U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended
December 31, 1997
Commission file number 1-13400
STRATASYS, INC.
(Name of Small Business Issuer in its Charter)
Delaware 36-3658792
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
14950 Martin Drive, Eden Prairie, Minnesota 55344
(Address of Principal Executive Offices) (Zip Code)
(612) 937-3000
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange on Which
Title of Each Class Each Class is Registered
Common Stock, $.01 par value The Pacific Stock Exchange Incorporated
- -------------------------------- ---------------------------------------
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Revenues for the issuer's most recent fiscal year were $29,636,370.
The aggregate market value of the voting stock held by
non-affiliates computed by reference to the closing price at which the stock was
sold on March 13, 1998 was $54,866,441.
As of March 13, 1998, the Issuer had 6,080,146 shares of Common
Stock, $.01 par value, outstanding.
Transitional Small Business Disclosure Format: Yes ___ No __X__
Documents Incorporated by Reference
Part III of the Annual Report on Form 10-KSB is herein incorporated
by reference from the definitive Proxy Statement to be filed with the Security
and Exchange Commission with respect to the Registrant's Meeting of Stock
holders scheduled to be held on May 14, 1998.
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ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
Stratasys, Inc. (the "Company") was incorporated under the laws
of the State of Delaware on August 8, 1989. The Company's executive offices are
located in Eden Prairie, Minnesota.
On October 20, 1994, the Company successfully completed an
initial public offering ("IPO") of 1,380,000 shares of its Common Stock,
including 180,000 shares issued upon exercise of the underwriter's
over-allotment option. The shares of Common Stock were sold at $5.00 per share
with the Company receiving net proceeds of approximately $5,700,000. The
underwriter was also granted warrants to purchase up to 120,000 shares of Common
Stock, exercisable at $7.50 per share, until October 1999, all of which have
been exercised.
On January 1, 1995, the Company purchased certain rapid
prototyping assets from International Business Machines Corporation ("IBM"),
pursuant to an Assignment and Sale of Rapid Prototyping Technology and Related
Assets Agreement dated as of January 1, 1995.
In March 1996, the Company announced three new products,
Genisys(R), the FDM(R) 1650, and the FDM(R) 8000, each of which is oriented to
separate stages of a customer's product development cycle. Shipments of the
FDM(R) 1650 and Genisys(R) began in March and June 1996, respectively, and
shipments of the FDM(R) 8000 began in the first quarter of 1997.
In March 1997, the Company announced the FDM(R) 2000, an
enhanced version of the Company's FDM(R) 1650. The Company began shipping the
FDM(R) 2000 in the first quarter of 1997.
In November 1997, the Company announced that its MedModeler
system, a rapid prototyping system designed for the medical market for
anatomical part output from MRI and CT scans, was granted 510(k) clearance by
the United States Food and Drug Administration ("FDA").
In January 1998, the Company introduced the FDM(R) Quantum,
which offers large modeling capabilities (second largest build envelope in the
industry) combined with significant speed and performance enhancements as
compared with the FDM(R) 2000. This product incorporates the new MagnaDrive
technology that allows the extrusion heads to move on a bed of air while
controlled by electro-magnetic homing devices. Commercial shipments are expected
to commence in the first quarter of 1998.
BUSINESS OF THE COMPANY
The Company is a leader in the three dimensional ("3D") imaging
business, which is referred to as "rapid prototyping". The Company develops,
manufactures and markets a family of rapid prototyping devices that enable
engineers and designers to create physical models, tooling and prototypes out of
plastic and other materials directly from a computer aided design ("CAD")
workstation. In many industries, the models and prototypes required in product
development are produced laboriously by hand-sculpting or machining, a
traditional process that can take days or weeks. The Company's computerized
modeling systems use its proprietary technology to make models and prototypes
more directly from a designer's three-dimensional CAD in a matter of hours.
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The Company believes that its patented fused deposition modeling
("FDM(R)") technology and new Genisys(R) technology are the only rapid
prototyping systems commercially available that can produce parts from plastic
without relying on lasers. This affords the Company a number of significant
advantages over other commercially available three-dimensional rapid prototyping
technologies, which primarily rely on lasers to create models. Such benefits
include the ability to use the device in an office environment due to the
absence of hazardous emissions, the need for relatively little set up of the
system for a particular project, the availability of a variety of modeling
materials and the lack of any need for costly replacement lasers and laser
parts. The systems can also run virtually unattended, producing models while
designers perform other tasks.
The process involved in the development of a three-dimensional
model using the Company's FDM(R) Benchtop systems begins with the creation of a
conceptual geometric model on a CAD workstation. The model is then imported into
the QuickSlice(R) software program, which mathematically slices the conceptual
model into horizontal layers that are downloaded into the system. These rapid
prototyping machines basically draw cross-sections of the model one layer at a
time to create a three-dimensional "blueprint." A spool of thin thermoplastic
modeling material feeds into a moving FDM(R) extruding head, which heats the
material to a semi-liquid state. This semi-liquid material is then extruded and
deposited in ultra-thin flat layers on a base (the "X-Y Stage") in the modeling
chamber. As the material is directed into place by the computer-controlled head,
layer upon layer, the material solidifies, creating a precise and strong
laminated model.
The Genisys(R) modeling process is similar. Genisys(R) uses
AutoGen(R) software to slice the conceptual model created on a CAD workstation
into horizontal layers that are downloaded into Genisys(R). Genisys(R) then uses
wafers of polyester modeling material, rather than spools of filament, to feed
the extrusion head. The extrusion head heats these wafers and, using a precision
hydraulic conical pump, deposits a continuous layer of plastic polymer beads
(much like squeezing toothpaste from a tube) onto the X-Y Stage to create a
three-dimensional model by building up layers. In comparison to the FDM(R)
Benchtop systems, due to its size, Genisys(R) allows the prototype to be created
on a desktop, directly from a workstation, like a 3D printer.
Products
MODELING EQUIPMENT. The Company has been developing and
improving its line of rapid prototyping products since its inception in 1989.
Since that time, the Company has developed and sold systems including the
3D-Modeler, a smaller benchtop version of the 3D-Modeler called the FDM(R) 1500
Benchtop, introduced in June 1993; an improved benchtop modeler called the
FDM(R) 1600 Benchtop, introduced in November 1994; the Company's Protoslice
operating software package; its successors, QuickSlice(R) and AutoGen(R); and in
some cases, a CAD workstation manufactured by SGI. The FDM(R) 1600 Benchtop
offered customers more features than its predecessor, the FDM(R) 1500, including
dual heads. As such, it had increased hardware and software performance.
Although the Company has discontinued sales of the 3D Modeler, the FDM(R) 1500,
SGI workstations and, in early 1996, the FDM(R) 1600 Benchtop system, it
continues to support and manufacture modeling materials for these systems. In
addition, the Company no longer sells ProtoSlice, the predecessor to
QuickSlice(R).
In March 1996, the Company introduced three new rapid
prototyping machines for commercial sale. Genisys(R) is a 3D desktop printer,
which uses the rapid prototyping technology developed by IBM that the Company
purchased in 1995. It is useful for the production of conceptual models employed
in the early stages of the design cycle, as it enables a designer to produce
concept iterations at his desk directly from a workstation in a simple
push-button fashion. The FDM(R) 1650 Benchtop can produce functional prototypes
at higher speeds than those of its predecessor, the FDM(R) 1600 Benchtop, and
can accommodate a variety of engineering modeling materials. The third new
product, the FDM(R) 8000, is a rapid prototyping device, which incorporates
QuickSlice(R) software and the filament extrusion method of the Company's FDM(R)
products. It is capable of building prototypes up to 24 inches in size with
throughput comparable to the recently announced Stratasys FDM(R) 2000. The
FDM(R) 8000 builds prototype parts using ABS plastics. Distribution of the
FDM(R) 1650 Benchtop and the Genisys(R) machine
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began in March and June 1996, respectively, while shipment of the FDM(R) 8000
began in the first quarter of 1997.
The Company announced the FDM(R) 2000 in March 1997. It is an
enhanced version of the FDM(R) 1650, but features a 30% to 40% throughput
improvement over the FDM(R) 1650. Upgraded hardware and software accounts for
the improved performance features. The Company began shipping the FDM(R) 2000 in
the first quarter of 1997. In November 1997, the Company announced that its
MedModeler rapid prototyping system had been granted 510(k) pre-market clearance
from the FDA. The MedModeler is a Benchtop rapid prototyping system designed for
the medical market that creates anatomical part output from computed tomography
("CT") and magnetic resonance imaging ("MRI") devices.
In January 1998, the Company announced the FDM(R) Quantum.
This system features the second largest build envelope in the industry and
incorporates the newly-developed MagnaDrive technology. The MagnaDrive
technology, which allows the extrusion head to float on a bed of air while being
controlled through electro magnetic devices, offers significant speed and
performance enhancements as compared with the FDM (R) 2000. Commercial
shipments of the Quantum are expected to commence in the first quarter of 1998.
The Company's family of rapid prototyping systems offers product
designers and developers the ability to create prototypes throughout all stages
of the development cycle as well as a wide range of prices from which to choose.
The domestic prices of the systems start at $45,000 for Genisys(R) and reach
$325,000 for the FDM(R) Quantum. The current domestic price of the FDM(R) 1650
Benchtop is $99,000, while the price of the FDM(R) 2000 is $125,000. By
comparison, the Company's original 3D Modeler sold for between $150,000 and
$180,000. The Company also offers special pricing for trade-in systems and
upgrades. Customers have the option to purchase an entire rapid prototyping
system from the Company or to buy individual components.
MODELING MATERIAL. FDM(R) technology allows the use of a greater
variety of modeling materials and colors than other technologies. The Company
continues to develop filament modeling materials that meet the customers' needs
for increased speed, strength, accuracy, surface resolution and color. These
materials are processed into its patented filament form, which is then fed into
the 3D Modeler or the FDM(R) Benchtop systems. The Company's spool-based system
has proven to be a significant advantage for its products over Ultra Violet
("UV") polymer systems, because the Company's system allows the user to quickly
change material by simply mounting the spool and threading the desired material
into the FDM(R) devices. Spools weigh from 2.3 pounds to ten pounds , and the
creation of a model may require from 0.1 pound to more than one pound of
filament. Other advantages of the spool-based system over a UV polymer system
are that the spool-based system allows the customer to purchase a single spool
as compared to an entire vat of UV polymer, thereby reducing the customer's
up-front costs, and to use the system in an office environment.
Currently, the Company has five modeling materials commercially
available for model generation using its FDM(R) technology: an elastomer
material for applications requiring strength, durability and flexibility, as
used in seals or tubing, an investment casting wax, the hard polymer material
ABS (named for its three initial monomers, acrylonitrile, butadiene and
styrene), which is used commercially to make products such as telephones, a
medical grade ABS (MABS), used for medical applications, and a release material.
Each material has specific characteristics that make it appropriate for various
applications. The ability to use different materials allows the user to match
the material to the end use application of the prototype, whether it is a
pattern for tooling or a concept model.
Genisys(R) uses only one type of modeling material, a plastic
polymer, which is manufactured in the form of wafers. A total of 50 wafers are
held in a cassette, which allows the wafers to be fed into the machine and
rapidly extruded in layers. Additional cassettes are easily loaded into the
system. Each cassette contains a memory chip that instructs the system as to the
parameters and melt temperature of the material lot, which optimizes the
automatic build process of the Genisys(R) system.
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The modeling filament and wafers are consumable products that
provide additional revenue for the Company.
OPERATING SOFTWARE. The Company offers two software products:
QuickSlice(R) and AutoGen(R). QuickSlice(R) converts three-dimensional
computer models into a format that controls the operation of the Company's
FDM(R) 1650, 2000, 8000 and Quantum modelers. AutoGen(R) performs the
same function for the Genisys 3-D Printer.
QuickSlice(R) is a simple, easy-to-use software package. The
Company originally sold the QuickSlice(R) software package for $7,000.
QuickSlice(R) 2.0, a modified version of QuickSlice(R), is the operating
software for the Company's FDM(R) 1650 system. The Company also supplies a
library of utility software programs and procedures to simplify the handling of
data and to automate common tasks.
