0001206774-13-003274.txt : 20130904 0001206774-13-003274.hdr.sgml : 20130904 20130904060040 ACCESSION NUMBER: 0001206774-13-003274 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20130904 FILED AS OF DATE: 20130904 DATE AS OF CHANGE: 20130904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRATASYS LTD. CENTRAL INDEX KEY: 0001517396 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 000000000 STATE OF INCORPORATION: L3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35751 FILM NUMBER: 131076506 BUSINESS ADDRESS: STREET 1: 7665 COMMERCE WAY CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 972-8-931-4314 MAIL ADDRESS: STREET 1: 2 Holtzman Street STREET 2: Science Park, P.O. Box 2496 CITY: Rehovot STATE: l3 ZIP: 76124 FORMER COMPANY: FORMER CONFORMED NAME: OBJET LTD DATE OF NAME CHANGE: 20111118 FORMER COMPANY: FORMER CONFORMED NAME: OBJET GEOMETRIES LTD DATE OF NAME CHANGE: 20110405 6-K 1 stratasys_6k.htm CURRENT REPORT OF FOREIGN ISSUER

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

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2013.

Commission File Number 001-35751

STRATASYS LTD.
(Translation of registrant’s name into English)

c/o Stratasys, Inc.	2 Holtzman Street, Science Park
7665 Commerce Way	P.O. Box 2496
Eden Prairie, Minnesota 55344	Rehovot, Israel 76124
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ¨ No x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

THE INFORMATION SET FORTH IN THIS REPORT OF FOREIGN PRIVATE ISSUER ON FORM 6-K, INCLUDING THE EXHIBITS ANNEXED HERETO, IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRANT'S REGISTRATION STATEMENTS ON FORM S-8 (SEC FILE NO.’S 333-185240 AND 333-190963) AND FORM F-3 (SEC FILE NO. 333-190965) (COLLECTIVELY, THE “REGISTRATION STATEMENTS”), AND SHALL BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FILED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

CONTENTS

Stratasys Ltd., or Stratasys, hereby files this Report on Foreign Private Issuer on Form 6-K, or this Form 6-K, in order to provide certain historical and pro-forma financial information with respect to Cooperation Technology Corporation, or MakerBot, which is the direct parent company of MakerBot Industries, LLC. MakerBot was acquired by Stratasys, referred to herein as the merger, on August 15, 2013 pursuant to an Agreement and Plan of Merger, dated as of June 19, 2013, or the merger agreement, by and among Stratasys, Baccio Merger Corporation, Baccio Corporation, Cooperation Technology Corporation and Shareholder Representative Services, LLC, as Seller Representative. The financial information annexed to this Form 6-K consists of the following:

	(i)	Exhibit 99.1: Audited, consolidated financial statements of Cooperation Technology Corporation as of and for the year ended, December 31, 2012 (including the notes thereto) (referred to herein as the Cooperation Technology Corporation 2012 Financial Statements).

	(ii)	Exhibit 99.2: Unaudited condensed consolidated financial statements of Cooperation Technology Corporation as of June 30, 2013 and for the six month periods ended June 30, 2013 and 2012.

	(iii)	Exhibit 99.3: Unaudited Pro Forma Condensed Combined Financial Statements of Operations for the year ended December 31, 2012 and the six months ended June 30, 2013 and Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2013, prepared in accordance with SEC Regulation S-X Article 11, which combine (a) the historical consolidated statements of operations of Stratasys and Cooperation Technology Corporation as if the merger had been completed on January 1, 2012 and (b) the historical consolidated balance sheets of Stratasys and Cooperation Technology Corporation, giving effect to the merger as if it had been consummated on June 30, 2013.

	(iv)	Exhibit 99.4: Supplemental Unaudited Pro Forma Condensed Combined non-GAAP Financial Data of Stratasys Ltd. and Cooperation Technology Corporation for the year ended December 31, 2012 and the six months ended June 30, 2013.

In addition, Stratasys is filing the following additional exhibit to this Form 6-K, which is incorporated by reference as Exhibit 23.4, 23.5 and 23.7 to Stratasys’ Registration Statements on Form S-8 (SEC File No. 333-185240), Form S-8 (SEC File No. 333-190963) and Form F-3 (SEC File No. 333-190965), respectively:

	(v)	Exhibit 23: Consent of CohnReznick LLP, independent auditor, to the incorporation by reference into Stratasys’ Registration Statements on Form S-8 (SEC File No.’s 333-185240 and 333-190963) and Form F-3 (SEC File No. 333-190965) of their report dated May 6, 2013, with respect to the Cooperation Technology Corporation 2012 Financial Statements.

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.

	STRATASYS LTD.

Dated: September 4, 2013	By:	/s/ Erez Simha
	Name: Erez Simha
	Title: Chief Financial Officer

EXHIBIT INDEX

The following exhibits are filed as part of this Form 6-K:

Exhibit No.		Description
23		Consent of CohnReznick LLP, independent auditor of Cooperation Technology Corporation
99.1		Audited, consolidated financial statements of Cooperation Technology Corporation as of and for the year ended December 31, 2012
99.2		Unaudited condensed consolidated financial statements of Cooperation Technology Corporation as of June 30, 2013 and for the six month periods ended June 30, 2013 and 2012
99.3		Unaudited Pro Forma Condensed Combined Statements of Operations of Stratasys Ltd. and Cooperation Technology Corporation for the year ended December 31, 2012 and the six months ended June 30, 2013, and Unaudited Pro Forma Condensed Combined Balance Sheet of Stratasys Ltd. and Cooperation Technology Corporation as of June 30, 2013
99.4		Supplemental Unaudited Pro Forma Condensed Combined non-GAAP Financial Data of Stratasys Ltd. and Cooperation Technology Corporation for the year ended December 31, 2012 and the six months ended June 30, 2013

EX-23 2 exhibit23.htm CONSENT OF COHNREZNICK LLP

Exhibit 23

Consent of Independent Auditor

We consent to the incorporation by reference in the registration statements on Form S-8 (File Nos. 333-185240 and 333-190963) and Form F-3 (File No. 333-190965) of Stratasys Ltd. of our report dated May 6, 2013, with respect to our audit of the consolidated balance sheet of Cooperation Technology Corporation and subsidiaries as of December 31, 2012, and the related consolidated statements of operations, cash flows, and shareholders’ equity for the year then ended, which report appears in the Report of Foreign Private Issuer on Form 6-K of Stratasys Ltd., filed with the Securities and Exchange Commission on September 3, 2013.

/s/ CohnReznick LLP

Roseland, New Jersey
August 30, 2013

EX-99.1 3 exhibit99-1.htm AUDITED, CONSOLIDATED FINANCIAL STATEMENTS

Exhibit 99.1

COOPERATION TECHNOLOGY CORPORATION
AND SUBSIDIARIES

Consolidated Financial Statements as of and
for the Year Ended December 31, 2012, and Independent
Auditor’s Report

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
INDEPENDENT AUDITOR’S REPORT		1

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
	DECEMBER 31, 2012:

	Balance Sheet	2

	Statement of Operations	3

	Statement of Cash Flows	4

	Statement of Shareholders’ Equity	5

Notes to Consolidated Financial Statements		6–16

Independent Auditor’s Report

The Board of Directors and Shareholders
Cooperation Technology Corporation

We have audited the accompanying consolidated financial statements of Cooperation Technology Corporation and Subsidiaries, which comprise the consolidated balance sheet as of December 31, 2012, and the related consolidated statements of operations, cash flows, and shareholders’ equity for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cooperation Technology Corporation and Subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ CohnReznick LLP

Roseland, New Jersey
May 6, 2013

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2012

(In thousands, except share and per share amounts)

ASSETS
Current assets:
Cash and cash equivalents	$	5,848
Accounts receivable — net of allowance of $33		266
Inventory — net		2,113
Prepaid expenses and other current assets		682
Total current assets		8,909
Property and equipment— net		1,897
Deferred financing costs— net		160
Restricted cash		633
Other assets		94
Total assets	$	11,693

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations	$	98
Accounts payable		1,044
Accrued expenses		512
Customer deposits and deferred revenue		3,168
Total current liabilities		4,822

Long-term portion of capital lease obligations		194
Total liabilities		5,016

Commitments and contingencies

Shareholders' equity:
Convertible preferred stock, Series B, $0.0001 par value; 5,000,000 shares authorized;
3,303,247 issued and outstanding; liquidation preference of $10,077		-

Convertible preferred stock, Series A, $0.0001 par value; 1,315,889 shares authorized,
issued and outstanding; liquidation preference of $1,200		-

Common stock, $0.0001 par value; 20,000,000 shares authorized; 10,170,204 shares
issued and outstanding		1

Additional paid-in capital		11,741
Accumulated deficit		(5,065	)
Total shareholders' equity		6,677
Total liabilities and shareholders' equity	$	11,693

See notes to consolidated financial statements.

- 2 -

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2012

(Dollars in thousands)

Revenue	$	15,748
Cost of revenue		9,170
Gross profit		6,578

Selling, general, and administrative expenses		7,305
Research and development		2,604
Restructuring charge		943
Loss from operations		(4,274	)

Interest expense		(13	)
Interest and other income		23

Net loss	$	(4,264	)

See notes to consolidated financial statements.

- 3 -

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2012

(Dollars in thousands)

Cash flows from operating activities:
Net loss	$	(4,264	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		171
Provision for doubtful accounts		15
Share-based compensation expense		198
Non-cash interest expense		6
Changes in operating assets and liabilities:
Operating cash		(633	)
Accounts receivable		(189	)
Inventory		(1,702	)
Prepaid expenses and other current assets		(499	)
Other assets		(57	)
Accounts payable and accrued expenses		1,124
Customer deposits and deferred revenue		3,153

Net cash used in operating activities		(2,677	)

Cash flows from investing activities:
Purchases of property and equipment		(1,689	)

Net cash used in investing activities		(1,689	)

Cash flows from financing activities:
Debt issuance costs		(13	)
Repayments of capital lease obligations		(15	)
Proceeds from exercise of stock options		12

Net cash used in financing activities		(16	)

Net decrease in cash and cash equivalents		(4,382	)

Cash and cash equivalents — beginning of year		10,230

Cash and cash equivalents — end of year	$	5,848

Supplemental disclosure of noncash investing and financing activities:
Property and equipment acquired under capital lease obligations	$	307
Warrants issued pursuant to term loan financing	$	153

See notes to consolidated financial statements.

