Exhibit 99.1
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2022
(UNAUDITED)
INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
(UNAUDITED)
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
| Consolidated Statements of Cash Flows | | | | | | | | | |
| in thousands | | | Six Months Ended June 30, |
| | | | 2022 | | | | 2021 | |
| Cash flows from operating activities | | | | | | | | | |
| Net loss | | | $ | (45,333 | ) | | $ | (39,070 | ) |
| | | | | | | | | | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | | |
| Impairment of other long-lived assets | | | | 3,865 | | | | - | |
| Depreciation and amortization | | | | 29,924 | | | | 27,695 | |
| Stock-based compensation | | | | 17,364 | | | | 15,182 | |
| Foreign currency transaction loss | | | | 10,318 | | | | 3,311 | |
| Share in loss of associated companies | | | | 174 | | | | 2,549 | |
| Revaluation of investments | | | | 2,316 | | | | (1,469 | ) |
| Other non-cash items, net | | | | 168 | | | | 1,152 | |
| | | | | | | | | | |
| Change in cash attributable to changes in operating assets and liabilities: | | | | | | | | | |
| Accounts receivable, net | | | | (11,058 | ) | | | (4,272 | ) |
| Inventories | | | | (39,162 | ) | | | 5,772 | |
| Other current assets and prepaid expenses | | | | 5,320 | | | | (5,066 | ) |
| Other non-current assets | | | | 382 | | | | 2,561 | |
| Accounts payable | | | | 10,217 | | | | 24,019 | |
| Other current liabilities | | | | (20,650 | ) | | | 4,804 | |
| Deferred revenues | | | | 4,540 | | | | 514 | |
| Deferred income taxes, net and uncertain tax positions | | | | (1,674 | ) | | | (5,574 | ) |
| Other non-current liabilities | | | | (5,620 | ) | | | (3,722 | ) |
| Net cash provided by (used in) operating activities | | | | (38,909 | ) | | | 28,386 | |
| | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | |
| Cash paid for acquisitions, net of cash acquired | | | | - | | | | (6,669 | ) |
| Purchase of property and equipment | | | | (7,526 | ) | | | (11,358 | ) |
| Investments in short-term bank deposits | | | | (195,429 | ) | | | (179,000 | ) |
| Proceeds from short-term bank deposits | | | | 272,000 | | | | 27,000 | |
| Purchase of intangible assets | | | | (965 | ) | | | (564 | ) |
| Other investing activities | | | | 122 | | | | (85 | ) |
| Investments in unconsolidated entities | | | | (5,030 | ) | | | (7,000 | ) |
| Net cash provided by (used in) investing activities | | | | 63,172 | | | | (177,676 | ) |
| | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | |
| Proceeds from public offering, net of issuance costs | | | | - | | | | 218,875 | |
| Proceeds from exercise of stock options | | | | 247 | | | | 3,516 | |
| Payment of contingent consideration | | | | (1,386 | ) | | | - | |
| Other financing activities | | | | 275 | | | | 405 | |
| Net cash provided by (used in) financing activities | | | | (864 | ) | | | 222,796 | |
| | | | | | | | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | | | (7,413 | ) | | | (1,869 | ) |
| | | | | | | | | | |
| Net change in cash, cash equivalents and restricted cash | | | | 15,986 | | | | 71,637 | |
| Cash, cash equivalents and restricted cash, beginning of period | | | | 243,293 | | | | 272,216 | |
| Cash, cash equivalents and restricted cash, end of period | | | $ | 259,279 | | | $ | 343,853 | |
| | | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | | | |
| Transfer of inventory to fixed assets | | | | 1,150 | | | | 2,024 | |
| Transfer of fixed assets to inventory | | | | 123 | | | | 252 | |
| Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: | | | | | | | | | |
| Cash and cash equivalents | | | | 255,886 | | | | 343,733 | |
| Restricted cash included in other current assets | | | | 160 | | | | 120 | |
| Cash balances classified as Held for sale | | | | 3,233 | | | | - | |
| Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | | | $ | 259,279 | | | $ | 343,853 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Business Description and Basis of Presentation
Stratasys Ltd. (collectively with its subsidiaries, the “Company” or “Stratasys”) is a global leader in connected, polymer-based 3D printing solutions, across the entire manufacturing value chain. The Company leverages its competitive advantages, which include a broad set of best-in-class 3D printing platforms, software, a materials and technology partner ecosystem, innovative leadership, and global GTM infrastructure, in order to position itself to capture share in a significant and growing global marketplace, with a focus on manufacturing. The Company’s approximately 1,700 granted and pending additive technology patents to date have been used to create models, prototypes, manufacturing tools, and production parts for a multitude of industries including aerospace, automotive, transportation, healthcare, consumer products, dental, medical, and education. Stratasys’ products and comprehensive solutions improve product quality, development time, cost, and time-to-market. The Company’s 3D ecosystem of solutions and expertise includes 3D printers, materials, software, expert services, and on-demand parts production.