In 1994, the Company developed and released to the public a
software package called SupportWorks(R). SupportWorks(R) is used in conjunction
with QuickSlice(R) enabling the Company's FDM(R) Benchtop, 8000, and Quantum
systems to automatically generate supports for the models, thereby eliminating
another step in the model-making process. The program originally sold for
approximately $6,000. The Company has now combined QuickSlice(R) and
SupportWorks(R) into a proprietary $15,000 copyrighted package which is sold
under the name QuickSlice(R). The current version is QuickSlice(R) 5.0.
In 1996, the Company introduced AutoGen(R), software
specifically designed for Genisys(R). AutoGen(R) automatically prepares models
for printing with almost no user interface. The over-all architecture and
detailed design of the AutoGen(R) and Quickslice(R) software were
developed by the Company, which has retained copyright and all other ownership
rights.
Applications of Rapid Prototyping
Rapid prototyping systems enable engineers and designers to
produce models of their engineering designs faster and cheaper than with
conventional manual methods. The prototypes themselves are used to test the
product or assembly's form, function and fit to specific tolerances. Companies
also use three-dimensional models for tooling as final patterns for a variety of
tooling procedures. In addition, several domestic and international
manufacturers produce one-of-a-kind orthopedic implants for patients using
computed topographic scanning and wax investment casting masters produced with
the Company's FDM(R) systems.
Potential Future Applications
The Company has positioned its products to be used as devices
that support CAD systems in a variety of design and manufacturing industries,
including automotive, aerospace, consumer products, electronics and medical. The
Company's systems are also used in service bureaus and educational institutions.
Additional future applications may arise in conceptual design, casting,
precision prototypes, consumer packaging, architectural design, rapid
manufacturing of small-volume custom parts and fit, form and function testing,
secondary tooling, and mold-making.
Among potential medical applications, rapid prototyping could be
used to produce accurate models of internal organs, bones or skulls for
pre-operative evaluations or modeling of prostheses. In such uses, the Company's
products could serve as peripheral devices for "CT" and "MRI" devices. The
Company currently has its MedModeler installed at four such medical beta sites.
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Marketing, Distribution and Customers
The strategic focus of the Company's marketing efforts begins
with identifying the needs of product managers, conceptual designers, design and
manufacturing engineers and production specialists in manufacturing companies.
The Company then seeks to understand a customer's needs and requirements. To
satisfy those needs, the Company offers a broad array of products, ranging from
the low cost, easy-to-use Genisys 3D Printer, to the large-scale, fast and
precise FDM(R) Quantum. The Company has sold systems to, among other customers,
General Motors Corporation, Ford Motor Company, Chrysler Corporation, Lockheed
Martin, Square D Company, Whirlpool Corporation, Callaway Golf, Snap On Tools,
Biomet, Inc., St. Jude Medical, Motorola, Eastman Kodak Company, Marubeni,
Hewlett-Packard, Brooks Air Force Base, Westinghouse Electric Corporation, Lego,
the Federal Bureau of Investigation (FBI), and NASA, as well as service bureaus,
universities and distributors in the United States and abroad. With the purchase
of rapid prototyping assets from IBM on January 1, 1995, the Company also
received a prospective customer list from IBM. The Company has promoted its
current technology to these prospective customers in an effort to further expand
its customer base. The Company sells both complete rapid prototyping systems and
separate components.
The Company utilizes a variety of tactical marketing methods to
reach potential customers, including advertising, press releases, trade magazine
articles, customer studies, brochures, direct mailings, telemarketing programs,
trade show demonstrations, videos and a Web site (www.Stratasys.com). In
addition, the Company has developed domestic and international on-site
demonstration capabilities.
Domestically, the Company sells directly to its customers. In
1997, the Company organized its domestic FDM(R) sales force into three regions.
Salespersons and management reside in the regions they service. In addition,
Genisys(R) resellers have been assigned to managers within this regional
framework. The Company markets internationally through a network of distributors
and sales representatives. During the years ended December 31, 1996 and 1997,
export sales amounted to approximately $8,865,000 and $12,639,000, respectively.
No customer accounted for more than 10% of sales in 1996 or
1997.
Warranty and Service
The Company provides a 90-day warranty on its domestic systems
and a one-year warranty on those sold internationally. In addition, the Company
offers annual service and maintenance contracts for its systems. The service
contracts include updates of the Company's software systems. Annual service
contracts for the Company's FDM(R) systems are priced at a range from $10,000 to
$32,000, while annual service contracts for the Genisys(R) system are priced at
$6,000.
Manufacturing
The Company's manufacturing process consists of the manual
assembly of purchased components. All parts used in the manufacturing process
are obtained from either distributors of standard electrical or mechanical parts
or from custom fabricators of the Company's proprietary designs. The Company
currently operates on a build-to-inventory basis.
The Company purchases the major component parts for its FDM(R)
and Genisys(R) systems from various outside vendors, subcontractors and other
sources and assembles them at its Minnesota facility. The Company performs
numerous diagnostic tests and quality control procedures throughout the assembly
process in order to assure reliability of its products. Prior to shipment, each
unit is subjected to a test and burn-in procedure to check for defects.
Precision modeling parameters are also checked.
The Company maintains an inventory of most of its necessary
supplies, which facilitates the assembly of products required for production.
The Company's sole current supplier of the X-Y Stage for the FDM(R) 1650, FDM(R)
2000 and FDM(R) 8000 Benchtop systems is Asymtek; and its sole current
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supplier of the FDM(R) head motors is MircoMo Electronics, Inc. The Company also
has sole suppliers for two key components of its new FDM(R) Quantum system. The
Company considers all of these suppliers to be reliable. Nevertheless, the
Company maintains an inventory of such components to support continued supply.
Furthermore, the Company believes that the supplier of the X-Y Stage could be
replaced by in-house design and production of the part within a three-month
period, if necessary; and the Company could employ FDM(R) head motors from other
suppliers by modifications to the design of the FDM(R) 1650 and 2000 Benchtops
and FDM(R) 8000. In-house development to replace the vendors of the Quantum
components would take four to eighteen months to accomplish. In regard to other
parts and materials, the Company uses multiple sources of supply and does not
believe that it is dependent on any single supplier. Although the Company
believes that it maintains adequate inventories of vendor-specific materials,
the loss of a supplier of such vendor-specific materials or compounds could
result in a delay in the manufacture and delivery of those materials and
compounds resulting from the need to retest and recertify products supplied by
one or more new vendors. The Company considers its relationships with its
suppliers to be good.
Research and Development
The Company has devoted significant time and resources to the
development of a universally compatible and user-friendly software system. The
Company believes that ongoing research and development efforts are essential to
its continued success. Accordingly, the Company's engineering development
efforts will continue to focus on improvements to the FDM(R) and Genisys(R)
technology and development of new modeling processes, materials, software and
products. To date, much of the Company's activity has been focused on research
and development. For the years ended December 31, 1996 and 1997, the Company's
research and development expenses were approximately $3,374,000 and $5,055,000,
respectively.
The Company's filament development and production operation is
located at its facility in Eden Prairie, Minnesota. The filament formulation and
manufacturing process is regarded by the Company as a trade secret, and the
Company holds patent claims on filament usage in its products.
Intellectual Property
The Company considers its proprietary technology to be important
to the development, manufacture, and sale of its products and seeks to protect
its technology through a combination of patents and confidentiality agreements
with its employees and others. Scott Crump, the Company's President, was granted
two U.S. Patents which cover many claims relating to various aspects of its
products, FDM(R) technology and the associated modeling process. The term of one
patent lasts until June 9, 2009, and the term of the other lasts until August
23, 2011. The patents have been assigned to the Company. In addition, other
employees of the Company have assigned to the Company patents and patent
applications for other rapid prototyping process and apparatus associated with
the FDM(R) process. As part of its purchase of rapid prototyping technology
assets from IBM, the Company was also assigned the rights and title to three
patents developed by IBM, which cover the Genisys(R) system and which the
Company believes will further augment its own product lines. The Company
recorded these patents domestically and is in the process of recording them in
certain foreign countries. The terms of these patents extend until June 7, 2005,
April 12, 2011, and May 17, 2011, respectively. In total, the Company currently
owns eleven primary U.S. patents.
Corresponding patent applications covering the same claims that
are contained in the Company's issued patents have been initiated in various
foreign countries, including Japan and the European Community. Other patent
applications have also been filed, including the patent applications assigned to
the Company by IBM. The Company has registered several trademarks, including
"Stratasys, Inc.," "3D Modeler," "QuickSlice," "3D Plotter," "3D Visualizer",
"FDM", "Genisys", "AutoGen", "FDMM", "FDC", and "BMD". Each of the registered
trademarks has a duration of 10 years and may be renewed every 10 years while it
is in use. Trademark applications have been filed in Japan and the European
Community.
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Competition
The Company competes in a marketplace that is still dominated by
conventional methods of model-making and prototype development, which are
primarily performed by machinists and engineers working from blueprints or CAD
files and using machining or by-hand methods. The Company believes that there is
currently no other commercial producer of three-dimensional modeling devices
that uses a single-step, non-toxic technology similar to the Company's FDM(R)
and Genisys(R) technologies. All other rapid prototyping or 3D printing systems
involve an additional post-processing step, such as curing the part after
construction of the model or prototype. The Company's FDM(R) and Genisys(R)
technologies do not rely on the laser or light technology used by many other
commercial manufacturers in the rapid prototyping industry.
A number of different technologies are employed in rapid
prototyping devices marketed by the Company's competitors. Stereolithography is
used in the products of 3D Systems, D-MEC, Mitsui and Teijin Seiki Co. 3D
Systems, in which Ciba-Geigy has a substantial interest, introduced the first
rapid prototyping product. The Company believes that 3D Systems accounts for
approximately 32% of sales of rapid prototyping units to date. DTM Corporation
produces machines that use lasers to sinter or harden powdered material.
Helisys, Inc. utilizes lasers to cut and laminate sheets of materials, such as
paper. The Company believes that its FDM(R) technology has important advantages
over the products of these companies, including the ability to be used in an
office environment, the availability of multiple modeling materials and a
one-step process. Sanders Prototype, Inc. ("Sanders"), 3D Systems, and Z-Corp
have developed prototyping systems which use ink-jet technology to deposit wax
material layer by layer which can be used in an office environment. A smoothing
or milling process is required between each deposited layer to maintain accuracy
in these processes. Certain of the Company's competitors have greater financial
and marketing resources than the Company.
According to a March 1998 report by Wohlers Associates, Inc.,
the Company was the second largest rapid prototyping vendor in the world in
terms of both revenue and units shipped in 1997.
Employees
As of March 13, 1998, the Company had 166 full-time employees
and 17 subcontractors or temporary employees. While the Company has separate
internal departments, such as manufacturing, marketing, engineering and sales,
many employees perform overlapping functions within the organization. No
employee is represented by a union, and the Company has not experienced a work
stoppage. The Company believes its employee relations are good.
Governmental Regulation
GENERAL
The Company is subject to various local, state and federal laws
and regulations that affect businesses generally, including regulations
promulgated by federal and state environmental and health agencies, the Federal
Occupational Safety and Health Administration and laws pertaining to the hiring,
treatment, safety and discharge of employees.
FDA REGULATION
The FDA has the authority to regulate the preclinical and
clinical testing, manufacture, labeling, distribution, and promotion of the
Company's MedModeler as a Class II medical device under the Federal Food, Drug,
and Cosmetic Act of 1976, as amended. Before a new device can be introduced into
the market, the manufacturer must generally obtain prior FDA permission to
market it through either clearance of a 510(k) notification to the FDA or
approval of a pre-market ("PMA") application. A 510(k) clearance will be granted
if the submitted information establishes that the proposed device is
"substantially equivalent" to a legally marketed Class I or II medical device or
to a Class III medical device for which the FDA has not called for PMA's. After
a device receives 510(k) clearance from the FDA, any modification
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that could significantly affect its safety or effectiveness, or would constitute
a major change in the intended use of the device, will require a new 510(k)
submission.
