to have a material
adverse effect on its 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 the Company's business and financial performance.

Control of the Company

    Proactive currently controls approximately 50.3% of the outstanding Common
Stock. At this percentage, Proactive could control elections of the Company's
Board of Directors and could control or substantially affect the outcome of most
matters submitted to the Company's shareholders for their vote or consent.
Proactive could also cause, prevent or delay a change in control of the Company.

Product Liability

    Products as complex as those offered by the Company may contain undetected
defects or errors when first introduced or as enhancements are released that,
despite testing by the Company, 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 the Company's reputation and business.
The Company attempts to include provisions in its agreements with customers that
are designed to limit the Company's exposure to potential liability for damages
arising out of defects or errors in the Company's 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 the Company's
products entails the risk of product liability claims. Any such claim brought
against the Company, regardless of its merit, could result in material expense
to the Company, diversion of management time and attention, and damage to the
Company's business reputation and its ability to retain existing customers or
attract new customers.

Year 2000 Compliance

    The Company has replaced its internal information technology and certain
non-information systems to meet Year 2000 compliance. There can be no assurance
that the Company has identified all significant Year 2000 problems. The Company
has not developed any formal contingency plan should they arise. Unforeseen Year
2000 problems, if not fixed, could have a material adverse effect on the
Company's business financial condition and results of operations. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations  Year 2000."

Possible Issuance of Preferred Stock

    The Company's Articles of Incorporation authorize the issuance of up to
3,000,000 shares of Preferred Stock, $0.001 par value ("Preferred Stock"), the
terms of which would be determined by the Board of Directors at the time of
issuance, without further shareholder approval. The Board of Directors would
determine whether these shares would carry voting rights, preferences in the
payment of dividends, sinking fund provisions and liquidation, redemption or
conversion rights, if any. The Company has no current plans to issue Preferred
Stock. However, if such stock is issued in the future, the rights of the holders
of Common Stock could be materially adversely affected. It is possible that the
Board of Directors could grant future holders of Preferred Stock rights that
could restrict the Company's ability to merge or sell its assets to a third
party, resulting in preservation of the control of the Company by its then
current owners. The Preferred Stock provisions of the Company's Articles of
Incorporation could inhibit a third party from acquiring a significant amount of
the Common Stock, thereby delaying or preventing changes of the management or
control of the Company, and possibly materially adversely affecting the Common
Stock price as a result.

                                       19
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Shares Eligible for Future Sale; Probable Resale of Common Stock Issued in
connection with Settlement of Shareholder Class Action Litigation

     Sales of shares of Common Stock into the market by Proactive, employees
exercising options or recipients of shares to be distributed in settlement of
the Company's shareholder class action litigation escrow could cause a decline
in the price of such stock. The shares of the Common Stock owned by Proactive
will be tradeable, 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 the Company, after a minimum of one year has elapsed from the date
on which Proactive acquired such shares. In addition, the Company has granted
Proactive certain demand registration rights and if the Company proposes to
register any of its securities under the Securities Act of 1933, whether for its
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
the Company's Common Stock in the registration.

     DTM employees hold immediately exercisable options to purchase 445,523
shares of Common Stock. The Company 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 of DTM 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 affiliates of the Company).

     The non-cash component of the settlement of the shareholder class action
resulted in the issuance of 334,485 shares of the Company's Common Stock into a
settlement escrow on February 4, 1999. Such shares are freely tradeable. This
holding comprised approximately 10% of the Company's public float at that time.
In a notice accompanying the first distribution to the class members, the escrow
agent stated that the escrow agent intends to sell the DTM shares into the
market prior to the final distribution to the recipients of the settlement.
Sales of Common Stock into the market by the escrow agent or, if distributed,
the recipients of the settlement could cause a decline in the price of such
stock.

Market Volatility

    The Company's Common Stock is listed on the Nasdaq National Market System.
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
companies.

ITEM 3.  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 2 above.
Such information is incorporated by reference herein.

                                       20
<PAGE>

                                    PART II
                               Other Information

ITEM 1.   LEGAL PROCEEDINGS

     For a discussion of the legal proceedings to which the Company is subject,
please see Note 4 to the Notes to Consolidated Financial Statements with regard
to the consolidated financial statements for the three months and nine months
ended September 30, 1999 and 1998. The competitor which is described in that
note is EOS GmbH Electro Optical System of Planegg, Germany.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits

               Exhibit 10.21 Loan and Security Agreement with Silicon Valley
               Bank, dated June 8, 1999

               Exhibit 10.22 Loan and Security Agreement (Exim Program) with
               Silicon Valley Bank, dated June 8, 1999.

               Exhibit 27.1 Current Financial Data Schedule for the quarter
               ended September 30, 1999





                                       21
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                                  SIGNATURES

     Pursuant to the requirements 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.

Dated:  October 28, 1999

                         DTM CORPORATION
                         (Registrant)


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


                         By:  /s/ Geoffrey W. Kreiger
                              --------------------------------------------
                              Geoffrey W. Kreiger
                              Vice President of Finance, Treasurer and Secretary

                                       22
<PAGE>

                               Index to Exhibits
                               -----------------

Number                 Description
------                 -----------

10.21     Loan and Security Agreement with Silicon Valley Bank, dated June 8,
          1999

10.22     Loan and Security Agreement (Exim Program) with Silicon Valley Bank,
          dated June 8, 1999

27.1      Current Financial Data Schedule for the quarter ended September 30,
          1999