- 4 -

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2012

(Dollars in thousands)

	Series B Convertible		Series A Convertible
	Preferred Stock		Preferred Stock		Common Stock			Additional		Retained Earnings
								Paid-in		(Accumulated			Shareholders'
	Shares	Amount	Shares	Amount	Shares	Amount		Capital		Deficit)			Equity
Balance as of January 1, 2012	3,303,247	-	1,315,889	-	10,155,330	$	1	$	11,378	$	(801	)	$	10,578

Share-based compensation									198					198
Exercise of stock options					14,874				12					12
Fair value of warrant from issuance of debt									153					153
Net loss											(4,264	)		(4,264	)

Balance as of December 31, 2012	3,303,247	-	1,315,889	-	10,170,204	$	1	$	11,741	$	(5,065	)	$	6,677

See notes to consolidated financial statements.

- 5 -

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2012

(In thousands, except share and per share amounts)

1.	NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	Business Description and Organization — Cooperation Technology Corporation and Subsidiaries (collectively, the "Company") is a New York-based provider of desktop three-dimensional (“3D”) printers, and related products and services. The Company’s customers include professionals, consumers, government organizations and educational institutions. Customers use the Company’s 3D printers and related products for a variety of activities, including design creation, product development, rapid prototyping, and replacement of traditional product manufacturing processes.

	From inception through December 31, 2011, the Company sold substantially all of its 3D printers to customers as unassembled kits. In 2012, the Company significantly expanded its operations to include production of assembled 3D printer products.

	From its inception in January 2009 through June 2010, the Company operated as MakerBot Industries, LLC, a New York Limited Liability Company (“MakerBot”). In June 2010, the Company formed Cooperation Technology Corporation (“CTC”), a Delaware corporation, as the holding company of MakerBot pursuant to the terms and conditions of its Convertible Preferred Stock, Series A financing (see Note 7). In connection therewith, in July 2010, each of the members of MakerBot exchanged their membership interest units for shares of common stock of CTC, and MakerBot consequently became a wholly-owned subsidiary of CTC.

	As of December 31, 2012, the Company’s wholly-owned subsidiaries included MakerBot, Thingiverse, LLC, and Bot World, LLC, which was formed in September 2012.

	Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances are eliminated in consolidation.

	Cash Equivalents — The Company considers all highly-liquid debt instruments purchased with maturities of three months or less when acquired to be cash equivalents. As of December 31, 2012, the Company’s cash reserves were substantially held in business checking and high-yield savings accounts. At various times during 2012, balances of cash at financial institutions exceeded the Federally insured limit. The Company has not experienced any losses in such accounts and believes cash and cash equivalents are not subject to any significant credit risk. At December 31, 2012, cash balances held in foreign bank accounts were $0.

	Revenue Recognition — Revenue from the sale of 3D printers and related products is recognized upon shipment, provided that persuasive evidence of a sales arrangement exists, both title and risk of loss have passed to the customer and collection is reasonably assured. Persuasive evidence of a sales arrangement exists upon execution of a written or internet-based sales agreement or purchase order that constitutes a fixed and legally binding commitment between the Company and the buyer. In instances where sales are made to resellers, the same criteria cited above are applied to determine the recognition of revenue. The reseller’s creditworthiness is evaluated prior to such sale. The reseller takes ownership of the related printers, products or print materials and payment is not dependent upon the reseller’s sale to an end user. Revenue includes amounts billed to customers for shipping and handling charges, which totaled $718 for the year ended December 31, 2012.

- 6 -

	The Company sells its 3D printers inclusive of embedded software to its customers. The embedded software is not sold separately, it is not a significant focus of the marketing effort and the Company does not provide post-contract customer support specific to the software or incur significant costs that are within the scope of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 985, “Software”. Additionally, the functionality that the software provides is marketed as part of the overall product. The software embedded in the equipment is incidental to the equipment as a whole such that ASC 985 is not applicable.

	The Company allows customers to return defective products or components for a reasonable time period after shipment of the product. On a periodic basis, the Company evaluates such activities, which to date have not been material, and provides allowances, as necessary, based on estimated future returns.

	In 2012, the Company began offering maintenance contracts, the MakerCare Service Plan, covering certain 3D printer products sold to customers based in the contiguous United States. Service revenue from maintenance contracts is recognized ratably over the one-year period of coverage. Unearned revenue from the sale of maintenance contracts was classified on the consolidated balance sheet as part of Customer Deposits and Deferred Revenue, and totaled $96. Revenues from maintenance contracts were $16 for the year ended December 31, 2012.

	Allowance for Doubtful Accounts — The Company maintains an allowance for doubtful accounts receivable for estimated losses resulting from customers’ failure to make payments. Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including (1) historical experience, (2) aging of the accounts receivable, and (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers.

	Inventory — Inventory is stated at the lower of cost or market, with cost determined based on the weighted-average method. As of December 31, 2012, inventory consisted primarily of raw material components for 3D printers, and finished products purchased for resale. The Company periodically assesses inventory for obsolescence and excess quantities and reduces the carrying value by an amount equal to the difference between its cost and the estimated market value based on assumptions about future demand and historical sales patterns.

	Warranties — The Company has not provided standard warranties for its products since its inception. Under the terms and conditions of MakerCare Service Plan, the Company provides replacement parts due to defect or normal wear, for certain covered parts, during the coverage period.

	Property and Equipment — Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method based upon the shorter of the estimated useful lives of the assets, or the lease term of the respective assets, if applicable. Charges for repairs and maintenance are expensed as incurred.

	Impairment of Long-Lived Assets — Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. There were no impairments for the year ended December 31, 2012.

- 7 -

Income Taxes —The Company complies with ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial reporting of income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

In accordance with ASC 740, the Company takes a two-step approach to recognizing and measuring uncertain tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company reevaluates these tax positions periodically and makes adjustments as required.

Deferred income taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company's Federal and state income tax returns for the tax years 2009 through 2012 remain subject to examination by tax authorities. The Company plans to evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings on an ongoing basis. In the event that the Company incurs interest and penalties associated with tax matters, it plans to recognize such costs as part of the income tax provision and include accrued interest and penalties with the related tax liability in the balance sheets.

Fair Value of Financial Instruments — The fair values of accounts receivable and accounts payable are estimated to approximate the carrying values at December 31, 2012, due to the short maturities of such instruments.

Share-Based Compensation — The Company calculates the fair value of share-based option awards on the date of grant using the Black-Scholes option pricing model. The Company granted certain members of management restricted shares of common stock. Share-based compensation expense is recognized ratably over the vesting periods of the respective grants.

Advertising — Advertising costs are charged to operations as incurred and were $63 for the year ended December 31, 2012.

Research and Development Costs — Expenditures for research, development and engineering of products and manufacturing processes are expensed as incurred, in accordance with ASC 730, “Research and Development”.

Use of Estimates — The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to the allowance for doubtful accounts, income taxes, inventory reserves, contingencies and revenue recognition. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Shipping Costs — Shipping and handling costs are included in cost of sales.

- 8 -

2.	INVENTORY

	Inventory at December 31, 2012 consists of the following:

Raw materials	$	1,590
Finished goods		523

	$	2,113

3.	PROPERTY AND EQUIPMENT

	Property and equipment at December 31, 2012 consist of the following:

	Estimated
	Useful Life
Furniture and fixtures	3-5 years	$	410
Machinery and equipment	1-5 years		917
Software	3-5 years		526
Leasehold improvements	5 years		234

			2,087

Less accumulated depreciation and amortization			(190	)

		$	1,897

Machinery and equipment includes amounts acquired under capital leases of $328 with related accumulated amortization of $0 at December 31, 2012.

Depreciation and amortization expense amounted to $171 for the year ended December 31, 2012.

- 9 -

4.	ACCRUED EXPENSES

	Accrued expenses at December 31, 2012 consist of the following:

Accrued payroll and related costs	$	238
Accrued professional fees		106
Accrued materials purchases		83
Accrued shipping fees		10
Other		75

	$	512

COMMITMENTS AND CONTINGENCIES

Lease Obligations —The Company has noncancelable obligations under operating lease agreements for office, assembly operations and warehouse space. Aggregate rent expense under the operating leases amounted to $300 for the year ended December 31, 2012.

During 2012, the Company entered into new lease agreements in connection with its expansion plans, including a five-year noncancelable operating lease agreement for its new headquarters office space, which was executed in May 2012. The Company took possession of the space in late December 2012. Pursuant to the terms of the lease, the Company executed a letter of credit agreement for $633 as security for the lease obligation. The letter of credit is collateralized in full with cash funds that have been segregated from the Company’s available cash reserves, and the balance has accordingly been classified as restricted cash on the Company’s consolidated balance sheet as of December 31, 2012.

In 2012, the Company entered into capital leases aggregating $307 in connection with the acquisition and implementation of a third-party enterprise resource planning (“ERP”) software solution. The capital lease obligations are payable over three years and include weighted-average imputed interest of 13.3%.