In November 1997, the Company announced the FDA granted the
MedModeler 510(k) clearance. The Company has subsequently made modifications to
the MedModeler, which it believes do not require the submission of new 510(k)
notifications. There can be no assurance, however, that the FDA would agree with
the determination by the Company not to submit, or would not require the Company
to submit, a new 510(k) notification for any of these changes. If the FDA
requires the Company to submit a new 510(k) notification for any device
modification, the Company may be prohibited from marketing the modified device
until the 510(k) notification is cleared by the FDA.
The MedModeler and any other medical devices manufactured or
distributed by the Company will be subject to pervasive and continuing
regulation by the FDA. The Company's manufacturing facility will be subject to
inspection by the FDA to assure compliance with its Quality System Regulation
("QSR"), which imposes testing, control, documentation and other quality
assurance procedures. In addition, the Company will be subject to other
regulatory requirements that usually apply to medical devices marketed in the
United States, including labeling regulations, Medical Device Reporting ("MDR")
regulations (which require that a manufacturer report to the FDA certain types
of adverse events involving its products), and the FDA's prohibitions against
promoting products for unapproved or "off-label" uses. In addition, Class II
devices can be subject to additional special controls that do not apply to Class
I devices, such as performance standards, postmarket surveillance, patient
registries, and FDA guidelines. Failure to comply with applicable requirements
could result in FDA enforcement action, including, among other things, fines,
injunctions, civil penalties, recall or seizure of the products, refusal to
grant pre-market clearances or approvals, withdrawal of marketing approvals and
criminal prosecution. Although the Company believes that any such enforcement
action would not have a material adverse effect on the Company's ability to
market its products other than as medical devices, any such enforcement action
could have a material adverse effect on its ability to market the MedModeler.
The MedModeler may be subject in certain instances to
regulation by foreign regulatory authorities to the extent that the Company
seeks to market it outside the United States.
ITEM 2. PROPERTIES.
The Company's executive offices and production facilities
presently occupy approximately 87,156 square feet in two adjacent buildings in
Eden Prairie, Minnesota, near Minneapolis. The Company occupies a 27,756 square
foot facility under a lease that expires on July 31, 1999. In October 1996, the
Company leased an additional 59,400 square feet of office and production space
in a building adjacent to its original Eden Prairie premises under a lease
expiring in October 1999. Approximately 40% of the new premises will be sublet
until needed by the Company. The Minnesota facilities are used for machine
assembly and filament production, as well as sales, administration and
operations. The current monthly rent for the premises occupied by the Company
total approximately $35,797. The Company does not require a large space for
production because it assembles its devices from sub-assemblies manufactured by
outside vendors.
Additional research and development was performed at the
Company's facility in Hawthorne, New York, which occupied approximately 5,710
square feet of space. The Company occupied these premises under a lease that
expired on January 25, 1998, at a monthly rent of $5,353. In the third quarter
of 1997, the Company surrendered the lease on this location and closed the
facility.
The Company opened two regional sales offices in 1997. In June
1997, the Company entered into a three year lease to occupy 1,912 square feet of
space in Southfield, Michigan, a suburb of Detroit. This lease expires in May
2000, with monthly rent of approximately $3,019. In September 1997, the Company
entered into a three year lease to occupy 2,504 square feet of space in Ontario,
California. The lease expires in May 2000, with base monthly rent of
approximately $3,005. The Company is also
<PAGE>
responsible for real estate taxes, insurance, utilities, trash removal and
maintenance expenses at all of these premises.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal or
administrative proceeding, and its property is not subject to any such
proceeding, other than actions arising in the ordinary course of the Company's
business, which the Company believes are not material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
No matter was submitted to a vote of Stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Common Stock of the Company is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System National
Market ("Nasdaq") under the symbol SSYS and is traded on The Pacific Stock
Exchange Incorporated under the symbol SAS.
The following table sets forth the high and low closing bid
prices of the Company's Common Stock for each quarter from January 1, 1996
through the fiscal year ended December 31, 1997.
High Low
---- ---
Fiscal Year Ended December 31, 1997 Bid Prices ($)
- ----------------------------------- --------------
January 1, 1997 - March 31, 1997 23.00 16.625
April 1, 1997 - June 30, 1997 25.75 15.00
July 1, 1997 - September 30, 1997 18.00 13.00
October 1, 1997 - December 31, 1997 17.75 10.25
Fiscal Year Ended December 31, 1996
- -----------------------------------
January 1, 1996 - March 31, 1996 23.375 16.375
April 1, 1996 - June 30, 1996 20.75 15.875
July 1, 1996 - September 30, 1996 24.50 15.375
October 1, 1996 - December 31, 1996 23.00 14.125
There were approximately 171 stockholders of record of the
Company's Common Stock as of March 13, 1998.
<PAGE>
DIVIDENDS
The Company has not paid or declared any cash dividends to date
and does not anticipate paying any in the foreseeable future. The Company
intends to retain earnings, if any, to support the growth of the Company's
business.
RECENT SALES OF UNREGISTERED SECURITIES
On November 13, 1997, the Company closed the sale of 206,897
Units consisting of one share of the Company's Common Stock, $.01 par value
("Common Stock"), a one-year warrant to purchase one share of Common Stock at an
exercise price of $14.50 (the "One-Year Warrant"), and a two-year warrant to
purchase one share of Common Stock at an exercise price of $14.50 (the "Two-Year
Warrant"), to one accredited investor for a purchase price of $14.50 per Unit.
The One-Year Warrants and the Two-Year Warrants are immediately exercisable by
the holders by cash payment of the exercise price. In connection with the
investor's subscription for such Units, the Company granted an option, which
expired on November 14, 1997, to purchase up to 148,148 Additional Units having
an aggregate purchase price of $2,000,000 at a purchase price of $13.50 per
Additional Unit. Each Additional Unit consisted of one share of Common Stock, a
one-year warrant to purchase one share of Common Stock at an exercise price of
$13.50 (the "Additional One-Year Warrant"), and a two-year warrant to purchase
one share of Common Stock at an exercise price of $13.50 (the "Additional
Two-Year Warrant"). The purchaser of the Units assigned its option to three
affiliated accredited investors, which exercised the option prior to its
expiration. The closing of the sale of the Additional Units occurred on November
20, 1997. On March 20, 1998, the Company agreed to exchange warrants to purchase
413,794 shares of Common Stock at an exercise price of $14.50 expiring on
October 31, 2000 ("Substitute $14.50 Warrants"), for the One-Year Warrants and
the Two-Year Warrants and to exchange Substitute Warrants to purchase 296,296
shares of Common Stock at an exercise price of $13.50 expiring on October 31,
2000 (the "Substitute $13.50 Warrants") for the Additional One-Year Warrants and
the Additional Two -Year Warrants. In connection with such exchange, the holders
of such warrants agreed not to request a registration of the shares purchased or
the shares of Common Stock issuable under such warrants until after December 31,
1998, and not to sell any of the shares purchased until after that date. The
Company relied upon Rule 506 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and Section 4(2) of the Securities Act for the
exemption from registration under the Securities Act in connection with the
issuance of the shares of Common Stock, One-Year Warrants, Two-Year Warrants,
the Additional One-Year Warrants, the Additional Two-Year Warrants, the
Substitute $14.50 Warrants and the Substitute $13.50 Warrants.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company develops, manufactures, and markets a family of
rapid prototyping devices that enable engineers and designers to create physical
models, tooling and prototypes out of plastic and other materials directly from
a computer aided design ("CAD") workstation. Historically, the Company's growth
has come from sales to a number of industries, including automotive, consumer
products, electronics, medical, and aerospace. Universities, other educational
institutions, and service bureaus have also been significant markets for the
Company. The Company's current and future growth is largely dependent upon its
ability to penetrate new markets, develop new applications, and develop and
market new rapid prototyping devices that meet the needs of its current and
prospective customers. New product developments will focus on various rapid
prototyping devices, modeling materials, and software enhancements. The Company
anticipates that in 1998, its primary business strategy will focus on expanding
its international and domestic sales of its existing family of rapid prototyping
devices, while maintaining on-going development of new rapid prototyping
equipment, modeling materials, and software. Growth through an appropriate
acquisition may also occur, but the Company can give no assurance that any such
acquisition will be consummated.
<PAGE>
The Company introduced two major new products in 1997. In March
1997 the Company introduced the FDM(R) 2000, a Benchtop system that offers
significant speed and performance enhancements over the Company's
FDM(R) 1650. The Company has continued to market the FDM(R) 1650 at a
reduced price of $99,000, while the FDM(R) 2000 is priced at approximately
$125,000. The Company also introduced the FDM(R)8000 in March 1997. This
represented the Company's entrance into the large-envelope modeling market,
previously not served by the Company. The FDM(R) 8000 offers the speed and
performance enhancements offered by the FDM(R)2000, while offering large
envelope modeling capabilities, and has a domestic list price of $200,000. The
Company also announced the MedModeler in the latter part of 1997 and also
introduced an elastomer modeling material. Continuing software enhancements and
other enhancements to improve the performance of the systems, including new tip
dimensionalities allowing for finer feature detail and surface finish on the
model output, were also introduced during the year.
Net sales of the Company's rapid prototyping devices, modeling
materials, and maintenance have increased each year since 1990. Management
expects, but cannot assure, that this trend will continue. The Company believes
that it shipped more rapid prototyping units than any of its competitors in
1996, and that it recorded the second highest revenues and unit shipments in the
industry in 1997. It can give no assurances, however, that this trend will
continue. The Company's profitability declined in 1997 as compared with 1996, in
spite of the 29.3% revenue growth and gross margins that improved from 65.6% of
sales in 1996 to 67.3% in 1997. The Company significantly expanded its
infrastructure and headcount in anticipation of higher revenues that were not
realized in 1997. In early 1997, the Company moved its manufacturing and service
organizations into a new, adjacent facility, incurring substantial leasehold and
operating expense increases. Sales offices were opened in Michigan and
California at various times during 1997. Preparation to open a European sales
office was also initiated in the later part of 1997. The Company's headcount
expanded from 143 employees at the end of 1996 to 177 employees at the end of
1997, with the majority of these additions occurring in the sales and
engineering departments. Future profitability of the Company will be dependent
upon the Company's ability to control its operating expenses while increasing
revenues. The Company does not believe that meaningful improvements to its gross
margins are achievable, and gross margins could possibly decline in the event
that significant price competition emerges within the industry. While the
Company believes that profitability will improve in 1998 as compared with 1997
as a result of operating expense control, it can give no assurance that these
results will be realized.
The Company believes that the rapid prototyping industry is
growing at approximately 20-30% per year. It believes that there is a trend
toward lower priced rapid prototyping systems capable of producing functional
prototypes, and that a sizable market exists for concept or visualization 3D
printers. This pricing trend should lead to growth in the more traditional
functional prototyping marketplace as companies continue to address in-house
rapid prototyping needs. Certain market segments in the industry have not
demonstrated pricing sensitivity. These segments are more interested in modeling
envelope size, modeling material variety, throughput, and part quality, which
should allow growth to continue for higher priced rapid prototyping systems
addressing these needs.
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
The following table sets forth certain statement of income data
as a percentage of net sales for the periods indicated. All items are included
in or derived from the Company's statement of income.
For the years ended December 31,
1997 1996
Net sales 100.0% 100.0%
Cost of sales 32.7% 34.4%
Gross margin 67.3% 65.6%
Selling, general, and administrative expenses 49.5% 41.4%
Research & development expense 17.1% 14.7%
Operating income 0.7% 9.5%
Other income 1.5% 2.4%
Income before taxes 2.2% 11.9%
Income taxes (benefit) 0.4% (3.4%)
Net income 1.7% 15.3%
NET SALES
Net sales for the year ended December 31, 1997 were $29,636,370,
compared with sales of $22,919,818 recorded for the year ended December 31,
1996. This represents an increase of $6,716,552, or 29.3%. This increase was due
to the Company's successful introduction of the FDM(R) 2000 Benchtop and FDM(R)
8000 systems. Whereas sales of the FDM(R) 1650 continued, the Company saw the
market for this product decline in favor of the faster, higher-priced FDM(R)
2000. Comparative revenue was negatively impacted by weak sales and returns of
Genisys systems, which was impacted by performance and technical issues since
the first quarter of 1997. Maintenance and materials revenue increased
significantly in 1997 as compared with 1996. Maintenance and materials revenues
were enhanced by the larger installed base of systems, customer satisfaction
with the ABS and other materials selection, and increased emphasis on the sale
of maintenance contracts.