The condensed consolidated interim financial information herein is unaudited; however, such information reflects all adjustments (consisting of normal, recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. The condensed consolidated interim financial statements include the accounts of Stratasys Ltd. and its subsidiaries. All intercompany accounts and transactions, including profits from intercompany sales not yet realized outside the Company, have been eliminated in consolidation.
The Company’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), which require the Company to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in its financial statements. Although the Company’s current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from the Company’s expectations, which could materially affect its results of operations and financial position.
In particular, a number of estimates have been and will continue to be affected by the COVID-19 pandemic and/or by macroeconomic conditions that have been triggered as a result of the pandemic or steps taken to counter it. The global economic environment that has set in after the most severe period of the COVID-19 pandemic has passed - assuming that it has passed - remains uncertain, rapidly changing and difficult to predict. The magnitude and duration of, as well as the consequences of, global macroeconomic trends triggered, in large part, by the recovery from the pandemic, such as inflationary pressures and supply chain problems, are currently difficult to predict. As a result, the accounting estimates and assumptions underlying the Company’s financial statements may change over time. Such changes could have an additional impact on the Company’s long-lived asset and intangible asset valuation; inventory valuation; assessment of the annual effective tax rate; and the allowance for expected credit losses and bad debt.
The results of operations for the three and six months ended June 30, 2022 are not indicative of results that could be expected for the entire fiscal year. Certain financial information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The reader is referred to the audited consolidated financial statements and notes thereto for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2022 as part of the Company’s Annual Report on Form 20-F for such year.
Note 2. New Accounting Pronouncements
Accounting Pronouncements Adopted in 2022
In August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2022, with no material impact on its consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
In October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Certain Transactions
Investment in Xaar 3D Ltd. ("Xaar 3D")
During the fourth quarter of 2019, the Company entered into an agreement with Xaar plc (“Xaar”) to purchase additional shares of Xaar 3D that would increase its stake from 15 to 45 percent, with Xaar retaining the remaining 55 percent. Xaar and Stratasys had announced the formation of Xaar 3D Ltd in July 2018 for the purpose of developing Powder Bed Fusion (“PBF”) additive manufacturing solutions that Stratasys can bring to the market. In addition, the agreement included an option for Stratasys to acquire the remaining shares of Xaar 3D.
Following the additional investment, the Company considered the FASB guidance in accordance with ASC Topic 810 “Consolidation” regarding the propriety of implementing consolidation, for both the variable interest entity and voting model, or equity method accounting. The Company concluded that it should continue accounting for the investment according to the equity method, as it had retained the ability to exercise significant influence but did not control Xaar 3D. For its additional interest in Xaar 3D, the Company paid approximately $15.7 million.
The investment was presented under other non-current assets in the Company’s consolidated balance sheets.
On November 1, 2021 (the “Xaar 3D transaction date”) , the Company acquired the remaining 55% share of Xaar 3D, for an aggregate purchase price of $29.3 million. The Company paid cash upon closing and it is obligated to make additional earn-out payments and payments of royalties on products and services sales for up to 15 years.