- 10 -

The following represents the Company’s commitments under capitalized and operating leases for each of the next five years ended December 31 and thereafter:

	Capitalized			Operating
Years ending December 31:	Leases			Leases
2013	$	130		$	1,350
2014		130			1,436
2015		88			1,152
2016					1,116
2017					1,084
Thereafter					558
Total minimum lease payments		348		$	6,696
Less: amounts representing imputed interest		(56	)
Present value of minimum lease payments		292
Less: current portion of capital lease obligations		(98	)
Capital lease obligations, excluding current portion	$	194

INCOME TAXES

The Company did not incur a provision for income taxes for the year ended December 31, 2012 as a result of its losses to date. As of December 31, 2012, the Company had Federal and state net operating losses (“NOL”) of approximately $4,667 each. The net operating losses are eligible to be carried forward to future tax periods, with the majority of the balance expiring in 2031 and 2032, respectively. The Company has provided a full valuation allowance for the NOL carryforward balance due to its expectation of continued tax losses for the foreseeable future. The valuation allowance increased by $1,708 for the year ended December 31, 2012.

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and liabilities at December 31, 2012 were as follows:

Deferred tax assets (liabilities):
Allowances for doubtful accounts and sales returns	$	12
Inventory reserves		165
Property and equipment depreciation and amortization		(149	)
Net operating loss carryforwards		1,867
Share-based compensation		46
Deferred revenue		38

Deferred tax asset		1,979

Less valuation allowance		(1,979	)

Net deferred tax asset	$	-

- 11 -

The following table presents a reconciliation of the statutory federal rate and the Company’s effective tax rate for the year ended December 31, 2012:

Tax benefit based on Federal statutory rate	(34	)%
State taxes, net of federal	(7	)%
Permanent differences	(1	)%
Research and development credit	(1	)%
Valuation allowance	43	%

Effective tax rate	0	%

CONVERTIBLE PREFERRED STOCK, SERIES A AND SERIES B

The Company authorized the issuance of up to 6,315,889 shares of preferred stock, with a par value of $0.0001 per share, and designated 1,315,889 of the authorized shares as Series A Preferred Stock (“Series A Preferred”), and 5,000,000 of the authorized shares as Series B Preferred Stock (“Series B Preferred”).

In July 2010, the Company sold 1,315,889 shares of Series A Preferred to investors at $0.91 per share, for net proceeds of $1,200. In August 2011, the Company sold 3,303,247 shares of Series B Preferred to investors at $3.05 per share, for net proceeds of $10,077, after deducting issuance costs.

Dividends — Upon declaration by the board of directors of the Company, holders of Series B Preferred, in preference to the holders of Series A Preferred and common stock, shall be entitled, on a one-time, non-cumulative basis, to cash dividends at the rate of eight percent (8%) of the original issue price (i.e., the price at which such share was purchased). The Company may not pay or declare any dividend or distribution on the common stock, or purchase, redeem or otherwise acquire for value any share of common stock until all dividends on the preferred stock have been paid or declared and set apart. In the event dividends are paid on any share of common stock, the Company must pay an additional dividend on all outstanding shares of preferred stock in a per share amount equal to the amount paid or set aside for each share of common stock. As of December 31, 2012, no dividends were declared or distributed to any shareholders.

Conversion — Each share of preferred stock is convertible, at any time, at its holder's discretion, into one fully paid and non-assessable share of common stock. The conversion rate shall be adjusted whenever the Company shall issue or sell, or is deemed to have issued or sold, any shares of common stock for a consideration per share less than the conversion price in effect immediately prior to the time of such issue or sale.

The preferred stock shall be automatically converted into common stock upon the consummation of an initial public offering. In addition, at any time prior to consummation of an initial public offering, all or a portion of the outstanding shares of each series of preferred stock shall be automatically converted into common stock upon the affirmative election of a majority of the outstanding shares, as defined in the Company’s articles of incorporation, by the holders of preferred stock, either voting together as a single class, or voting within each class of preferred stock. Upon any such automatic conversion, any declared and unpaid dividends shall be paid.

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	Liquidation Preferences — In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, holders of Series B Preferred, in preference to the holders of Series A Preferred and common stock, shall be entitled to be paid out of the assets of the Company that are legally available for distribution, an amount equal to the applicable original issue price per share, for each preferred share held by them, plus all declared and unpaid dividends on the Series B Preferred (the "Series B Preference Amount"). In the event that the assets available for distribution are not sufficient to pay the full Series B Preference Amount, the assets shall be distributed pro rata among the holders of Series B Preferred shares in proportion to the aggregate Series B Preference Amount that each such holder would otherwise be entitled to receive. The aggregate Series B Preference Amount was $10,077 as of December 31, 2012. After payment of the full liquidation preference of the Series B Preferred, before any distribution or payment shall be made to the holders of common stock, the holders of Series A Preferred shall be entitled to be paid out of the remaining assets of the Company legally available for distribution, if any, an amount equal to the applicable original issue price per share, for each preferred share held by them, plus all declared and unpaid dividends on the Series A Preferred (the "Series A Preference Amount"). In the event that the assets available for distribution are not sufficient to pay the full Series A Preference Amount, the assets shall be distributed pro rata among the holders of Series A Preferred shares in proportion to the aggregate Series A Preference Amount that each such holder would otherwise be entitled to receive. The aggregate Series A Preference Amount was $1,200 as of December 31, 2012. After payment to the holders of the preferred shares of the respective Series B Preference Amounts and Series A Preference Amounts, the entire remaining assets and funds of the Company legally available for distribution, if any, shall be distributed ratably to the holders of common stock. Voting — Each holder of shares of preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted at the time of voting. For so long as any shares of Series B Preferred remain outstanding, in addition to any other vote or consent, the vote or written consent of the holders of a majority of the outstanding Series B Preferred shall be required for effecting or validating certain actions, including: (1) any issuance of Series B Preferred; (2) any amendment, alteration, or repeal of the certificate of incorporation or the bylaws of the Company; (3) any increase or decrease in the authorized number of shares of common stock or preferred stock or any series thereof; (4) any authorization or designation, whether by reclassification or otherwise, of a new class or series of stock; (5) any redemption, repurchase, payment or declaration of dividends or other distributions with respect to common stock and preferred stock, other than certain permitted transactions; (6) any agreement by the Company or its shareholders regarding an asset transfer or acquisition that values the Company at less than a specified amount; (7) any adverse changes to the rights, preferences and privileges of the Series B preferred; (8) any transactions resulting in a reduction of the Company’s ownership interest in any subsidiary, other than an asset transfer or acquisition that has been approved in accordance with the Company’s certificate of incorporation; and (9) any increase or decrease in the authorized number of members of the Company’s board of directors.

8.	COMMON STOCK AND EQUITY INCENTIVE PLAN

	Common stock — The Company authorized the issuance of up to 20,000,000 shares of common stock, with a par value of $0.0001 per share (“Common Stock”). Conversion of MakerBot Industries, LLC membership interest units — In July 2010, each of the members of MakerBot exchanged their membership interest units, which totaled 10,355,330 units, for an equivalent number shares of common stock of CTC.

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Share cancellations — The Company canceled 200,000 shares of restricted common stock that were originally issued to an employee whose employment was terminated in 2011.

Equity Incentive Plan — In August 2011, the Company's board of directors and shareholders approved the establishment of the 2011 Equity Incentive Plan (“2011 EIP”) to provide stock award grants to employees, directors and consultants of the Company. Pursuant to the terms of the 2011 EIP, up to 1,638,759 shares of Common Stock are reserved for stock award grants, including incentive and nonstatutory stock options (“Options”), stock appreciation rights (“SAR”), restricted stock awards and restricted stock unit awards. The board of directors of the Company, or at its discretion, a committee of the board is responsible for the administration of the 2011 EIP.

The 2011 EIP requires that the per share exercise price of each Option or SAR shall not be less than 100% of the fair market value of the Common Stock subject to the Option or SAR on the grant date. Option and SAR grants shall not be exercisable after the expiration of ten years from the date of its grant or such shorter period as specified in a stock award agreement. The 2011 EIP provides that the board of directors may, in its sole discretion, impose such limitations on transferability of Options and SAR’s as the board shall determine. In the absence of a determination by the board of directors to the contrary, Options and SAR’s shall not be transferable except by will or by the laws of descent and distribution, or by domestic relations orders unless specifically agreed to by the plan administrator.

The Company issued 155,330 shares of restricted common shares in 2010, of which 106,790 shares were vested as of December 31, 2012. There were no restricted share issuances in 2011 or 2012. In connection with the 2010 restricted share issuances, the Company recognized share-based compensation expense of $27 for the year ended December 31, 2012. As of December 31, 2012, the remaining share-based compensation expense for outstanding unvested restricted shares was $36.

In connection with stock options issued under the 2011 EIP, the Company recorded share-based compensation expense of $171 for the year ended December 31, 2012. As of December 31, 2012, the total unrecognized compensation cost related to issued and outstanding Options under the plan was $1,548.

The following summary sets forth the stock option activity under the plan:

	Shares from		Weighted Average
	Option Grants		Exercise Price
Balance at January 1, 2012	217,700		$0.81

Grants and commitments	920,200		$1.09
Exercises	(14,874	)	$0.81
Forfeitures	(69,726	)	$0.81

Balance at December 31, 2012	1,053,300		$0.81 - $1.09

As of December 31, 2012, the Company had vested options totaling 94,052 shares, with a weighted-average exercise price of $0.81. All such vested options were exercisable as of the respective dates. As of December 31, 2012, the Company expected options to purchase 1,050,310 shares to vest, with a weighted-average exercise price of $1.04 per share.

For the year ended December 31, 2012, the weighted-average fair value per option grant was $1.82.

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For the year ended December 31, 2012, the fair value of each Option was estimated at the commitment date using the Black-Scholes method with the following assumptions:

Weighted average risk-free interest rates (1):	1.1	%
Weighted average expected life (in years):	6.3
Weighted average expected volatility (2):	120.0	%
Expected dividend yield:	-

(1)		Based on the U.S. Treasury 7-year constant maturity interest rate whose term is consistent with the expected term of the option.

(2)		Expected volatility is based on an analysis of comparable public company volatilities and adjusted for the Company's stage of development.