The Company booked 260 orders for new systems in 1997. The
Company sold 245 units in 1997, as compared with sales of 257 units recorded in
1996. Unit sales in 1997 included sales of all systems, including trade-in and
upgrade systems, but excluded returns, substantially all of which were Genisys
systems. As previously disclosed, Genisys was impacted by a number of technical
issues, the most pronounced of which was a pump plugging condition that was
ultimately determined to be caused by contaminated raw materials provided by
outside vendors. Sales in 1997 of Genisys systems were significantly below the
levels attained in 1996. Total FDM(R) unit sales, including trade-ins but
excluding upgrades, increased by approximately 23% over 1996 FDM(R) unit sales.
Total FDM(R) revenue in 1997 increased by approximately 49% over the level
attained in 1996. Consumable and maintenance revenue increased by approximately
72% in 1997 as compared with 1996, and constituted the fastest growing component
of the Company's revenue mix. The Benchtop systems (both the FDM(R) 1650 and
FDM(R) 2000) continued to account for a majority of the Company's 1997 revenue,
but significant revenue was also derived from FDM(R) 8000 system sales.
Domestic sales accounted for approximately 57% of total revenue,
down from approximately 61% recorded in 1996. In the United States, the eastern
and central regions, including Detroit, recorded the most revenue, while the
western region was weak. The western region was negatively impacted by delays in
the hiring of additional salesmen. By the fourth quarter of 1997, the western
region was fully staffed, with a newly established office in the southern
California area. Europe accounted for approximately 20% of total revenue in
1997, and was the Company's strongest international region. However, total
revenues as a percentage of sales declined from 26% of total revenue recorded in
1996.
<PAGE>
The Company's combined Asia-Pacific region, which comprises Japan, China, the
Far East and India, accounted for approximately 20% of total revenue, up from
the 9.5% attained in 1996. The Company believes that 1998 sales into the East
Asian countries that have been most impacted by the recent currency and economic
turbulence will be weak. These countries include Korea, Indonesia, and Malaysia.
GROSS PROFIT
Gross profits improved to $19,939,905, or 67.3% of sales, in the
year ended December 31, 1997, compared with $15,031,302, or 65.6% of sales, in
the year ended December 31, 1996, an improvement of $4,908,603, or 32.7%. Gross
profits increased due to the higher average selling price of the FDM(R) 2000 and
FDM(R) 8000 systems in 1997, and were negatively impacted by higher
manufacturing overhead costs associated with the expansion of the Company's
manufacturing facility.
OPERATING EXPENSES
Selling, general and administrative ("SG&A") expenses increased
to $14,676,175 for the year ended December 31, 1997, from $9,485,519 for the
year ended December 31, 1996. This represents an increase of $5,190,656, or
54.7%. Personnel expenses, commissions, facility expenses and sales-related
travel expenses accounted for much of the increase in 1997.
Research and development ("R&D") expenses increased to
$5,054,767 for the year ended December 31, 1997 from $3,374,039 for the year
ended December 31, 1996. The increase in 1997 over 1996 amounted to $1,680,728,
or 49.8% Payroll-related expenses and significantly reduced software
capitalization accounted for much of the increase to R&D expenses in 1997.
The Company's operating income for the year ended December 31,
1997 declined to $208,863 from $2,171,744 the year ended December 31, 1997.
OTHER INCOME
Other income and expense netted to $435,293 in 1997. Interest
income amounted to $496,813, a decrease of $88,703 compared with 1996. This was
due to a lower average balance of cash and marketable securities. Interest
expense increased by $22,284 to $61,250 in 1997 as the Company increased its
acquisition of equipment under capitalized leases.
NET INCOME
Net income for 1997 amounted to $514,833 compared with
$3,503,024 in 1996. The 1996 period benefited from a tax benefit of $785,000
resulting in an effective tax rate of (28.9%) as compared with income tax
expense of $129,423, for an effective income tax rate for 1997 of 20%.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities during 1997 used cash of $597,363,
primarily reflecting increases in accounts receivable of $1,331,196, inventory
of $2,843,140, and reductions in the Company's accounts payable and other
current liabilities of $556,213. These changes resulted from the increased
volume of business in 1997. This use of cash was partially offset by increases
in unearned maintenance revenue of $1,344,226. In 1996 the Company used cash of
$3,409,541 in its operating activities, principally as a result of increased
accounts receivable and inventories of $8,178,145 and $1,699,176, respectively.
The Company used $185,049 of cash in its 1997 investing activities, including
$2,048,884 used for the acquisition of property and equipment, and $173,635 for
payments for intangible assets. The Company netted $2,131,527 from proceeds from
the sale of marketable securities in the same 1997 period. In the 1996 period
the Company used $2,523,450 of cash in its investing activities, including
$1,432,387 for the acquisition of property and equipment and $822,924 for
payments for intangible assets. In 1997, the Company's financing activities
provided net cash proceeds of $5,933,676, $6,166,806 of which resulted
<PAGE>
from proceeds from the sale of the Company's common stock. In 1996, financing
activities provided net cash proceeds of $5,171,903, $5,350,492 of which was
generated from the sale of the Company's common stock. The net increase in cash
for the year ended December 31, 1997 amounted to $5,151,264 as compared with a
net decrease of $761,088 for the comparable 1996 period. The Company's ending
cash and cash equivalents balances as of December 31, 1997 and 1996 were
$9,116,232 and $3,964,968, respectively.
At December 31, 1997, the Company's cash, cash equivalents, and
marketable securities balances totaled $13,557,612. These assets will be used by
the Company for working capital purposes, for improvement to facilities, for new
product development, tooling, and introduction, for acquisition of production
equipment and computers, for increased selling and marketing activities, and for
potential acquisitions. Management believes that the Company's revenue from
operations, its current cash and cash equivalents balance, and the proceeds from
the sale of short-term marketable securities should provide sufficient cash
resources to finance its operations for at least 12 months.
The Company has historically been unable to finance its growth
from cash generated from operations. Furthermore, the Company's working capital
requirements may significantly increase if an acquisition is consummated or if
significant operating losses occur. No assurances can be given as to the
adequacy of the Company's working capital to support the Company's operations
following an acquisition or a period of losses. If the existing cash balances
are insufficient or if working capital requirements are greater than estimated,
the Company could be required to raise additional capital. There can be no
assurance that the Company will be able to raise additional capital or that the
terms upon which such capital will be available to the Company will be
acceptable.
As of December 31, 1997, the Company had gross accounts
receivable of $12,180,515, less an allowance of $514,461 for returns and
doubtful accounts. Historically, the Company's bad debt expense has been
minimal. However, at December 31, 1997, large balances were concentrated with
certain international distributors. While the Company can give no assurances, it
believes that most, if not all, the accounts receivable balances will ultimately
be collected. The Company has not experienced significant inventory adjustments,
although it can give no assurances that future inventory adjustments caused by
obsolescence, product design changes, declining sales, or other factors, will
not occur.
The Company's total current assets amounted to $31,993,494 at
December 31, 1997, the majority of which consisted of cash, cash equivalents,
marketable securities, inventory and accounts receivable. Total current
liabilities amounted to $5,636,749, $2,426,270 of which was for unearned
maintenance revenues. The Company's debt is minimal, consisting primarily of
payments due under capital leases. The Company estimates that it will spend
approximately $2,400,000 in 1998 for facility improvements, production and
research and development equipment, computers and integrated software, and
tooling. As of December 31, 1997, material commitments for inventory purchases
from selected vendors for the ensuing nine month period ending September 30,
1998 will amount to approximately $1,035,000.
INFLATION
Management believes that inflation has not had a material effect
on the Company's operations or on its financial condition.
FOREIGN CURRENCY TRANSACTIONS
Substantially all of the Company's transactions are negotiated,
invoiced, and paid in US dollars. Fluctuations in the currency exchange rates in
other countries may therefore reduce the demand for the Company's products by
increasing the price of the Company's products in the currency of countries in
which the local currency has declined in value.
<PAGE>
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
All statements herein that are not historical facts or that
include such words as expect, anticipate, project, estimates or believes or
other similar words are forward-looking statements deemed by the Company to be
covered by and to qualify for the safe harbor protection covered by the safe
harbor protection provided by the Private Securities Litigation Reform Act of
1995 (the "1995 Act"). Investors and prospective investors in the Company should
understand that several factors govern whether any forward-looking statement
herein will be or can be achieved. Any one of these factors could cause actual
results to differ materially from those projected herein. These forward-looking
statements include the expected increases in net sales of rapid prototyping
systems and services, the ability of the Company to maintain its gross margins
on these sales, and the plans and objectives of management to introduce new
products, control expenses, improve profitability, and consummate acquisitions.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions, among others, that the Company (1) will be
able to continue to introduce new rapid prototyping systems acceptable to the
market and improve existing technology and software in its current product
offering, including the Genisys rapid prototyping system that has been
especially affected by technological problems, (2) will be able to maintain its
gross margins on its present products, (3) will be able to control its operating
expenses, especially its selling, general and administrative expenses and (4)
will be able to retain and recruit employees with the necessary skills to
produce, develop, market, and sell it products. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive, and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of those assumptions could prove inaccurate, and therefore there
is and can be no assurance that the results contemplated in any such
forward-looking statement will be realized. The impact of actual experience and
business developments may cause the Company to alter its marketing plans,
capital expenditure budgets or other budgets, which may in turn affect the
Company's results of operations. Due to the factors noted above and elsewhere in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company's future earnings and stock price may be subject to
significant volatility, particularly on a quarterly basis. Additionally, the
Company may not learn of revenue or earnings shortfalls until late in a fiscal
quarter, since the Company frequently receives the majority of its orders very
late in a quarter. This could result in an immediate and adverse effect on the
trading price of the Company's common stock. Past financial performance should
not be considered a reliable indicator of future performance, and investors
should not use historical trends to anticipate results or trends in future
periods.
ITEM 7. FINANCIAL STATEMENTS.
This information appears following Item 13 of this report and is
incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company did not have any changes in or disagreements with
its accountants on accounting and financial disclosure.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Incorporated herein by reference to the Company's Definitive
Proxy Statement with respect to the Company's Annual Meeting of Stockholders
scheduled to be held May 14, 1998.
ITEM 10. EXECUTIVE COMPENSATION.
Incorporated herein by reference to the Company's Definitive
Proxy Statement with respect to the Company's Annual Meeting of Stockholders
scheduled to be held May 14, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference to the Company's Definitive
Proxy Statement with respect to the Company's Annual Meeting of Stockholders
scheduled to be held May 14, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference to the Company's Definitive
Proxy Statement with respect to the Company's Annual Meeting of Stockholders
scheduled to be held May 14, 1998.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of the Company. (3)
3.2 Amendment to Certificate of Incorporation of the Company. (6)
3.3 By-Laws of the Company. (1)
4.1 Agent's Warrant issued to R.J. Steichen & Company dated November
12, 1993. (1)
4.2 Agent's Warrant issued to R.J. Steichen & Company dated December
13, 1993. (1)
4.3 Form of Common Stock purchase warrants issued by the Company
dated as of November 12, 1993 and December 13, 1993. (1)
4.4 Form of Common Stock purchase warrant issued by the Company in
its August 1995 private placement (2).
4.5 Form of 3-year Common Stock purchase warrants issued by the
Company in its November 1995 offering under Regulation D and
Regulation S. (5)
4.6 Form of 3-month Common Stock purchase warrants issued by the
Company in its November 1995 offering under Regulation D and
Regulation S. (5)
<PAGE>
4.7 Form of Placement Agent's warrant issued by the Company in its
November 1995 offering under Regulation D and Regulation S. (5)
4.8 Form of warrant issued to Sunrise Securities Corp. by the
Company in connection with its November 1995 offering under
Regulation D and Regulation S. (5)
4.9 Form of substitute warrant to purchase an aggregate of 413,794
shares of Common Stock at $14.50 per share expiring on October
31, 2000.
4.10 Form of substitute warrant to purchase an aggregate of 296,296
shares of Common Stock at $13.50 per share expiring on October
31, 2000.