The Xaar 3D transaction is reflected in accordance with ASC Topic 805, “Business Combinations”, using the acquisition method of accounting, with the Company as the acquirer. The Company accounted for the acquisition of the remaining equity of Xaar 3D as a step acquisition, which required re-measurement of the Company’s previous ownership interest to fair value prior to completing purchase accounting. Using step acquisition accounting, the Company increased the value of its previously-held equity investment to its fair value of $23.8 million, which resulted in a gain of approximately $14.4 million, recorded in the consolidated statements of operations in the fourth quarter of 2021. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $0.6 million, which was reclassified from accumulated other comprehensive income (OCI). The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, as detailed below.
The following table summarizes the fair value of the consideration transferred to Xaar 3D’s stockholders for the Xaar 3D transaction:
In accordance with ASC Topic 805, the estimated contingent consideration as of the Xaar 3D transaction date was included in the purchase price. The total contingent payments could reach a maximum aggregate amount of up to $21 million. The estimated fair value of the contingent consideration is based on management’s assessment of whether, and at what level, the financial metrics will be achieved, and the present value factors associated with the timing of the payments. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. Changes in the fair value of contingent consideration will be recorded in operating expenses.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Xaar 3D transaction date. The estimated fair values are preliminary and based on the information that was available as of November 1, 2021. Thus, the measurements of fair value that are reflected are subject to changes, and such changes could be significant. The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:
RPS acquisition
On February 16, 2021 the Company acquired RP Support Limited (“RPS”), a provider of industrial stereolithography 3D printers and solutions. In exchange for 100% of the outstanding shares of RPS, the Company paid cash upon closing and is obligated to make additional payments (in cash), subject to performance-based criteria, via earn-out payments over two years.
Marketable equity investment
The Company recognized losses for the revaluation of an equity investment, in amounts of $1.3 million and $2.9 million in the three-month periods ended June 30, 2022 and 2021, respectively. A loss of $2.3 million and a gain of $0.7 million were recognized in the six-month periods ended June 30, 2022 and 2021, respectively.
The entity in which the Company invested became public during the first quarter of 2021 and accordingly the investment is treated as a marketable equity investment. Prior to the first quarter of 2021, the investment was treated as a non-marketable equity investment without readily determinable fair value.
MakerBot and Ultimaker transaction
On May 12, 2022, the Company announced the creation of a new company (“the combined company”) comprised of MakerBot and Ultimaker. Under the terms of the agreement, Stratasys will contribute MakerBot assets, invest $47 million and own 45.6% of the combined company, while NPM Capital will contribute Ultimaker assets, invest $15.4 million, and own 54.4% of the combined company. The transaction is expected to close within few months.
The Company will account for its investment, in the combined company according to the equity method in accordance with ASC Topic 323, as it has retained the ability to exercise significant influence but does not control the new entity.
In connection with this transaction, the Company expects to record a gain from deconsolidation of MakerBot representing the difference between the book value of MakerBot's net assets and the fair value allocated to such net assets in the transaction.
In accordance with ASC Topic 360, MakerBot’s assets and liabilities are classified as held for sale. The held for sale assets and liabilities are presented under Other current assets ($23.5 million) and Accrued expenses and other current liabilities ($10.1 million), respectively, in the Company's consolidated balance sheets as of June 30, 2022.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Revenues
Disaggregation of Revenues
The following table presents the Company’s revenues disaggregated by geographical region (based on the Company's customers' locations) and revenue type for the three and six months ended June 30, 2022 and 2021:
The following table presents the Company’s revenues disaggregated based on the timing of revenue recognition (at a specific point in time or over the course of time) for the three and six months ended June 30, 2022 and 2021:
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Contract Assets and Contract Liabilities
Contract assets are recorded when the Company's right to consideration is conditioned on constraints other than the passage of time. The Company had no material contract assets as of June 30, 2022 and December 31, 2021.
Contract liabilities include advance payments and billings in excess of revenue recognized, which are primarily related to advanced billings for service type warranty. Contract liabilities are presented under deferred revenues. The Company's deferred revenues as of June 30, 2022 and December 31, 2021 were as follows:
*Includes $22.7 million and $21.1 million under long-term deferred revenue in the Company's consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively.