9.	TERM LOAN

	In November 2012, the Company entered into a Loan and Security Agreement (“Term Loan”), as amended by Amendment No. 1 thereto, with Silicon Valley Bank (“SVB”), whereby SVB agreed to lend the Company up to $4,000 through Growth Capital A and Growth Capital B advances that must be repaid in scheduled installments until maturity in September 2016. The Company will also be eligible to borrow an additional $1,000 through a Growth Capital C advance if it attains certain performance milestones based on revenues and gross profits for the twelve month period ending September 30, 2013. The Growth Capital C advance, if applicable, will be repayable in thirty-five scheduled installments commencing on the six-month anniversary of the funding date of the advance. As of December 31, 2012, there were no borrowings on the Term Loan. In February 2013, the Company borrowed $2,000 in accordance with the terms of the Term Loan with respect to the Growth Capital A advance. The Company may borrow up to $2,000 of Growth Capital B Advances until June 30, 2013. The principal amount for each Growth Capital Advance will accrue interest, which is payable monthly, at a floating rate per annum equal to Prime Rate, as defined, plus 2.25%. The Term Loan requires that SVB will maintain a first priority perfected security interest in all of the Company’s tangible and intangible assets, excluding intellectual property, until the payment and performance in full of all obligations under the Term Loan are satisfied. In connection with the execution of the Term Loan, the Company issued SVB warrants to purchase 80,000 shares of the Company’s common stock. The warrants have an exercise price of $0.81 per share and expire ten years after the date of issuance. The fair value of the warrants of $153 was recorded as deferred financing costs, and such costs are being charged to interest expense over the term of the Term Loan. As of December 31, 2012, the Company charged $6 of deferred financing costs to interest expense.

10.	RESTRUCTURING CHARGE

	During 2012, the Company restructured its Research and Development operations, which resulted in the write-off of certain long-lived assets by Company management, the termination of 11 employees, and certain related legal fees associated with the restructuring. Accordingly, the Company recorded a restructuring charge of $943, including write-off of equipment and tooling costs aggregating $806 that the Company scrapped, severance costs of $57, and legal fees of $80. As of December 31, 2012, the Company had no remaining obligations associated with the restructuring.

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11.	CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS AND VENDORS

	Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are maintained with high quality financial institutions, the compositions and maturities of which are regularly monitored by management. For the year ended December 31, 2012, the number of customers representing greater than 5%, but less than 10%, of the Company’s total revenue was two. At December 31, 2012, the number of customers representing greater than 10% of the Company’s total accounts receivable balances was none. The Company’s top three vendors accounted for approximately 35% of total raw material and finished product purchases for the year ended December 31, 2012.

12.	SUBSEQUENT EVENTS

	The Company has evaluated subsequent events through May 6, 2013, pursuant to ASC 855-10 “Subsequent Events”.

* * * * * *

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EX-99.2 4 exhibit99-2.htm UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Exhibit 99.2

COOPERATION TECHNOLOGY CORPORATION
AND SUBSIDIARIES

Unaudited Condensed Consolidated Financial Statements for
the Six Months Ended June 30, 2013 and 2012

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30, 2013 AND 2012:

Balance Sheets		3

Statements of Operations		4

Statements of Cash Flows		5

Statement of Shareholders’ Equity		6

Notes to Consolidated Financial Statements		7–10

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	June 30,			December 31,
	2013			2012
	(unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	6,863		$	5,848
Accounts receivable — net		1,421			266
Inventory — net		5,484			2,113
Prepaid expenses and other current assets		1,210			682
Total current assets		14,978			8,909
Property and equipment— net		4,102			1,897
Deferred financing costs— net		146			160
Restricted cash		633			633
Other assets		220			94
Total assets	$	20,079		$	11,693
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Term loan	$	2,000		$	-
Current portion of capital lease obligations		121			98
Accounts payable		1,297			1,044
Accrued expenses		3,396			512
Customer deposits and deferred revenue		3,192			3,168
Total current liabilities		10,006			4,822

Long-term portion of capital lease obligations		189			194
Total liabilities		10,195			5,016

Commitments and contingencies

Shareholders' equity:
Convertible preferred stock, Series B		-			-
Convertible preferred stock, Series A		-			-
Common stock		1			1
Additional paid-in capital		12,002			11,741
Accumulated deficit		(2,119	)		(5,065	)
Total shareholders' equity		9,884			6,677
Total liabilities and shareholders' equity	$	20,079		$	11,693

See notes to condensed consolidated financial statements.

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COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30

(Dollars in thousands) (unaudited)

	2013			2012
Revenue	$	28,299		$	6,156
Cost of revenue		14,375			3,430
Gross profit		13,924			2,726

Selling, general, and administrative expenses		8,702			3,009
Research and development		2,187			918
Restructuring charge		-			943
Income (loss) from operations		3,035			(2,144	)

Interest income (expense), net		(89	)		16

Net income (loss)	$	2,946		$	(2,128	)

See notes to condensed consolidated financial statements.

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COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30

(Dollars in thousands) (unaudited)

	2013			2012
Cash flows from operating activities:
Net income (loss)	$	2,946		$	(2,128	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization		501			53
Provision for doubtful accounts		66			4
Share-based compensation expense		254			46
Other non-cash items		34			-
Changes in operating assets and liabilities:
Accounts receivable		(1,220	)		(323	)
Inventory		(3,371	)		(638	)
Prepaid expenses and other current assets		(528	)		(1,253	)
Other assets		(126	)		11
Accounts payable and accrued expenses		3,137			742
Customer deposits and deferred revenue		23			(12	)

Net cash provided by (used in) operating activities		1,716			(3,498	)

Cash flows from investing activities:
Purchases of property and equipment		(2,639	)		(470	)

Net cash used in investing activities		(2,639	)		(470	)

Cash flows from financing activities:
Proceeds from term loan borrowings		2,000			-
Debt issuance costs		(20	)		-
Repayments of capital lease obligations		(49	)		-
Proceeds from exercise of stock options		7			-

Net cash provided by financing activities		1,938			-

Net increase (decrease) in cash and cash equivalents		1,015			(3,968	)

Cash and cash equivalents — beginning of period		5,848			10,230

Cash and cash equivalents — end of period	$	6,863		$	6,262

Supplemental disclosure of cash flow information:
Cash paid for interest	$	41		$	6

Supplemental schedule of noncash investing and financing activity:
Equipment acquired under capital lease obligations	$	67		$	-

See notes to condensed consolidated financial statements.

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COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Series B Convertible		Series A Convertible
	Preferred Stock		Preferred Stock		Common Stock			Additional		Retained Earnings
								Paid-in		(Accumulated			Total
	Shares	Amount	Shares	Amount	Shares	Amount		Capital		Deficit)			Equity
Balance as of January 1, 2013	3,303,247	-	1,315,889	-	10,170,204	$	1	$	11,741	$	(5,065	)	$	6,677

Share-based compensation									254					254
Exercise of stock options					8,716				7					7
Net income											2,946			2,946

Balance as of June 30, 2013	3,303,247	-	1,315,889	-	10,178,920	$	1	$	12,002	$	(2,119	)	$	9,884

See notes to condensed consolidated financial statements.

- 6 -

COOPERATION TECHNOLOGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(In thousands, except share and per share amounts)	(unaudited)

1.	BASIS OF PRESENTATION

	The unaudited interim condensed consolidated financial statements of Cooperation Technology Corporation and Subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information. These statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, cash flows and shareholders’ equity for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring adjustments. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain financial information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2012. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. The accompanying consolidated balance sheet as of December 31, 2012, was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements.

2.	BUSINESS COMBINATION

	On August 15, 2013, (the “merger date”) Stratasys Ltd. (“Stratasys”) and the Company, completed their merger under the terms of the definitive merger agreement (the “merger agreement”) which had been signed on June 19, 2013. The Company merged with a subsidiary of Stratasys in a stock-for-stock transaction. Each share of the Company’s preferred stock and common stock outstanding immediately prior to closing was converted into the right to receive an amount equal to the per share aggregate merger consideration. All Company stock options were deemed to be fully vested and certain of those stock options, along with the warrant, were cancelled in exchange for the right to receive payment of the merger consideration in approximately such number of shares as would have been issued to such holder had the option or warrant been exercised on a net exercise basis. Other Company stock options holders received fully vested Stratasys stock options of equivalent value. Under terms of the merger agreement, in exchange for 100% of MakerBot’s outstanding capital stock, at the merger date Stratasys issued 3.92 million shares, made tax withholding payments on behalf of certain shareholders in lieu of issuing 115 thousand shares, held back from issuing 655 thousand shares to secure the indemnification rights of Stratasys, and issued Stratasys options in exchange for certain MakerBot options with a fully diluted equivalent of 73 thousand shares. This and the value of the earn-out discussed below resulted in an aggregate purchase price of $491,900, based on the average price on the merger date of Stratasys ordinary shares (“average merger date stock price”) of $97.46.

- 7 -

	Company shareholders may also qualify for two earn-out payments that provide for aggregate payments of up to 1.2 million shares (having a value of based on the average merger date stock price of $116,000) based on the level of achievement of revenue and gross margin percentage targets for the six months ending December 31, 2013, and the year ending December 31, 2014. Additionally, certain Company employees will participate in a performance bonus plan adopted in connection with the merger. Participating employees, contingent on certain continuing employment conditions, are entitled to bonus payments of compensation that in the aggregate will equal, dollar for dollar, the actual amounts determined in the earn-out calculation up to 1.2 million shares (having a value based on the average merger date stock price of $116,000). The earn-out payments and bonus payments, if earned, will be made in Stratasys’ shares or cash, or a combination thereof, at Stratasys’ discretion. As of June 30, 2013, the Company incurred $1,600 of merger costs, including legal fees, which are recorded as part of the accrued expenses in the Company’s condensed consolidated balance sheet as of June 30, 2013, and reflected as selling, general and administrative expense in the results of operations for the six months ended June 30, 2013.