10.1 Non-Competition Agreement between the Company and S. Scott
Crump, dated October 15, 1990. (1)
10.2 Non-Competition Agreement between the Company and S. Lisa Crump,
dated October 15, 1990. (1)
10.3 Employee Confidentiality Agreement between the Company and S.
Scott Crump, dated October 15, 1990. (1)
10.4 Employee Confidentiality Agreement between the Company and Lisa
Crump, dated October 15, 1990. (1)
10.5 Stratasys, Inc. Employee Stock Option Plan #1. (1)
10.6 Amended and Restated Stratasys, Inc. 1994 Stock Plan. (3)
10.7 Second Amended and Restated Stratasys, Inc. 1994-2 Stock Plan.
(8)
10.8 Asset Purchase Agreement between the Company and IBM dated
January 1, 1995. (4)
10.9 Equipment Lease Agreement between the Company and IBM dated
January 1, 1995. (4)
10.10 Assignment, dated October 23, 1989, from S. Scott Crump to the
Company with respect to a patent application for an apparatus
and method for creating three-dimensional objects. (7)
10.11 Assignment, dated June 5, 1992, from S. Scott Crump to the
Company with respect to a patent application for a modeling
apparatus for three dimensional objects. (7)
10.12 Assignment, dated June 1, 1994, from S. Scott Crump, James W.
Comb, William R. Priedeman, Jr., and Robert Zinniel to the
Company with respect to a patent application for a process and
apparatus of support removal for three-dimensional modeling. (7)
10.13 Lease between the Company and Richard A. Burke, dated October
14, 1996. (9)
21.1 Subsidiaries of the Company. (5)
23.1 Consent of Rothstein, Kass & Company, P.C.
27.1 Financial Data Schedule.
<PAGE>
27.2 Financial Data Schedule with restated earnings per share in
accordance with FAS No. 128 for the year ending December 31,
1996 and the quarters ending March 31, June 30 and September 30,
1996.
27.3 Financial Data Schedule with restated earnings per share in
accordance with FAS No.128 for the quarters ending March 31,
June 30 and September 30, 1997.
(1) Incorporated by reference from the Company's Registration
Statement on Form SB-2 (File No. 33-83638-C) filed September 2,
1994.
(2) Incorporated by reference from the Company's Form 8-K, dated
August 24, 1995.
(3) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1994.
(4) Incorporated by reference from the Company's Form 8-K, Amendment
No.2, dated January 1, 1995.
(5) Incorporated by reference from the Company's Registration
Statement on Form SB-2 (File No. 33-99108) filed November 8,
1995.
(6) Incorporated by reference from the Company's Form 10-QSB for the
nine months ended September 30, 1995.
(7) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2 (File No. 33-99108) filed
December 20, 1995.
(8) Incorporated by reference from the Company's definitive Proxy
Statement on Schedule 14A with respect to the Company's 1997
Annual Meeting of Stockholders.
(9) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1996.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1997
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-3
Statements of Income F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6 - F-7
Notes to Financial Statements F-8 - F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stratasys, Inc.
We have audited the accompanying consolidated balance sheets of Stratasys, Inc.
and Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Stratasys, Inc. and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Rothstein, Kass & Company, P.C.
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
February 3, 1998
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
==============================================================================================================
DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,116,232 $ 3,964,968
Marketable securities 4,441,380 6,572,907
Accounts receivable, less allowance for returns and
doubtful accounts of $514,461 in 1997 and $470,000
in 1996 11,666,054 10,607,155
Inventories 5,492,130 2,648,990
Prepaid expenses 226,698 344,101
Deferred income taxes 1,051,000 945,000
-------------------------------
Total current assets 31,993,494 25,083,121
-------------------------------
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 3,445,265 2,184,165
-------------------------------
OTHER ASSETS
Intangible assets, less accumulated amortization 3,376,038 4,119,857
Sundry 169,633 75,576
-------------------------------
3,545,671 4,195,433
-------------------------------
$ 38,984,430 $ 31,462,719
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Obligations under capital leases, current portion $ 144,137 $ 186,415
Accounts payable and other current liabilities 3,066,342 3,622,555
Unearned maintenance revenues 2,426,270 1,082,044
-------------------------------
Total current liabilities 5,636,749 4,891,014
-------------------------------
DEFERRED INCOME TAXES 124,000 71,000
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 136,314 94,977
-------------------------------
260,314 165,977
-------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 15,000,000 shares,
issued and outstanding 6,079,659 shares in 1997 and 5,517,309
shares in 1996 60,797 55,173
Capital in excess of par value 33,556,084 27,394,902
Accumulated deficit (529,514) (1,044,347)
-------------------------------
Total stockholders' equity 33,087,367 26,405,728
-------------------------------
$ 38,984,430 $ 31,462,719
===============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
YEARS ENDED DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------
SALES $ 29,636,370 $ 22,919,818
COST OF SALES 9,696,465 7,888,516
-----------------------------
GROSS PROFIT 19,939,905 15,031,302
-----------------------------
COSTS AND EXPENSES
Research and development 5,054,767 3,374,039
Selling, general and administrative 14,676,175 9,485,519
-----------------------------
19,730,942 12,859,558
-----------------------------
OPERATING INCOME 208,963 2,171,744
-----------------------------
OTHER INCOME (EXPENSE)
Interest and other income 496,813 585,516
Interest expense (61,520) (39,236)
-----------------------------
435,293 546,280
-----------------------------
INCOME BEFORE INCOME TAXES 644,256 2,718,024
NCOME TAXES (BENEFIT) 129,423 (785,000)
-----------------------------
NET INCOME $ 514,833 $ 3,503,024
=============================
INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Basic $ .09 $ .67
=============================
Diluted $ .09 $ .63
=============================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
Basic 5,726,339 5,191,002
=============================
Diluted 6,016,381 5,585,417
=============================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STRATASYS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
====================================================================================================================================
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL IN
PREFERRED STOCK COMMON STOCK EXCESS OF ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAR VALUE DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1996 264,000 $ 2,640 4,233,876 $ 42,339 $22,024,604 $(4,547,371) $17,522,212
COMMON STOCK ISSUED UPON CONVERSION
OF PREFERRED STOCK (264,000) (2,640) 379,437 3,794 (1,154)
SALE OF COMMON STOCK, less related expenses 901,996 9,020 5,341,472 5,350,492
COMMON STOCK ISSUED AS COMPENSATION 2,000 20 29,980 30,000
NET INCOME 3,503,024 3,503,024
----------------------------------------------------------------------------------------
BALANCES, December 31, 1996 -- -- 5,517,309 55,173 27,394,902 (1,044,347) 26,405,728
SALE OF COMMON STOCK, less related expenses 562,350 5,624 6,161,182 6,166,806
NET INCOME 514,833 514,833
----------------------------------------------------------------------------------------
BALANCES, December 31, 1997 -- $ -- 6,079,659 $ 60,797 $33,556,084 $ (529,514) $33,087,367
========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
==============================================================================================
YEARS ENDED DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 514,833 $ 3,503,024
Adjustments to reconcile net income to
net cash used in operating activities:
Deferred income taxes (53,000) (874,000)
Depreciation and amortization 1,019,973 474,902
Amortization of intangibles 917,454 614,027
Allowance for sales returns 68,000 55,588
Bad debts 204,297 220,000
Amortization of discounts on marketable securities (30,172)
Common stock issued for services 30,000
Other 5,660
Increase (decrease) in cash attributable to changes
in assets and liabilities:
Accounts receivable (1,331,196) (8,178,145)
Inventories (2,843,140) (1,699,176)
Prepaid expenses 117,403 (221,266)
Accounts payable and other current liabilities (556,213) 1,979,543
Unearned maintenance revenues 1,344,226 710,474
-----------------------------
NET CASH USED IN OPERATING ACTIVITIES (597,363) (3,409,541)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 35,166,222 1,307,198
Acquisition of marketable securities (33,034,695) (1,540,885)
Acquisition of property and equipment (2,048,884) (1,432,387)
Payments for intangible assets (173,635) (822,924)
Payments for sundry assets, net (94,057) (34,452)
-----------------------------
NET CASH USED IN INVESTING ACTIVITIES (185,049) (2,523,450)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of obligations under capital leases (233,130) (178,589)
Proceeds from sale of common stock 6,166,806 5,350,492
-----------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,933,676 5,171,903
-----------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,151,264 (761,088)
CASH AND CASH EQUIVALENTS, beginning of year 3,964,968 4,726,056
-----------------------------
CASH AND CASH EQUIVALENTS, end of year $ 9,116,232 $ 3,964,968
=============================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
YEARS ENDED DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the year for:
Interest $ 61,520 $ 39,236
============================
Income taxes $ 202,495 $ --
============================
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND
FINANCING ACTIVITIES, machinery and equipment
acquired under capital lease obligations $ 232,189 $ 120,012
============================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Stratasys, Inc. and Subsidiaries (collectively the "Company") develops,
manufactures and markets a family of rapid prototyping systems (RPS)
and devices that permit engineers and designers to create physical
models and prototypes, made of various materials, utilizing three
dimensional Computer Aided Design ("3D CAD") files at a CAD
workstation. The Company sells these devices worldwide.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Stratasys, Inc. and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in
consolidation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's assets and liabilities, which qualify
as financial instruments under Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial
Instruments," approximates the carrying amounts presented in the
consolidated balance sheet.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents. Cash
equivalents include a U.S. Treasury note and money market account. As
of December 31, 1997, and at various times during the year, balances of
cash at financial institutions exceeded the federally insured limit.
The Company has not experienced any losses in such accounts and
believes it is not subject to any significant credit risk on cash and
cash equivalents.
MARKETABLE SECURITIES
The Company records its marketable securities in accordance with SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Marketable securities have been categorized as available
for sale and, as a result, are stated at fair value. Realized gains or
losses are determined on the specific identification method and are
reflected in income.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost, on the first in, first out
method, or market.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the recoverability of the carrying
amounts of long-lived assets, including intangible assets. A loss is
recognized when expected undiscounted future cash flows are less than
the carrying amount of the asset. The impairment loss is the difference
by which the carrying amount of the asset exceeds its fair value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization is computed using the straight line
method over the estimated useful lives of the assets ranging from 3-5
years.
INTANGIBLE ASSETS
Intangible assets are being amortized over their estimated useful lives
using the straight line method as follows:
RPS Technology 11 years
Capitalized software development costs 3 years
Patents 17 years
Copyrights and licensed internal code 5 years
The costs of software development, including significant product
enhancements, incurred subsequent to establishing technological
feasibility have been capitalized in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." Costs incurred prior to establishment of
technological feasibility are charged to research and development
expense.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
UNEARNED MAINTENANCE REVENUES
Maintenance revenues are amortized over the term of the related
maintenance contracts, principally one year.
REVENUE RECOGNITION
The Company recognizes revenues from the sale of RPS machines when
shipped. The Company has established warranty programs which enable
customers to return a RPS machine. The Company establishes valuation
allowances for estimated returns at the time of shipment. In addition,
reserves for customer discounts are recorded when revenues are
recognized.
Software revenues are recorded based on Statement of Position 91-1 (SOP
91-1), "Software Revenue Recognition," which provides for recognizing
revenues from software product sales when a non-cancelable license
agreement has been signed, the product has been delivered, all
significant obligations have been satisfied and collectibility of the
receivable is reasonably certain. The Company sells its software as an
integral part of the RPS machines.
Service revenues, excluding maintenance contracts, are recognized at
the time the services are performed.
RESEARCH AND DEVELOPMENT COSTS
Expenditures for research, development and engineering of products and
manufacturing processes are expensed as incurred.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
The Company complies with SFAS No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to financial reporting
of income taxes. Deferred income tax assets and liabilities are
computed for differences between financial statement and tax bases 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.
INCOME PER COMMON SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). SFAS
No. 128 requires dual presentation of basic and diluted income per
share for all periods presented. Basic income per share excludes
dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares
outstanding for the period. Diluted income per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the income
of the Company. Prior period income per share information has been
restated as required by SFAS No. 128. The difference between the number
of shares used to compute basic income per share and diluted income per
share relates to additional shares to be issued (290,042 in 1997 and
394,415 in 1996) upon the assumed exercise of stock options and
warrants, net of shares hypothetically repurchased at the average
market price with the proceeds of exercise.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. ACCOUNTS RECEIVABLE
At December 31, 1997 and 1996, accounts receivable included balances
due from foreign entities of approximately $5,732,000 and $3,711,000,
respectively.