3.	INVENTORY

	Inventory, net of reserves, at June 30, 2013 and December 31, 2012, consists of the following:

	2013		2012
Raw materials	$	4,854	$	1,590
Finished goods		630		523
	$	5,484	$	2,113

TERM LOAN

In November 2012, the Company entered into a Loan and Security Agreement (“Term Loan”), as amended by Amendment No. 1 thereto, with Silicon Valley Bank (“SVB”), whereby SVB agreed to lend the Company up to $4,000 through Growth Capital A and Growth Capital B advances that must be repaid in scheduled installments until maturity in September 2016. The Company will also be eligible to borrow an additional $1,000 through a Growth Capital C advance if it attains certain performance milestones based on revenues and gross profits for the twelve month period ending September 30, 2013. The Growth Capital C advance, if applicable, will be repayable in thirty-five scheduled installments commencing on the six-month anniversary of the funding date of the advance.

In February 2013, the Company borrowed $2,000 in accordance with the terms of the Term Loan with respect to the Growth Capital A advance. As of June 30, 2013, the principal balance outstanding under the Term Loan was $2,000.

The principal amount for each Growth Capital Advance accrues interest, which is payable monthly, at a floating rate per annum equal to Prime Rate, as defined, plus 2.25%.

- 8 -

	The Term Loan requires that SVB will maintain a first priority perfected security interest in all of the Company’s tangible and intangible assets, excluding intellectual property, until the payment and performance in full of all obligations under the Term Loan are satisfied. Subsequent to the merger, the Company repaid the term loan.

5.	INCOME TAXES

	The Company did not incur a provision for income taxes for the six months ended June 30, 2013, due to its expected utilization of net operating losses incurred from inception through December 31, 2012, that are eligible to be carried forward to current and future tax periods. The Company has provided a full valuation allowance for the net operating loss carry forward balance. The Company did not incur a provision for income taxes for the six months ended June 30, 2012, due to its loss for the period.

6.	SHARE-BASED COMPENSATION PLAN

	Under the terms of the Company’s 2011 Equity Incentive Plan (“2011 EIP”), up to 1,638,759 shares of Common Stock are reserved for stock award grants, including incentive and nonstatutory stock options (“Options”), stock appreciation rights (“SAR”), restricted stock awards and restricted stock unit awards. The 2011 EIP requires that the per share exercise price of each Option or SAR shall not be less than 100% of the fair market value of the Common Stock subject to the Option or SAR on the grant date. Option and SAR grants shall not be exercisable after the expiration of ten years from the date of its grant or such shorter period as specified in a stock award agreement. The Company issued 155,330 shares of restricted common shares in 2010, of which 126,206 and 87,373 shares were vested as of June 30, 2013 and 2012 respectively. There were no other restricted share issuances as of June 30, 2013. In connection with the 2010 restricted share issuances, the Company recognized share-based compensation expense of $15 and $13 for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013, the remaining share-based compensation expense for outstanding unvested restricted shares was $21. In connection with stock options issued under the 2011 EIP, the Company recorded share-based compensation expense of $239 and $33 for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013, the total unrecognized compensation cost related to issued and outstanding Options under the plan was approximately $1,933. The following summary sets forth the stock option activity under the plan:

	Shares from		Weighted Average
	Option Grants		Exercise Price
Balance at January 1, 2013	1,053,300		$0.81 - $2.16

Grants and commitments	343,000		$2.16
Exercises	(8,716	)	$0.81
Forfeitures	(121,731	)	$0.81 - $2.16
Balance at June 30, 2013	1,265,853		$0.81 - $2.16

- 9 -

	For the six months ended June 30, 2013 and 2012, the weighted-average fair value per option grant was $1.72 and $1.19, respectively.

7.	RESTRUCTURING CHARGE

	During the six months ended June, 30, 2012 the Company restructured its Research and Development operations, which resulted in the write-off of certain long-lived assets by Company management, the termination of 11 employees, and certain related legal fees associated with the restructuring. Accordingly, the Company recorded a restructuring charge of $943, including write-off of equipment and tooling costs aggregating $806 that the Company scrapped, severance costs of $57, and legal fees of $80. As of June 30, 2012, the Company had no remaining obligations associated with the restructuring.

8.	SUBSEQUENT EVENTS

	The Company has evaluated subsequent events through September 3, 2013, pursuant to ASC 855-10 “Subsequent Events.” See also note 2.

* * * * * *

- 10 -

EX-99.3 5 exhibit99-3.htm UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF STRATASYS AND MAKERBOT

The following Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2012 and the six months ended June 30, 2013 combine the historical consolidated statements of operations of Stratasys Ltd. (“Stratasys”) and the historical consolidated statements of operations of Cooperation Technology Corporation (“MakerBot”), giving effect to the merger as if it had been consummated on January 1, 2012. The following Unaudited Pro Forma Condensed Combined Balance Sheet combines the historical consolidated balance sheets of Stratasys and MakerBot, giving effect to the merger as if it had been consummated on June 30, 2013. The historical consolidated statement of operations of Stratasys for the year ended December 31, 2012 has been adjusted to reflect the merger of Stratasys, Inc. and Objet Ltd. (“Objet”), which was completed on December 1, 2012, as if it had been consummated on January 1, 2012 and, accordingly, the Stratasys column is labeled “Pro Forma for Objet Merger”. The Unaudited Pro Forma Condensed Combined Statement of Operations of Stratasys and Objet for the year ended December 31, 2012 that includes the results of Objet for that full year and result in the Pro Forma for Objet Merger amounts are incorporated by reference from the previously filed Form 6-K on September 3, 2013.

On August 15, 2013 (the “merger date”) Stratasys and privately held MakerBot, completed their merger under terms of the definitive merger agreement (the “merger agreement”) which had been signed on June 19, 2013. MakerBot merged with a subsidiary of Stratasys in a stock-for-stock transaction. Each share of MakerBot preferred stock and common stock outstanding immediately prior to closing was converted into the right to receive an amount equal to the per share aggregate merger consideration. All MakerBot stock options were deemed to be fully vested and certain of those stock options, along with the MakerBot warrant, were cancelled in exchange for the right to receive payment of the merger consideration in approximately such number of shares as would have been issued to such holder had the option or warrant been exercised on a net exercise basis. Other MakerBot stock options holders received fully vested Stratasys stock options of equivalent value.

Under terms of the merger agreement, in exchange for 100% of MakerBot’s outstanding capital stock, at the merger date Stratasys issued 3.92 million shares, made tax withholding payments on behalf of certain shareholders in lieu of issuing 115 thousand shares, held back from issuing 655 thousand shares to secure the indemnification rights of Stratasys, and issued Stratasys options in exchange for certain MakerBot options with a fully diluted equivalent of 73 thousand shares. This and the value of the earn-out discussed below resulted in an aggregate purchase price of $491.9 million, based on the average price on the merger date of Stratasys ordinary shares (“average merger date stock price”) of $97.46.

MakerBot stockholders may also qualify for two earn-out payments that provide for aggregate payments of up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price) depending on the level of achievement of revenue and gross margin percentage targets for the six months ending December 31, 2013 and the year ending December 31, 2014. Additionally, certain MakerBot employees will participate in a performance bonus plan adopted in connection with the merger. Participating employees, contingent on certain continuing employment conditions, are entitled to bonus payments of compensation that in the aggregate will equal, dollar for dollar, the actual amounts determined in the earn-out calculation up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price). The earn-out payments and bonus payments, if earned, will be made in Stratasys shares or cash, or a combination thereof, at Stratasys’ discretion.

The unaudited pro forma condensed combined financial information has been prepared in accordance with SEC Regulation S-X Article 11. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the combined operating results or financial position that would have resulted had the merger been consummated on the dates and in accordance with the assumptions described herein, nor is it necessarily indicative of future results of operations or financial position of the combined company.

Stratasys is the acquirer in the transaction and will allocate the purchase price consideration to the tangible and intangible assets acquired and liabilities assumed from MakerBot. Stratasys has not completed the detailed valuation studies necessary to determine the fair values of MakerBot’s assets and liabilities, nor has it identified all adjustments necessary to conform MakerBot's accounting policies to Stratasys' accounting policies. Stratasys has allocated the purchase price based on the preliminary estimated fair value of MakerBot's assets acquired and liabilities assumed based on discussions with MakerBot's management, preliminary valuation studies, and due diligence. Accordingly, the unaudited pro forma purchase price allocation and related adjustments are preliminary and are subject to further adjustments as additional information becomes available and as additional valuations and analyses are completed. Subsequent to the merger, Stratasys is in the process of completing final valuations of the assets acquired and liabilities assumed from MakerBot. Accordingly, there may be increases or decreases in the fair value of MakerBot’s assets and liabilities reflected in the balance sheet which may also impact the statements of operations. There can be no assurance that such final valuations of the assets acquired and liabilities assumed pursuant to the acquisition of MakerBot will not be materially different from the information presented below.

These Unaudited Pro Forma Condensed Combined Financial Statements have been developed from and should be read in conjunction with (i) the unaudited interim consolidated financial statements of Stratasys contained in its Report of Foreign Private Issuer on Form 6-K (Form 6-K) that reports its results for the six month period ended June 30, 2013, furnished to the SEC on August 8, 2013 and incorporated by reference herein and the unaudited interim condensed consolidated financial statements of MakerBot for the six month period ended June 30, 2013, included in Exhibit 99.2 of this Form 6-K, and (ii) the audited consolidated financial statements of Stratasys contained in its Annual Report Form 20-F for the year ended December 31, 2012, incorporated herein by reference and the audited consolidated financial statements of MakerBot for the fiscal year ended December 31, 2012, included in Exhibit 99.1 of this Form 6-K.

Unaudited Pro Forma Condensed Combined Statements of Operations

		Year Ended December 31, 2012
		Pro Forma for Objet						Pro Forma				Pro Forma
(in thousands, except per share data)		Merger *			MakerBot			Adjustments			Note 4	Combined
Net sales		$	359,054		$	15,748		$	-			$	374,802
Cost of sales			195,131			9,170			6,260		(a)
									278		(b)		210,839

Gross profit			163,923			6,578			(6,538	)			163,963

Operating expenses
Research and development			36,923			2,604			100		(b)
									2,869		(c)		42,496
Selling, general and administrative			141,232			8,248			9,370		(a)
									(378	)	(b)
									11,894		(c)		170,366
			178,155			10,852			23,855				212,862

Operating loss			(14,232	)		(4,274	)		(30,393	)			(48,899	)

Other income			2,124			10			13		(e)		2,147

Loss before income taxes			(12,108	)		(4,264	)		(30,380	)			(46,752	)

Income taxes (benefit)			9,407			-			(13,858	)	(f)		(4,451	)

Net loss		$	(21,515	)	$	(4,264	)	$	(16,522	)		$	(42,301	)

Non-controlling interest			62			-			-				62

Loss attributable to Stratasys Ltd		$	(21,577	)	$	(4,264	)	$	(16,522	)		$	(42,363	)

Loss per common share
	Basic	$	(0.58	)								$	(1.04	)
	Diluted	$	(0.58	)								$	(1.04	)

Weighted average common shares
outstanding
	Basic		36,987						3,922		(g)		40,909
	Diluted		36,987						3,922		(g)		40,909

* The pro forma statement of operations of Stratasys Ltd., has been adjusted to reflect the merger of Stratasys, Inc. and Objet Ltd., which was completed on December 1, 2012, as if it had been completed on January 1, 2012.

The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Statements of Operations

		Six Months Ended June 30, 2013
								Pro Forma				Pro Forma
(in thousands, except per share data)		Stratasys			MakerBot			Adjustments			Note 4	Combined
Net sales		$	203,692		$	28,299		$	-			$	231,991
Cost of sales			115,913			14,375			3,130		(a)
									331		(b)		133,749

Gross profit			87,779			13,924			(3,461	)			98,242

Operating expenses
Research and development			21,126			8,702			(496	)	(b)
									695		(c)		30,027
Selling, general and administrative			85,990			2,187			4,685		(a)
									165		(b)
									4,467		(c)
									(5,424	)	(d)		92,070
			107,116			10,889			4,092				122,097
Operating income (loss)			(19,337	)		3,035			(7,553	)			(23,855	)

Other income (expense)			652			(89	)		89		(e)		652

Income (loss) before income taxes			(18,685	)		2,946			(7,464	)			(23,203	)

Income taxes (benefit)			(417	)		-			(3,337	)	(f)		(3,754	)

Net income (loss)		$	(18,268	)	$	2,946		$	(4,127	)		$	(19,449	)

Non-controlling interest			68			-			-				68

Net income (Loss) attributable to Stratasys Ltd		$	(18,336	)	$	2,946		$	(4,127	)		$	(19,517	)

Loss per common share
	Basic	$	(0.47	)								$	(0.46	)
	Diluted	$	(0.47	)								$	(0.46	)

Weighted average common shares
outstanding
	Basic		38,637						3,922		(g)		42,559
	Diluted		38,637						3,922		(g)		42,559

The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Balance Sheet

					As of June 30, 2013
							Pro Forma				Pro Forma
(in thousands)	Stratasys			MakerBot			Adjustments			Note 4	Combined
ASSETS

Current assets
Cash and cash equivalents	$	148,061		$	6,863		$	(2,000	)	(h)	$	152,924
Restricted cash		834			-			-				834
Accounts receivable, net		81,443			1,421			-				82,864
Other current assets		22,055			-			-				22,055
Inventories		64,603			5,484			402		(i)		70,489
Net investment in sales-type leases		5,687			-			-				5,687
Prepaid expenses		3,138			1,210			-				4,348
Deferred income taxes		9,834			-			-				9,834
Total current assets		335,655			14,978			(1,598	)			349,035

Property and equipment, net		68,256			4,102			-				72,358
Other assets
Goodwill		822,463			-			368,740		(j)		1,191,203
Other intangible assets, net		484,798			-			169,165		(k)		653,963
Net investment in sales-type leases		9,206			-			-				9,206
Amount funded in respect of employees rights upon retirement		2,844			-			-				2,844
Deferred income taxes		-			-			11,297		(l)		11,297
Other non-current assets		2,928			999			-				3,927
Total other assets		1,322,239			999			549,202				1,872,440
Total assets	$	1,726,150		$	20,079		$	547,604			$	2,293,833

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND EQUITY
Current liabilities
Accounts payable	$	24,077		$	1,297		$	2,513		(m)
								11,499		(m)	$	39,386
Other current liabilities		41,116			3,517			-				44,633
Term loan		-			2,000			(2,000	)	(h)		-
Deferred tax liabilities		-			-			130		(l)		130
Earn-out payable		-			-			11,950		(n)		11,950
Unearned revenues and customer deposits		25,140			3,192			(339	)	(o)		27,993
Total current liabilities		90,333			10,006			23,753				124,092
Non-current liabilities
Deferred tax liabilities - long term		51,194			-			67,664		(l)		118,858
Unearned revenues - long-term		3,155			-			-				3,155
Employees right upon termination		4,437			-			-				4,437
Earn-out payable		-			-			15,199		(n)		15,199
Other non-current liabilities		6,077			189			-				6,266
Total liabilities		155,196			10,195			106,616				272,007
Commitments and contingencies
Convertible preferred stock		-			-			-		(p)		-
Equity
Ordinary shares		102			1			11		(p)
								(1	)	(p)		113
Additional paid-in capital		1,477,121			12,002			7,198		(p)
								446,008		(p)
								(12,002	)	(p)		1,930,327
Retained earnings		94,167			(2,119	)		(2,345	)	(p)
								2,119		(p)		91,822
Accumulated other comprehensive income		(593	)		-			-				(593	)
Non-controlling interest		157			-			-				157
Total equity		1,570,954			9,884			440,988				2,021,826
Total liabilities, convertible preferred stock and equity	$	1,726,150		$	20,079		$	547,604			$	2,293,833

The accompanying notes are an integral part of these Unaudited Pro Forma
Condensed Combined Financial Statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Description of the Transaction

Stratasys and MakerBot, inter alia, entered into an Agreement and Plan of Merger dated as of June 19, 2013, and on August 15, 2013 completed the merger. Stratasys accomplished the acquisition of MakerBot through the merger of Baccio Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of Stratasys (“Merger Sub I”), with and into MakerBot, with MakerBot as the surviving corporation (“Merger I”), which was immediately followed by the merger of MakerBot with and into Baccio Corporation (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”) with Merger Sub II as the surviving corporation and a wholly-owned subsidiary of Stratasys (“Merger II” and together with Merger I, the “Merger”).

MakerBot stockholders may also qualify for two earn-out payments that provide for aggregate payments of up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price) depending on the level of achievement of revenue and gross margin percentage targets for the six months ending December 31, 2013 and the year ending December 31, 2014. Certain MakerBot employees will participate in a performance bonus plan adopted in connection with the merger. Additionally, participating employees, contingent on certain continuing employment conditions, are entitled to bonus payments of compensation that in the aggregate will equal, dollar for dollar, the actual amounts determined in the earn-out calculation up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price). The earn-out payments and bonus payments, if earned, will be made in Stratasys shares or cash, or a combination thereof, at Stratasys’ discretion. Any payments will be made after Stratasys and the seller’s representative agree on the calculation of the earn-out in a process established in the merger agreement and, accordingly, any payments would be expected to be made some time from the March to July that follows the end of each of the two earn-out periods.

Note 2. Basis of Pro Forma Presentation

The Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2012 and the six months ended June 30, 2013 give effect to the merger as if it had been completed on January 1, 2012. The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2013 gives effect to the merger as if it had been completed on June 30, 2013.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

The Unaudited Pro Forma Condensed Combined Financial Statements have been derived from the historical consolidated financial statements of Stratasys incorporated by reference in this filing from other SEC filings of Stratasys and of historical consolidated financial statements of MakerBot are included in Exhibits 99.1 and 99.2 of this Form 6-K. The historical consolidated statement of operations of Stratasys for the year ended December 31, 2012 has been adjusted to reflect the merger of Stratasys Inc. and Objet Ltd. (Objet), which was completed on December 1, 2012, as if it had been consummated on January 1, 2012 and accordingly the Stratasys column is labeled “Pro Forma for Objet Merger”. The Unaudited Pro Forma Condensed Combined Statement of Operations of Stratasys and Objet for the year ended December 31, 2012 that includes the results of Objet for that full year and result in the Pro Forma for Objet Merger amounts are incorporated by reference from the previously filed Form 6-K on September 3, 2013.

Stratasys has not completed the detailed review of MakerBot’s accounting policies. Based on a preliminary review and as described in footnote 4(b), certain MakerBot expenses have been reclassified between cost of sales and operating expenses to be consistent with Stratasys’ classification. Further review of MakerBot's accounting policies may result in revisions to MakerBot's policies and classifications to conform to those of Stratasys.

Assumptions and estimates underlying the unaudited pro forma adjustments are described in these notes, which should be read in conjunction with the Unaudited Pro Forma Condensed Combined Financial Statements. Since the Unaudited Pro Forma Condensed Combined Financial Statements have been prepared based upon preliminary estimates, the final amounts recorded may differ materially from the information presented.

The merger is reflected in the Unaudited Pro Forma Condensed Combined Financial Statements in accordance with Accounting Standards Codification (ASC) Topic 805, "Business Combinations," using the acquisition method of accounting with Stratasys as the accounting acquirer. Under these accounting standards, Stratasys’ total estimated purchase price is calculated as described in Note 3 to the Unaudited Pro Forma Condensed Combined Financial Statements, and the assets acquired and the liabilities assumed of MakerBot are measured and recorded at their estimated fair values. For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed, Stratasys estimated the fair values as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The fair value measurements utilize estimates based on key assumptions of the merger, including historical and current market data. The unaudited pro forma adjustments included herein are preliminary and will be adjusted as additional information becomes available and as additional analyses are performed. The final purchase price allocation will be determined subsequent to the merger and the final amounts of the assets acquired and liabilities assumed in the acquisition of MakerBot may differ materially from the values recorded in the pro forma financial statements.