3. INVENTORIES
Inventories consist of the following at December 31:
1997 1996
Finished goods $ 2,318,013 $ 1,295,803
Work in process 276,366 264,259
Raw materials 2,897,751 1,088,928
---------------------------
$ 5,492,130 $ 2,648,990
===========================
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1997 1996
Machinery and equipment $ 1,108,874 $ 706,411
Computer equipment and
software 1,813,069 1,061,312
Office equipment 460,456 235,572
Leasehold improvements 911,618 383,430
Equipment under capital leases 851,950 635,155
----------------------------
5,145,967 3,021,880
Accumulated depreciation
and amortization (including
$154,881 in 1997 and $218,597
in 1996 under capital leases) 1,700,702 837,715
----------------------------
$ 3,445,265 $ 2,184,165
============================
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
1997 1996
RPS Technology $ 2,558,532 $ 2,558,532
Capitalized software
development costs 2,009,739 1,886,768
Patents 495,881 445,868
Copyrights and licensed
internal code 56,856 56,856
Other 17,488 16,837
---------------------------
5,138,496 4,964,861
Accumulated amortization 1,763,458 845,004
---------------------------
$ 3,376,037 $ 4,119,857
===========================
For the years ended December 31, 1997 and 1996, amortization for
computer software development costs charged to operations was $639,219
and $339,960, respectively.
Included in research and development costs for the years ended December
31, 1997 and 1996 are computer software development expenditures of
$1,625,188 and $414,026, respectively.
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consist of the following
at December 31:
1997 1996
Trade $ 1,474,061 $ 1,753,643
Compensation and related
benefits 928,656 1,056,552
Reserve for warranty expenses 225,425 362,912
Other 438,200 449,448
---------------------------
$ 3,066,342 $ 3,622,555
===========================
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
7. OBLIGATIONS UNDER CAPITAL LEASES
Aggregate minimum lease payments for obligations under capital leases
in the years subsequent to December 31, 1997 are as follows:
YEAR ENDING DECEMBER 31
1998 $ 186,966
1999 115,430
2000 34,428
-----------
Total minimum lease payments 336,824
Less amounts representing interest 56,373
-----------
Present value of minimum lease payments 280,451
Less current portion 144,137
-----------
$ 136,314
===========
8. INCOME TAXES
The tax effects of principal temporary differences are shown in the
following table at December 31:
1997 1996
Net operating loss
carryforwards $ 54,000 $ 142,000
Depreciation (116,000) (139,000)
Amortization (8,000) 68,000
Allowance for doubtful accounts 188,000 142,000
Reserve for warranty expenses 92,000 147,000
Reserve for sales returns, net 21,000 24,000
Federal minimum tax credit
carryforwards 74,000 14,000
Research and development tax
credit carryforwards 622,000 476,000
---------------------------
$ 927,000 $ 874,000
===========================
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. INCOME TAXES (CONTINUED)
At December 31, 1997, the Company had state net operating loss
carryforwards of approximately $824,000, which can be utilized against
future taxable income and expire in various years through 2009.
At December 31, 1997, the Company had research and development tax
credit carryforwards of approximately $622,000, which can be utilized
against future federal income tax and expire in various years through
2017.
The components of income taxes (benefit) for the years ended December
31, 1997 and 1996 are as follows:
1997 1996
FEDERAL
Current $ 175,423 $ -
Deferred (102,000) (699,000)
------------------------------
73,423 (699,000)
------------------------------
STATE AND OTHER
Current 7,000 82,000
Deferred 49,000 (168,000)
------------------------------
56,000 (86,000)
------------------------------
$ 129,423 $ (785,000)
==============================
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. INCOME TAXES (CONTINUED)
A reconciliation of income tax expense to the federal statutory rate is
as follows for the years ended December 31:
1997 1996
Federal statutory rate 34.0 % 34.0 %
Foreign sales corporation exclusion (2.7)
Loss of foreign subsidiary 9.0
State income tax 0.7 2.0
Change in valuation allowance (66.7)
Permanent differences and other 3.4 1.8
Utilization of research and
development credit (24.4)
----------------------------
Effective income tax rate 20.0 % (28.9)%
============================
9. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under leases which expire through
2000.
Aggregate future minimum annual rental payments are as follows:
YEAR ENDING DECEMBER 31, 1998 1999 2000
Minimum rentals $ 674,658 $ 482,062 $ 51,952
Less: sublease payments (84,000) (84,000)
--------------------------------------
Net rental payments $ 590,658 $ 398,062 $ 51,952
======================================
Rent expense for the years ended December 31, 1997 and 1996 was
approximately $800,000 and $364,000, respectively.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. PREFERRED STOCK
On January 1, 1996, the holder of the preferred stock converted all
264,000 shares of the Company's preferred stock into 379,437 shares of
the Company's common stock.
11. COMMON STOCK
In 1996, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of common stock to 15,000,000.
During 1996, the Company issued 2,000 shares of common stock as
compensation to the Chief Operating Officer of the Company and charged
operations for $30,000.
During 1997 and 1996, stock options to purchase 200,298 and 240,353
shares, respectively, of the Company's common stock were exercised with
proceeds to the Company of approximately $1,156,000 and $1,198,000,
respectively. In addition during 1997 and 1996, warrants to purchase
7,007 and 662,643 shares of the Company's common stock were exercised
with net proceeds to the Company of approximately $31,000 and
$4,153,000, respectively.
12. STOCK OPTIONS AND WARRANTS
The Company has established three employee stock option plans, the
Stratasys, Inc. Employee Stock Option Plan #1 (Plan 1), Stratasys, Inc.
1994 Stock Plan (Plan 2) and Stratasys, Inc. 1994 -2 Stock Plan (Plan
3). The three plans provide for the granting of options to qualified
employees of the Company, independent contractors, consultants and
other persons to purchase 1,300,000 shares of common stock.
All the options under Plan 1 have been granted and the plan expires
April 19, 2001. Under Plan 2, 177,042 options have been granted. Since
the adoption of Plan 3, options to purchase an aggregate of 1,019,428
shares of common stock have been granted. All options under the above
plans are granted at a price not less than the fair market value of the
Company's common stock at dates of grant and are exercisable over five
years.
During 1997, the Company granted non-qualified stock options to
purchase 206,897 shares of common stock at an exercise price of $13.50
per share. These options are immediately exercisable and expire one
year from the date of issue. The option price per share for all grants
were not less then the market price of the Company's common stock at
the date of grant.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
12. STOCK OPTIONS AND WARRANTS (CONTINUED)
The following summarizes the information relating to outstanding stock
options and the activity during 1997 and 1996:
WEIGHTED
NUMBER AVERAGE
OF PER SHARE EXERCISE
SHARES OPTION PRICE PRICE
Shares under option
at January 1, 1996 733,902 $1.59 - $20.69 $ 11.39
Granted in 1996 314,414 15.56 - 23.13 17.53
Exercised in 1996 (240,353) 1.59 - 6.00 5.27
Forfeited in 1996 (75,064) 5.25 - 23.13 18.25
----------------------------------------
Shares under option
at December 31, 1996 732,899 1.59 - 21.44 10.15
Granted in 1997 845,471 10.94 - 23.75 14.97
Exercised in 1997 (200,298) 1.59 - 16.63 9.18
Forfeited in 1997 (300,274) 5.38 - 16.62 12.73
----------------------------------------
Shares under option
at December 31, 1997 1,077,798 $1.59 - $23.75 $ 14.09
========================================
Shares exercisable at
December 31, 1997 516,286 $1.59 - $23.75 $ 11.89
========================================
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
12. STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company, as part of sales of common stock and other agreements, has
issued warrants to purchase the Company's common stock. The following
summarizes the information relating to outstanding warrants and the
activity during 1997 and 1996:
WEIGHTED
NUMBER AVERAGE
OF PER SHARE EXERCISE
SHARES WARRANT PRICE PRICE
Shares under warrants
at January 1, 1996 899,048 $ 3.00 - $21.00 $ 8.86
Granted in 1996 13,000 18.50 - 18.50 18.50
Exercised in 1996 (661,643) 3.00 - 18.00 6.36
---------------------------------------
Shares under warrants
at December 31, 1996 250,405 5.80 - 21.00 15.95
Granted in 1997 710,090 13.50 - 14.50 14.08
Exercised in 1997 (7,007) 5.80 5.80
---------------------------------------
Shares under warrants
at December 31, 1997 953,488 $ 5.80 - $21.00 $ 14.60
=======================================
Shares exercisable at
December 31, 1997 953,488 $ 5.80 - $21.00 $ 14.60
=======================================
The warrants outstanding at December 31, 1997 expire between July 1998
and March 2001.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
" Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the Company's three stock
option plans and stock purchase warrants.
<PAGE>
STRATASYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
12. STOCK OPTIONS AND WARRANTS (CONTINUED)
Had compensation cost for the Company's three stock option plans and
stock purchase warrants been determined based on the fair value at the
grant date of awards in 1997 and 1996 consistent with the provisions of
SFAS 123, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
1997 1996
Net Income - as reported $ 514,833 $ 3,503,024
Net income (loss) - pro forma (271,113) 2,865,041
Diluted earnings per share - as reported .09 .63
Diluted earnings (loss) per share -
pro forma (.05) .51
13. EXPORT SALES
Export sales were as follows for the years ended December 31:
1997 1996
Europe $ 5,735,000 $ 5,916,000
Asia 6,057,000 2,180,000
Other 847,000 769,000
----------------------------
$ 12,639,000 $ 8,865,000
============================
14. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
<S> <C> <C> <C> <C>
1997
Net sales $ 5,208,527 $ 6,965,334 $ 7,345,471 $ 10,117,038
Gross profit 3,445,164 4,651,832 4,559,308 7,283,601
Net income (loss) (404,414) (82,884) 50,763 951,368
Income (loss) per
common share:
Basic (.07) (.01) .01 .16
Dilutive (.07) (.01) .01 .16
1996
Net sales $ 2,752,465 $ 5,316,879 $ 4,402,436 $ 10,448,038
Gross profit 1,844,062 3,446,578 2,905,016 6,835,646
Net income 10,163 572,911 63,847 2,856,103
Income per common
share:
Basic - .11 .01 .52
Dilutive - .10 .01 .52
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 26, 1998
STRATASYS, INC.
By: /s/ S. Scott Crump
-------------------------
S. Scott Crump, President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ S. Scott Crump Chairman of the Board of Directors, March 26, 1998
- ------------------------------ President, Chief Executive Officer,
S. Scott Crump Treasurer, (Principal Executive Officer)
/s/ Thomas W. Stenoien Chief Financial Officer March 26, 1998
------------------------- (Principal Financial Officer)
Thomas W. Stenoien
/s/ Ralph E. Crump Director March 26, 1998
- -----------------------------
Ralph E. Crump
/s/ Clifford H. Schwieter Director March 26, 1998
- ---------------------------
Clifford H. Schwieter
/s/ Arnold J. Wasserman Director March 26, 1998
- -------------------------
Arnold J. Wasserman
/s/ Gregory L. Wilson Director March 26, 1998
- ---------------------------
Gregory L. Wilson
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of the Company. (3)
3.2 Amendment to Certificate of Incorporation of the Company. (6)
3.3 By-Laws of the Company. (1)
4.1 Agent's Warrant issued to R.J. Steichen & Company dated November
12, 1993. (1)
4.2 Agent's Warrant issued to R.J. Steichen & Company dated December
13, 1993. (1)
4.3 Form of Common Stock purchase warrants issued by the Company
dated as of November 12, 1993 and December 13, 1993. (1)
4.4 Form of Common Stock purchase warrant issued by the Company in
its August 1995 private placement (2).
4.5 Form of 3-year Common Stock purchase warrants issued by the
Company in its November 1995 offering under Regulation D and
Regulation S. (5)
4.6 Form of 3-month Common Stock purchase warrants issued by the
Company in its November 1995 offering under Regulation D and
Regulation S. (5)
4.7 Form of Placement Agent's warrant issued by the Company in its
November 1995 offering under Regulation D and Regulation S. (5)
4.8 Form of warrant issued to Sunrise Securities Corp. by the
Company in connection with its November 1995 offering under
Regulation D and Regulation S. (5)
4.9 Form of substitute warrant to purchase an aggregate of 413,794
shares of Common Stock at $14.50 per share expiring on October
31, 2000.
4.10 Form of substitute warrant to purchase an aggregate of 296,296
shares of Common Stock at $13.50 per share expiring on October
31, 2000.
<PAGE>
10.1 Non-Competition Agreement between the Company and S. Scott
Crump, dated October 15, 1990. (1)
10.2 Non-Competition Agreement between the Company and S. Lisa Crump,
dated October 15, 1990. (1)
10.3 Employee Confidentiality Agreement between the Company and S.
Scott Crump, dated October 15, 1990. (1)
10.4 Employee Confidentiality Agreement between the Company and Lisa
Crump, dated October 15, 1990. (1)
10.5 Stratasys, Inc. Employee Stock Option Plan #1. (1)
10.6 Amended and Restated Stratasys, Inc. 1994 Stock Plan. (3)
10.7 Second Amended and Restated Stratasys, Inc. 1994-2 Stock Plan.
(8)
10.8 Asset Purchase Agreement between the Company and IBM dated
January 1, 1995. (4)
10.9 Equipment Lease Agreement between the Company and IBM dated
January 1, 1995. (4)
10.10 Assignment, dated October 23, 1989, from S. Scott Crump to the
Company with respect to a patent application for an apparatus
and method for creating three-dimensional objects. (7)
10.11 Assignment, dated June 5, 1992, from S. Scott Crump to the
Company with respect to a patent application for a modeling
apparatus for three dimensional objects. (7)
10.12 Assignment, dated June 1, 1994, from S. Scott Crump, James W.
Comb, William R. Priedeman, Jr., and Robert Zinniel to the
Company with respect to a patent application for a process and
apparatus of support removal for three-dimensional modeling. (7)
10.13 Lease between the Company and Richard A. Burke, dated October
14, 1996. (9)
<PAGE>
21.1 Subsidiaries of the Company. (5)
23.1 Consent of Rothstein, Kass & Company, P.C.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule with restated earnings per share in
accordance with FAS No. 128 for the year ending December 31,
1996 and the quarters ending March 31, June 30 and September 30,
1996.
27.3 Financial Data Schedule with restated earnings per share in
accordance with FAS No.128 for the quarters ending March 31,
June 30 and September 30, 1997.
(1) Incorporated by reference from the Company's Registration
Statement on Form SB-2 (File No. 33-83638-C) filed September 2,
1994.
(2) Incorporated by reference from the Company's Form 8-K, dated
August 24, 1995.
(3) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1994.
(4) Incorporated by reference from the Company's Form 8-K, Amendment
No.2, dated January 1, 1995.
(5) Incorporated by reference from the Company's Registration
Statement on Form SB-2 (File No. 33-99108) filed November 8,
1995.
(6) Incorporated by reference from the Company's Form 10-QSB for the
nine months ended September 30, 1995.
(7) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form SB-2 (File No. 33-99108) filed
December 20, 1995.
(8) Incorporated by reference from the Company's definitive Proxy
Statement on Schedule 14A with respect to the Company's 1997
Annual Meeting of Stockholders.
(9) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1996.
EXHIBIT 4.9
Warrant No. W-AR1/00-
Warrant to Purchase ________ Shares
STOCK PURCHASE WARRANT
To Purchase Common Stock ($.01 par value)
of
STRATASYS, INC.
(a Delaware corporation)
Expires October 31, 2000
<PAGE>
Warrant No. W-AR1/00-
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON
UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON October 31, 2000
STRATASYS, INC.
Warrant to Purchase Shares of Common Stock
_______Shares
THIS CERTIFIES that, for good and valuable consideration received,
_________________ (the "Holder") is entitled to subscribe for and purchase from
Stratasys, Inc., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time or from time to time until 5:00 P.M.
New York City time on October 31, 2000 (the "Expiration Date"), all or any
portion of________ shares of the Company's Common Stock, par value $.01 per
share, subject to adjustment as provided herein (the "Warrant Shares"), at a
price (the "Exercise Price") hereinafter defined and also subject to adjustment
as provided herein. This Warrant shall not be redeemable by the Company. The
term "Common Stock" as used herein shall mean the Company's Common Stock, par
value $.01 per share. This Warrant may not be sold, transferred, assigned or
hypothecated at any time, except as permitted by applicable law and the terms of
this Warrant, and the term "Holder" as used herein shall include any transferee
to whom this Warrant has been transferred.
1. Method of Exercise. This Warrant may be exercised at any time
prior to the Expiration Date, as to the whole or any lesser number of Warrant
Shares, by the surrender of this Warrant (with the election at the end hereof
duly executed) to the Company at its office at 14950 Martin Drive, Eden Prairie,
Minnesota 55344-2020 or at such other place as may be designated in writing by
the Company, together with a certified or bank cashier's check payable to the
order of the Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares for which this Warrant is being exercised and a written
opinion of counsel, satisfactory to the Company's counsel, to the effect that
the Warrant and the Warrant Shares have been registered under the Act or are
exempt from registration thereunder.
<PAGE>
2. Issuance of Certificates. Upon each exercise of the Holder's
rights to purchase Warrant Shares, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Recording of Transfer. Any warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company, at
any time on or after November 13, 1997, upon delivery thereof duly endorsed by
the Holder or by his or its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new warrant or warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder hereof, for another
warrant, or other warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause this Warrant to be transferred on its books to any person
if, in the written opinion of counsel to the Company, such transfer does not
comply with the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations thereunder.
4. Reservation of Common Stock. The Company currently has and shall
at all times reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the
Warrants, such number of shares of Common Stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
payment therefor, shall be validly issued, fully paid, nonassessable and free of
preemptive rights.
5. Exercise Price; Exercise Price Adjustments.
(a) The Exercise Price shall be $14.50.
(b) Subject to the provisions of this Section 5, the Exercise Price
in effect from time to time shall be subject to adjustment, as follows:
<PAGE>
(i) In case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, but including any such
reclassification in connection with the consolidation or merger of the Company
with or into another corporation (other than a merger in which the Company is
the continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants)), then, in each case, the Exercise Price
in effect, and the number of shares of Common Stock issuable upon exercise of
the Warrants outstanding, at the time of the record date for such dividend or at
the effective date of such subdivision, combination or reclassification, shall
be proportionately adjusted so that the holders of the Warrants after such time
shall be entitled to receive the aggregate number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such holders
would have owned upon such exercise and immediately thereafter been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable hereunder and the exercise price thereof after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(iii) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of this Warrant. If any fraction of a share would be issuable upon the exercise
of this Warrant (or specified portions thereof), the Company may issue a whole
share in lieu of such fraction or the Company may purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price of such
share of Common Stock on the date of exercise of this Warrant.
(iv) The Current Market Price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or a similar organization
if NASDAQ is no longer reporting such information. If on any such date the
Common Stock is not listed or admitted to trading on any national securities
exchange and is not quoted by NASDAQ or any similar organization, the fair value
of a share of Common Stock on such date, as determined in good faith by the
Board of Directors of the Company, whose determination shall be conclusive
absent manifest error, shall be used.
(v) No adjustment in the Exercise Price shall be required if
such adjustment is less than $0.05; provided, however, that any adjustments
which but for this paragraph 5(b)(v) would be required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent.
(vi) Upon each adjustment of the Exercise Price as a result of
the calculations made in this Section 5, the Warrants shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of
<PAGE>
shares of Common Stock (calculated to the nearest hundredth) obtained by
dividing (i) the product obtained by multiplying the (A) number of shares of
Common Stock purchasable upon exercise of the Warrants prior to adjustment of
the number of shares of Common Stock by (B) the Exercise Price in effect prior
to adjustment of the Exercise Price, by (ii) the Exercise Price in effect after
such adjustment of the Exercise Price.
6. Reorganizations.
(a) In case of any consolidation or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the kind and amount of shares of stock or
other securities, cash or other property which would otherwise have been
deliverable to a holder of the number of shares of Common Stock upon the
exercise of this Warrant upon such Reorganization if this Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by and set
forth in a supplemental agreement between the Company, or any successor thereto,
and the Holder and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash or
other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such reclassification, change, consolidation
or merger by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision shall be made
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the
following occur:
<PAGE>
(a) The Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any reclassification
or change of outstanding shares of Common Stock or any consolidation, merger,
sale, lease or conveyance of property, described in Section 6; or
(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially all
of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined, (ii)
the date on which any such offer to holders of Common Stock is made, or (iii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution or winding-up is expected to become effective and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange their shares for securities or other property, if
any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up.
8. Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to the
Holder for any tax (other than income tax) or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
9. Legend. Unless registered under the Securities Act of 1933, as
amended, the Warrant Shares issued upon exercise of the Warrant shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR
IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY
<PAGE>
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY
APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
10. Replacement of Warrants. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
11. No Rights as Stockholder. The Holder of any Warrant shall not
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
12. Registration Rights. The Holder is entitled to the registration
rights set forth in Article VI of the Subscription Agreement to which this
Warrant is attached, which Article VI is incorporated herein by reference.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 1 of this
Warrant or to such other address as the Company may designate by notice to the
Holder.
14. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
15. Headings. The Article and Section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
16. Governing Law. This Warrant shall be construed in accordance
with the laws of the State of New York applicable to contracts made and
performed within such State, without regard to principles of conflicts of law.
17. Modification of Agreement. This Warrant shall not be modified,
supplemented or amended in any respect unless such modification, supplement or
amendment is in writing and signed by the Company and the Holder of this Warrant
and Holders of any portion of the Warrant subsequently assigned or transferred
in accordance with the terms of this Warrant.
18. Consent to Jurisdiction. The Company and the Holder irrevocably
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Warrant, any document or instrument delivered
pursuant to, in
<PAGE>
connection with or simultaneously with this Warrant, or a breach of this Warrant
or any such document or instrument. In any such action or proceeding, the
Company waives personal service of any summons, complaint or other process and
agrees that service thereof may be made in accordance with Section 12 hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the date set forth below.
Dated: March 20, 1998
STRATASYS, INC.
By: /s/ S. Scott Crump
S. Scott Crump
President
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder desires to
transfer the attached Warrant. Pursuant to the terms of the attached Warrant,
such transfer may not be effected prior to __________________).
FOR VALUE RECEIVED, _______________________ hereby sells, assigns,
and transfers unto _________________, having an address at ____________________
_______________________, the attached Warrant (having an Exercise Price defined
therein) to the extent of the right to purchase ____________ shares of Common
Stock, $.01 par value per share, of Stratasys, Inc. (the "Company"), together
with all right, title, and interest therein, and does hereby irrevocably
constitute and appoint _________________ as attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated: _______________, 199__
------------------------------------
Print name of holder of Warrant
By:
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the
name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
To: Stratasys, Inc.
14950 Martin Drive
Eden Prairie, Minnesota 55344-2020
The undersigned hereby exercises its right to purchase _________
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_____________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
By signing below, the undersigned certifies that the undersigned has
obtained an opinion of counsel, satisfactory to the counsel of Stratasys, Inc.,
to the effect that the Warrant and the Warrant Shares have been registered under
the Act or are exempt from registration thereunder.
Dated:__________________ Name:
(Print)
(Signature)
(Signature must conform to the name
of the Warrant Holder specified on
the face of the Warrant)
Address:
EXHIBIT 4.10
Warrant No. W-AR2/00-
Warrant to Purchase __________ Shares
STOCK PURCHASE WARRANT
To Purchase Common Stock ($.01 par value)
of
STRATASYS, INC.
(a Delaware corporation)
Expires October 31, 2000
<PAGE>
Warrant No. W-AR2/00-
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON
UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON October 31, 2000
STRATASYS, INC.
Warrant to Purchase Shares of Common Stock
______ Shares
THIS CERTIFIES that, for good and valuable consideration received,
___________________ (the "Holder") is entitled to subscribe for and purchase
from Stratasys, Inc., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time or from time to time until 5:00 P.M.