In accordance with ASC Topic 805, the estimated earn-out obligations are included in the purchase price allocation and are recorded as a current liability for the first earn-out payment and a long-term liability for the second earn-out payment. The estimated fair value of the obligations are based on management’s assessment of whether, and at what level, the revenue and gross margin percentage targets will be achieved, and the present value factors associated with the timing of the payments. Because the amount of the earn-out obligation is based on Stratasys ordinary shares, change in the price of the Stratasys ordinary shares through the earn-out payment date will change the dollar obligation. Management will re-measure the fair value of the earn-out obligations at each reporting period, with any change in fair value being recorded in the current period’s statement of operations.

The bonus plan is reflected in the Unaudited Pro Forma Condensed Combined Financial Statements because it is directly attributable to the merger, factually supportable and has a continuing impact greater than 12 months. Compensation expense is accrued over each of the service periods in an estimated amount based upon management’s assessment of the probable level of achievement of targets of revenue and gross margin percentage and the resulting bonus to be earned. Because the amount of the expense is based on Stratasys ordinary share, change in the price of Stratasys ordinary shares through the bonus payment date will change the dollar amount of the accrual. Management will re-assess the probable level of achievement at each reporting period, and any change will be recorded in the current period’s statement of operations. Also reflected in the Unaudited Pro Forma Condensed Combined Financial Statements, are compensation expenses for a cash retention bonus plan with payments to certain employees at the first and second anniversary of the merger date, contingent on certain continuing employment conditions.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

Estimated transaction costs have been excluded from the Unaudited Pro Forma Condensed Combined Statements of Operations as they reflect charges directly related to the merger which do not have a continuing impact. However, the anticipated transaction costs are reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as an increase to accounts payable and other current liabilities and a decrease to retained earnings.

Stratasys and MakerBot expect to incur costs associated with integrating the operations of Stratasys and MakerBot after the merger is completed. The Unaudited Pro Forma Condensed Combined Financial Statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the merger.

Note 3. Estimate of Consideration Transferred

The following is a preliminary estimate of the merger consideration transferred to effect the merger:

Issuance of Stratasys ordinary shares to MakerBot stockholders	$	446,019
Tax withholding payments on behalf of MakerBot shareholders		11,499
Exchange of MakerBot stock options for Stratasys options		7,198
Earn out at estimated fair value		27,149
Total consideration	$	491,865

At the merger date, Stratasys issued 3.92 million shares, made tax withholding payments on behalf of certain shareholders in lieu of issuing 115 thousand shares, held back from issuing 655 thousand shares to secure the indemnification rights of Stratasys, and issued Stratasys options in exchange for certain MakerBot options with a fully diluted equivalent of 73 thousand shares. The aggregate purchase price consideration was calculated based on $446.0 million for the shares issued and for those held back, based on the average merger date stock price of $97.46, $11.5 million for the withholding tax payments, $27.2 million for the estimated fair value of the earn out and $7.2 million for the valuation of the Stratasys options under the Black Scholes valuation model.

The estimated value of the merger consideration reflected in these Unaudited Pro Forma Condensed Combined Financial Statements is subject to finalizing the estimated fair value of the earn-out. This fair value may change between the estimate used in these Unaudited Pro Forma Condensed Combined Financial Statements and the estimate used in recording the merger.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

The allocation of the preliminary purchase price to the fair values of assets acquired and liabilities assumed includes unaudited pro forma adjustments to reflect the fair values of MakerBot's assets and liabilities. The allocation of the preliminary purchase price is as follows:

(in thousands)
Current assets	$	13,380
Property and equipment		4,102
Goodwill		368,740
Other intangible assets		169,165
Other assets		12,296

Total assets		567,683

Current liabilities		(7,667	)
Deferred tax liabilities		(67,962	)
Other non-current liabilities		(189	)

Total liabilities		(75,818	)

Estimated purchase price	$	491,865

Note 4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Statements

The unaudited adjustments included in the Unaudited Pro Forma Condensed Combined Financial Statements are as follows:

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

(a) Amortization. The adjustment to amortization expense recorded in cost of sales, or COS, and selling, general and administrative, or SG&A, expenses is a result of the fair market value adjustments to assets acquired. The estimated fair value of amortizable intangible assets of $119 million is expected to be amortized on a straight-line basis over estimated useful lives that will generally range from 2 to 12 years, subject to the completion of the purchase price allocation. The weighted-average useful life of amortizable intangibles is approximately 9.2 years. The preliminary estimated amortization expense adjustment is based on the estimated useful lives of the acquired MakerBot assets. The purchase price allocation to identifiable intangible assets and the impact on amortization is as follows:

	Pro Forma		Pro Forma Adjustments to Amortization Expense
		Useful Lives	Year Ended	Six Months Ended
(in thousands)	Adjustments	(years)	December 31, 2012	June 30, 2013
Developed technology	43,820	7	6,260	3,130
Trade name	42,382	12	3,532	1,766
Customer relationships - Distributors	18,770	12	1,564	782
Customer relationships - Direct	3,500	2	1,750	875
Non-compete agreement	10,094	4	2,524	1,262
IPR&D - Printers	34,167	Indefinite	-	-
IPR&D - Peripherals	16,432	Indefinite	-	-
Total	169,165		15,630	7,815

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

The amortization of developed technology is included in COS expenses. The amortization of trade name, customer relationships and the non-compete agreement is included in SG&A expenses. The preliminary measurements of fair value reflected are subject to change. Such changes could be significant to the fair value and to the related amortization. For example, a 10% change in the purchase price allocation to developed technology, trade name, customer relationships or non-compete agreement would result in a $0.6 million, $0.4 million, $0.3 million or $0.3 million, respectively, change in annual amortization. Amortization of IPR&D after the estimated date of product launch is not included in the Unaudited Pro Forma Condensed Combined Statements of Operations due to the risk inherent in IPR&D projects and subjectivity in estimating the product launch dates. If the products are launched on their estimated product launch dates, amortization will take place over a seven year useful life with amortization in the first year after the close of the transaction totaling approximately $4.8 million and in the first six months of the second year totaling approximately $3.6 million.

Fair value adjustments and changes to estimated useful lives for MakerBot’s property, plant and equipment are not expected to be significant and accordingly, no adjustments have been made to MakerBot’s recorded amount of property, plant and equipment or depreciation.

(b) Reclassification of cost of sales and operating expenses. Net expenses of $0.3 million for the year ended December 31, 2012 and $0.3 million for the six months ended June 30, 2013 have been reclassified from cost of sales to operating expenses in the Unaudited Pro Forma Condensed Combined Statement of Operations to be consistent with Stratasys’ classification.

(c) Bonus plan compensation expense. The performance bonus plan pays amounts to certain MakerBot employees if they satisfy certain continued employment conditions through certain dates based on the same achievement of revenue and gross margin percentage targets for 2013 and 2014 as in the earn-out plan. Participating employees, contingent on certain continuing employment conditions, are entitled to bonus payments of compensation that in the aggregate will equal, dollar for dollar, the actual amounts determined in the earn-out calculation up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price). Compensation expense is initially estimated based on the target levels that are probable of achievement and then re-assessed each quarter. Stratasys will recognize the expense by accruing the expense over the service period for the employees, which ranges up to three years after the closing date of the merger. The cash retention bonus plan pays a fixed amount to certain MakerBot employees that satisfy a two year continued employment condition and the related expense is recognized over the two year service period.

(d) Elimination of transaction costs. Total Stratasys transaction costs related to the merger have been estimated to be $5.4 million, of which $3.8 million have been recorded as an expense in SG&A within the Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2013. Total MakerBot costs related to the merger have been estimated to be $2.5 million, of which $1.6 million have been recorded as an expense in SG&A within the Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2013. The portion of the costs that were expensed, totaling $5.4 million for both companies, have been removed from SG&A expenses with a pro forma adjustment for the six months ended June 30, 2013 as these costs relate directly to the transaction and do not have an ongoing impact. No costs related to this transaction were expensed within the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2012 for either Stratasys or MakerBot. The impact of the estimated transaction costs of $2.5 million to be incurred after June 30, 2013 (estimated total of $7.9 million less the amounts previously expensed of $5.4 million) is included in the accompanying Unaudited Pro Forma Condensed Combined Balance Sheet.

(e) Elimination of interest expense on term note. The term loan of MakerBot will be paid off at the closing of the merger, accordingly, the pro forma adjustment eliminates interest expense related to the term note as if the term note had been paid off on January 1, 2012.

(f) Income tax expense. MakerBot had a net operating loss for the year ended December 31, 2012 and utilized net operating loss carryforwards against its income for the six months ended June 30, 2013, and as such, reflected no tax expense or benefit in its historical consolidated statement of operations. With the completion of the merger, MakerBot and Stratasys expect to have future combined taxable income, which will utilize the net operating losses. Accordingly, the Unaudited Pro Forma Condensed Combined Statements of Operations assume that the historical valuation allowance that MakerBot carried against the deferred tax asset related to the net operating loss carryforward will be eliminated and therefore reflect an estimated 40% statutory tax rate on MakerBot income or loss for those periods through a pro forma adjustment. The 40% rate has also been applied to the unaudited pro forma adjustments related to expenses (with the exception of non-deductible transaction costs of $3.8 million for the six months ended June 30, 2013) for the year ended December 31, 2012 and for the six months ended June 30, 2013.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

(g) Shares outstanding. The unaudited pro forma weighted average number of basic shares outstanding is calculated for each period presented by adding Stratasys’ weighted average number of basic shares outstanding for that period and the 3.92 million of Stratasys shares that were issued to MakerBot stockholders as a result of the merger. The 655 thousand shares held back from issuance to secure the indemnification rights of Stratasys are not included as basic shares outstanding. Due to the pro forma combined net loss for the year ended December 31, 2012 and the six months ended June 30, 2013, common share equivalents were excluded from diluted weighted average common shares outstanding as they would have been anti-dilutive.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

(h) Term loan pay off. Represents pay off of term loan at the closing of the merger.