New York City time on October 31, 2000 (the "Expiration Date"), all or any
portion of _______shares of the Company's Common Stock, par value $.01 per
share, subject to adjustment as provided herein (the "Warrant Shares"), at a
price (the "Exercise Price") hereinafter defined and also subject to adjustment
as provided herein. This Warrant shall not be redeemable by the Company. The
term "Common Stock" as used herein shall mean the Company's Common Stock, par
value $.01 per share. This Warrant may not be sold, transferred, assigned or
hypothecated at any time, except as permitted by applicable law and the terms of
this Warrant, and the term "Holder" as used herein shall include any transferee
to whom this Warrant has been transferred.
1. Method of Exercise. This Warrant may be exercised at any time
prior to the Expiration Date, as to the whole or any lesser number of Warrant
Shares, by the surrender of this Warrant (with the election at the end hereof
duly executed) to the Company at its office at 14950 Martin Drive, Eden Prairie,
Minnesota 55344-2020 or at such other place as may be designated in writing by
the Company, together with a certified or bank cashier's check payable to the
order of the Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares for which this Warrant is being exercised and a written
opinion of counsel, satisfactory to the Company's counsel, to the effect that
the Warrant and the Warrant Shares have been registered under the Act or are
exempt from registration thereunder.
<PAGE>
2. Issuance of Certificates. Upon each exercise of the Holder's
rights to purchase Warrant Shares, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Recording of Transfer. Any warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company, at
any time on or after November 20, 1997, upon delivery thereof duly endorsed by
the Holder or by his or its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new warrant or warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder hereof, for another
warrant, or other warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause this Warrant to be transferred on its books to any person
if, in the written opinion of counsel to the Company, such transfer does not
comply with the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations thereunder.
4. Reservation of Common Stock. The Company currently has and shall
at all times reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the
Warrants, such number of shares of Common Stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
payment therefor, shall be validly issued, fully paid, nonassessable and free of
preemptive rights.
5. Exercise Price; Exercise Price Adjustments.
(a) The Exercise Price shall be $13.50.
(b) Subject to the provisions of this Section 5, the Exercise Price
in effect from time to time shall be subject to adjustment, as follows:
<PAGE>
(i) In case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, but including any such
reclassification in connection with the consolidation or merger of the Company
with or into another corporation (other than a merger in which the Company is
the continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants)), then, in each case, the Exercise Price
in effect, and the number of shares of Common Stock issuable upon exercise of
the Warrants outstanding, at the time of the record date for such dividend or at
the effective date of such subdivision, combination or reclassification, shall
be proportionately adjusted so that the holders of the Warrants after such time
shall be entitled to receive the aggregate number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such holders
would have owned upon such exercise and immediately thereafter been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable hereunder and the exercise price thereof after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(iii) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of this Warrant. If any fraction of a share would be issuable upon the exercise
of this Warrant (or specified portions thereof), the Company may issue a whole
share in lieu of such fraction or the Company may purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price of such
share of Common Stock on the date of exercise of this Warrant.
(iv) The Current Market Price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or a similar organization
if NASDAQ is no longer reporting such information. If on any such date the
Common Stock is not listed or admitted to trading on any national securities
exchange and is not quoted by NASDAQ or any similar organization, the fair value
of a share of Common Stock on such date, as determined in good faith by the
Board of Directors of the Company, whose determination shall be conclusive
absent manifest error, shall be used.
(v) No adjustment in the Exercise Price shall be required if
such adjustment is less than $0.05; provided, however, that any adjustments
which but for this paragraph 5(b)(v) would be required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent.
(vi) Upon each adjustment of the Exercise Price as a result of
the calculations made in this Section 5, the Warrants shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of
<PAGE>
shares of Common Stock (calculated to the nearest hundredth) obtained by
dividing (i) the product obtained by multiplying the (A) number of shares of
Common Stock purchasable upon exercise of the Warrants prior to adjustment of
the number of shares of Common Stock by (B) the Exercise Price in effect prior
to adjustment of the Exercise Price, by (ii) the Exercise Price in effect after
such adjustment of the Exercise Price.
6. Reorganizations.
(a) In case of any consolidation or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the kind and amount of shares of stock or
other securities, cash or other property which would otherwise have been
deliverable to a holder of the number of shares of Common Stock upon the
exercise of this Warrant upon such Reorganization if this Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by and set
forth in a supplemental agreement between the Company, or any successor thereto,
and the Holder and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash or
other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such reclassification, change, consolidation
or merger by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision shall be made
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the
following occur:
<PAGE>
(a) The Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any reclassification
or change of outstanding shares of Common Stock or any consolidation, merger,
sale, lease or conveyance of property, described in Section 6; or
(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially all
of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined, (ii)
the date on which any such offer to holders of Common Stock is made, or (iii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution or winding-up is expected to become effective and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange their shares for securities or other property, if
any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up.
8. Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to the
Holder for any tax (other than income tax) or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
9. Legend. Unless registered under the Securities Act of 1933, as
amended, the Warrant Shares issued upon exercise of the Warrant shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR
IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY
<PAGE>
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY
APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
10. Replacement of Warrants. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
11. No Rights as Stockholder. The Holder of any Warrant shall not
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
12. Registration Rights. The Holder is entitled to the registration
rights set forth in Article VI of the Subscription Agreement to which this
Warrant is attached, which Article VI is incorporated herein by reference.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 1 of this
Warrant or to such other address as the Company may designate by notice to the
Holder.
14. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
15. Headings. The Article and Section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
16. Governing Law. This Warrant shall be construed in accordance
with the laws of the State of New York applicable to contracts made and
performed within such State, without regard to principles of conflicts of law.
17. Modification of Agreement. This Warrant shall not be modified,
supplemented or amended in any respect unless such modification, supplement or
amendment is in writing and signed by the Company and the Holder of this Warrant
and Holders of any portion of the Warrant subsequently assigned or transferred
in accordance with the terms of this Warrant.
18. Consent to Jurisdiction. The Company and the Holder irrevocably
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Warrant, any document
<PAGE>
or instrument delivered pursuant to, in connection with or simultaneously with
this Warrant, or a breach of this Warrant or any such document or instrument. In
any such action or proceeding, the Company waives personal service of any
summons, complaint or other process and agrees that service thereof may be made
in accordance with Section 12 hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the date set forth below.
Dated: March 20, 1998
STRATASYS, INC.
By: /s/ S. Scott Crump
S. Scott Crump
President
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder desires to
transfer the attached Warrant. Pursuant to the terms of the attached Warrant,
such transfer may not be effected prior to __________________).
FOR VALUE RECEIVED, _______________________ hereby sells, assigns,
and transfers unto _________________, having an address at _____________________
_______________________, the attached Warrant (having an Exercise Price defined
therein) to the extent of the right to purchase ____________ shares of Common
Stock, $.01 par value per share, of Stratasys, Inc. (the "Company"), together
with all right, title, and interest therein, and does hereby irrevocably
constitute and appoint _________________ as attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated: _______________, 199__
-------------------------------------
Print name of holder of Warrant
By:
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the
name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
To: Stratasys, Inc.
14950 Martin Drive
Eden Prairie, Minnesota 55344-2020
The undersigned hereby exercises its right to purchase _________
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_____________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
By signing below, the undersigned certifies that the undersigned has
obtained an opinion of counsel, satisfactory to the counsel of Stratasys, Inc.,
to the effect that the Warrant and the Warrant Shares have been registered under
the Act or are exempt from registration thereunder.
Dated:__________________ Name:
(Print)
(Signature)
(Signature must conform to the name
of the Warrant Holder specified on
the face of the Warrant)
Address:
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Stratasys, Inc. on Form S-8 (File No. 33-93362) of our report dated
February 3, 1998, on our audits of the consolidated financial statements of
Stratasys, Inc. as of December 31, 1997 and 1996 and for the years ended
December 31, 1997 and 1996, which report is included in this Annual Report on
Form 10-KSB.
/s/ Rothstein, Kass & Company, P.C.
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
March 27, 1998
<TABLE> <S> <C>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,116,232
<SECURITIES> 4,441,380
<RECEIVABLES> 12,180,515
<ALLOWANCES> (514,461)
<INVENTORY> 5,492,130
<CURRENT-ASSETS> 31,993,494
<PP&E> 5,145,967
<DEPRECIATION> (1,700,702)
<TOTAL-ASSETS> 38,984,430
<CURRENT-LIABILITIES> 5,636,749
<BONDS> 0
0
0
<COMMON> 60,797
<OTHER-SE> 33,026,570
<TOTAL-LIABILITY-AND-EQUITY> 38,984,430
<SALES> 29,636,370
<TOTAL-REVENUES> 29,636,370
<CGS> 9,696,465
<TOTAL-COSTS> 19,730,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,520
<INCOME-PRETAX> 644,256
<INCOME-TAX> 129,423
<INCOME-CONTINUING> 514,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 514,833
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
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<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS 6-MOS 9-MOS
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<SECURITIES> 6,309,048 6,572,907 6,399,381 6,409,550 6,555,828
<RECEIVABLES> 2,899,010 11,077,155 1,984,347 4,986,510 4,832,053
<ALLOWANCES> (130,000) (470,000) (130,000) (130,000) (130,000
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<INVENTORY> 907,319 2,648,990 1,773,382 2,240,368 3,126,903
<CURRENT-ASSETS> 14,830,856 25,083,121 16,242,328 17,502,201 20,496,561
<PP&E> 1,509,081 3,021,880 1,801,678 1,989,152 2,575,559
<DEPRECIATION> (396,753) (837,715) (474,007) (578,110) (723,187
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<TOTAL-ASSETS> 19,895,268 31,462,719 21,780,946 23,238,207 26,618,759
<CURRENT-LIABILITIES> 2,190,536 4,891,014 2,312,754 3,036,023 3,061,934
<BONDS> 0 0 0 0 0
0 0 0 0 0
2,640 0 0 0 0
<COMMON> 42,339 55,173 48,510 52,884 54,961
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<SALES> 10,275,186 22,919,818 2,752,465 8,069,344 12,471,780
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<CGS> 3,906,841 7,888,516 908,403 2,778,704 4,276,124
<TOTAL-COSTS> 6,227,267 12,859,558 1,969,472 4,954,258 7,949,008
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 50,404 39,236 9,923 18,692 28,780
<INCOME-PRETAX> 394,024 2,718,024 10,163 583,074 646,921
<INCOME-TAX> 23,000 (785,000) 0 0 0
<INCOME-CONTINUING> 371,024 3,503,024 10,163 583,074 646,921
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 371,024 3,503,024 10,163 583,074 646,921
<EPS-PRIMARY> 0.10 0.67 0.00 0.11 0.12
<EPS-DILUTED> 0.09 0.63 0.00 0.1 0.11
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<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 3,091,359 2,396,299 2,540,350
<SECURITIES> 7,347,752 5,701,209 4,324,077
<RECEIVABLES> 8,901,942 9,562,694 11,051,612
<ALLOWANCES> (428,400) (366,675) (473,364)
<INVENTORY> 4,661,494 6,193,739 5,975,709
<CURRENT-ASSETS> 25,049,786 25,248,381 24,896,672
<PP&E> 3,667,068 4,231,834 4,931,679
<DEPRECIATION> (993,615) (1,273,448) (1,491,374)
<TOTAL-ASSETS> 31,741,258 32,106,118 32,130,391
<CURRENT-LIABILITIES> 4,901,731 4,874,492 4,753,813
<BONDS> 0 0 0
0 0 0
0 0 0
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<SALES> 5,208,527 12,173,861 19,519,332
<TOTAL-REVENUES> 5,208,527 12,173,861 19,519,332
<CGS> 1,763,363 4,076,865 6,863,028
<TOTAL-COSTS> 4,135,028 9,031,908 13,658,086
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<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 10,275 22,523 40,568
<INCOME-PRETAX> (611,414) (749,683) (671,593)
<INCOME-TAX> (207,000) (262,385) (235,058)
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<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (404,414) (487,298) (436,535)
<EPS-PRIMARY> (0.07) (0.08) (0.07)
<EPS-DILUTED> (0.07) (0.08) (0.07)
</TABLE>