(i) Inventories. Represents the unaudited pro forma adjustment to reflect the increase in the preliminary fair value of MakerBot's inventories balance at June 30, 2013 at current market prices (less selling costs) to approximately $5.9 million, a step-up of $0.4 million from the carrying value. After the merger closing date, the step-up will increase cost of sales over approximately three months as the inventory is sold. The amortization is not included in the accompanying pro forma condensed consolidated statements of operations as it is considered a nonrecurring charge that will be included in the statement of operations within twelve months following the transaction. The provisional measurements of fair value reflected are subject to change.

(j) Goodwill. Reflects the preliminary estimate of the excess of the purchase price paid over the fair value of MakerBot's identifiable assets acquired and liabilities assumed and is not amortized. The estimated purchase price of the transaction, based on the average merger date price of Stratasys' ordinary shares on August 15, 2013, and the excess purchase price over the fair value of the identifiable net assets acquired is calculated as follows (in thousands):

Preliminary purchase price	$	491,865
Less: fair value of net assets acquired		(123,125	)

Pro forma goodwill adjustment	$	368,740

(k) Other intangible assets. Represents the unaudited pro forma adjustment to reflect the preliminary estimated fair value of MakerBot's intangibles of approximately $169.2 million. The intangibles consist of developed technology of $43.8 million, trade name of $42.4 million, customer relationships of $22.3 million, in process research and development of $50.6 million and non-compete agreement of $10.1 million. The provisional measurements of fair value reflected are subject to change. Such changes could be significant to the fair value and to the related amortization. See footnote 4(a) for further information on intangible assets.

(l) Deferred income taxes. Deferred taxes arise from the difference in the income tax basis and the estimated fair value adjustments in the financial statements for acquired inventory, intangibles other than goodwill, and deferred revenue, as well as for certain stock option transactions in connection with the merger and tax deductible transaction expenses. MakerBot has a significant net operating loss carryforward at the completion of the merger, primarily due to the income tax deductions that result from the cancellation of certain stock options in exchange for receiving merger consideration in the amount approximately of $28 million. Based on expectations of future combined taxable income between MakerBot and Stratasys, no valuation allowance is considered necessary for the deferred tax asset relating to the net operating loss carryforward. The deferred taxes are based on MakerBot's statutory tax rate of 40% in the years the deferred taxes are expected to reverse. Stratasys and MakerBot will perform a more detailed analysis of expected future tax rates. Such tax rates and the related deferred income taxes and goodwill amounts may differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(continued)

(m) Accounts payable. The adjustments represent an increase to accounts payable due to (1) $2.5 million of estimated transaction fees in addition to the $5.4 million of transaction fees accrued at June 30, 2013 and (2) $11.5 million of estimated payments to be made to taxing authorities on behalf of MakerBot option holders who received Stratasys shares. The above amounts are expected to be paid at or near the time of closing.

(n) Earn-out payable. This adjustment represents the current and long-term liability related to the estimated fair value of the earn-out. MakerBot stockholders may qualify for two earn-out payments that provide for aggregate payments of up to 1.19 million shares (having a value of approximately $116.0 million based on the average merger date stock price) depending on the level of achievement of revenue and gross margin percentage targets for the six months ending December 31, 2013 and the year ending December 31, 2014. There is no payable under the bonus plans reflected on the Unaudited Pro Forma Condensed Combined Balance Sheet since the expense will be accrued over the future service period.

(o) Unearned revenue. Represents the unaudited pro forma adjustment to reflect the decrease in the preliminary fair value of MakerBot’s deferred revenue balance at June 30, 2013, based on the cost of fulfillment plus a normal profit margin, to approximately $2.9 million, a reduction of $0.3 million from the carrying value. After the merger closing date, the adjustment will be amortized as a reduction in revenue over approximately six months as the services are performed. The impact is not included in the accompanying pro forma condensed consolidated statements of operations as it is considered a nonrecurring charge that will be included in the statement of operations within twelve months following the transaction.

(p) Stockholders' equity. The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the issuance of approximately 3.9 million Stratasys ordinary shares that were issued upon completion of the merger and increased common stock by $11,000 (3.9 million of ordinary shares at NIS 0.01 par value which equates to approximately U.S. $0.003 per share, the approximately 655 thousand shares held back from issuance to secure the indemnification rights of Stratasys are not included in common stock, but rather the total value is included in additional paid-in capital until the shares are actually issued), and the elimination of MakerBot’s equity. Amounts in additional paid-in capital represent the fair value of the shares issued, less the par value of the shares issued and includes $7.2 million to reflect the portion of the purchase price related to the total estimated fair value of MakerBot stock options outstanding as of June 30, 2013 converted to Stratasys stock options.

Retained earnings of Stratasys were reduced by $2.3 million for estimated transaction costs (after tax benefit of $167,000 for certain transaction expenses which were deductible) in excess of previously expensed transaction fees of $5.4 million. These estimated transaction costs have been excluded from the Unaudited Pro Forma Condensed Combined Statement of Operations as they reflect charges directly related to the merger that do not have an ongoing impact.

EX-99.4 6 exhibit99-4.htm SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED NON-GAAP FINANCIAL DATA

Exhibit 99.4

SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED NON-GAAP FINANCIAL DATA

Results of Operations Data on a Pro Forma Combined Non-GAAP Basis

Exhibit 99.3 to this Form 6-K provides unaudited pro forma condensed combined statements of operations for the year ended December 31, 2012 and the six months ended June 30, 2013, which combined the consolidated statements of operations of Stratasys and Cooperation Technology Corporation as if the merger had been completed on January 1, 2012. These pro forma financial statements also assume that the December 1, 2012 merger of Stratasys, Inc. and Objet Ltd. had been completed on January 1, 2012.

The following table sets forth certain of this unaudited pro forma combined information on an unaudited non-GAAP basis for the twelve months ended December 31, 2012 and six months ended June 30, 2013 (in thousands).

	Year Ended		Six Months Ended
	December 31, 2012		June 30, 2013
Gross profit	$	214,662	$	134,619
Operating income		70,082		46,900
Net income attributable to Stratasys Ltd.		57,156		39,078

The foregoing pro forma non-GAAP data, which exclude the categories of expenses described below, are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful information for investors and shareholders of the company in gauging results of operations (x) on an ongoing basis after the mergers, when the exceptional expenses related to the mergers, and to Objet’s proposed initial public offering in 2012 will not recur, and (y) excluding non-cash charges for share-based compensation and amortization of intangible assets, which do not reflect actual cash outlays that impact our liquidity or our financial condition, as assessed by management. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period, such as the effects of merger-related, non-cash compensation and other charges, and may not provide a comparable view of the Company’s performance to other companies in the industry. The presentation of these non-GAAP measures is not meant to be considered in isolation or as an alternative to any measure of financial performance calculated in accordance with GAAP. A reconciliation of pro forma GAAP and pro forma non-GAAP results of operations is set forth below.

Reconciliation of Pro Forma GAAP and Pro Forma Non-GAAP Results of Operations

For the Twelve months ended December 31, 2012 (in thousands):

					Non-GAAP			Pro Forma
		Pro Forma			Adjustments			Non-GAAP
	Gross profit (1)	$	163,963		$	50,699		$	214,662
	Operating income (loss) (1,2)		(48,899	)		118,981			70,082
	Net income (loss) attributable to
	Stratasys Ltd. (1,2,3)		(42,363	)		99,519			57,156

(1)	Acquired Objet intangible assets
	amortization expense					39,294
	Acquired Solidscape intangible assets
	amortization expense					1,744
	Acquired MakerBot intangible assets
	amortization expense					6,260
	Non-cash stock-based compensation
	expense					2,665
	Merger related expense					265
	Expense related to the revaluation of
	Solidscape, Inc. and Fasotech Co., Ltd
	inventory at acquistion					471
						50,699

(2)	Acquired Objet intangible assets
	amortization expense					8,967
	Acquired Solidscape intangible assets
	amortization expense					533
	Acquired MakerBot intangible assets
	amortization expense					9,370
	Bonus plan compensation expense					14,763
	Non-cash stock-based compensation
	expense					25,387
	Merger related expense					9,262
						68,282
						118,981

(3)	Tax expense related to adjustments					(19,462	)
					$	99,519

For the Six months ended June 30, 2013 (in thousands):

					Non-GAAP			Pro Forma
		Pro Forma			Adjustments			Non-GAAP
	Gross profit (1)	$	98,242		$	36,377		$	134,619
	Operating income (loss) (1,2)		(23,855	)		70,755			46,900
	Net income (loss) attributable to
	Stratasys Ltd. (1,2,3)		(19,517	)		58,595			39,078

(1)	Acquired Objet intangible assets
	amortization expense					29,670
	Acquired Solidscape intangible assets
	amortization expense					872
	Acquired MakerBot intangible assets
	amortization expense					3,130
	Non-cash stock-based compensation
	expense					1,266
	Fair value of Objet deferred revenue
	pre-merger					1,214
	Merger related expense					225
						36,377

(2)	Acquired Objet intangible assets
	amortization expense					7,620
	Acquired Solidscape intangible assets
	amortization expense					266
	Acquired MakerBot intangible assets
	amortization expense					4,685
	Bonus plan compensation expense					5,162
	Non-cash stock-based compensation
	expense					9,838
	Acqusition related expense					6,807
						34,378
						70,755

(3)	Tax expense related to adjustments					(12,096	)
	Depreciation and amortization
	expense attributable to
	non-controlling interest					(64	)
					$	58,595