Revenue recognized in 2022 that was included in deferred revenue balance as of December 31, 2021 was $12.9 million and $30.5 million for the three and six months ended June 30, 2022.
Remaining Performance Obligations
Remaining Performance Obligations (“RPO“) represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2022, the total RPO amounted to $112.7 million. The Company expects to recognize $89.5 million of this RPO during the next 12 months, $16.2 million over the subsequent 12 months and the remaining $6.9 million thereafter.
Incremental Costs of Obtaining a Contract
Sales commissions earned mainly by the Company’s sales agents are considered incremental costs of obtaining a contract with a customer, as the Company expects the benefit of those commissions to be longer than one year. The majority of the sales commissions are not subject to capitalization, as the commission expense is recognized as the related revenue is recognized. Sales commissions for initial contracts related to the service type warranty are deferred and then amortized on a straight-line basis over the expected customer relationship period if the Company expects to recover those costs. Amortization expense is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. As of June 30, 2022 and December 31, 2021, the deferred commissions amounted to $8.4 million and $7.4 million, respectively.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 5. Inventories
Inventories consisted of the following as of the below balance sheet dates:
Note 6. Goodwill and Other Intangible Assets
Goodwill
Changes in the carrying amount of the Company’s goodwill during the six months ended June 30, 2022 were as follows:
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Other Intangible Assets
Other intangible assets consisted of the following:
Amortization expenses relating to intangible assets for the three-month periods ended June 30, 2022 and 2021 were approximately $9.2 million and $7.7 million, respectively. Amortization expenses relating to intangible assets for the six month periods ended June 30, 2022 and 2021 were approximately $18.4 million and $15.2 million, respectively.
As of June 30, 2022, the estimated amortization expenses relating to intangible assets for each of the following future periods were as follows:
Note 7. Net Loss Per Share
The following table presents the numerator and denominator of the basic and diluted net loss per share computations for the three and six months ended June 30, 2022 and 2021:
The computation of diluted net loss per share excluded share awards of 5.2 million shares and 5.1 million shares for the three and six months ended June 30, 2022 and 2021, respectively, because their inclusion would have had an anti-dilutive effect on the diluted net loss per share.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 8. Income Taxes
The Company had income tax benefit of $0.4 million for the three-month period ended June 30, 2022, compared to income tax benefit of $4.4 million for the three-month period ended June 30, 2021. The Company had income tax benefit of $0.5 million for the six-month period ended June 30, 2022, compared to income tax benefit of $5.3 million for the six-month period ended June 30, 2021 The Company’s effective tax rate as of June 30, 2022, was primarily impacted by the geographic mix of its earnings and losses, as well as its valuation allowance.
Note 9. Fair Value Measurements
Financial instruments measured at fair value
The following table summarizes the Company’s financial assets and liabilities that are carried at fair value on a recurring basis, in its consolidated balance sheets:
*Includes $4.8 million and $2.4 million under Accrued expenses and other current liabilities in the Company's consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively.
The Company’s foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).
Contingent consideration represents liabilities recorded at fair value in connection with acquisitions, and thus represents a Level 3 measurement within the fair value hierarchy (refer to Note 3).
Other financial instruments consist mainly of cash and cash equivalents, short-term deposits, current and non-current assets, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Derivative instruments and hedging activities
Since the Company conducts its operations globally, it is exposed to global market risks and to the risk that its earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates. The Company enters into transactions involving foreign currency exchange derivative financial instruments. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to net exposures and take advantage of any natural hedging. The transactions are designed to manage the Company’s net exposure to foreign currency exchange rates and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not enter into derivative transactions for trading purposes.
The Company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities and forecasted transactions denominated in the New Israeli Shekel (“NIS”), Euro, GBP, Korean Won, Chinese Yuan and the Japanese Yen. The gains and losses on the hedging instruments partially offset losses and gains on the hedged items. Financial markets and currency volatility may limit the Company’s ability to hedge these exposures. These contracts mature through June 2023.
The following table summarizes the consolidated balance sheets classification and fair values of the Company’s derivative instruments:
Foreign exchange contracts not designated as hedging instruments
As of June 30, 2022, the notional amounts of the Company’s outstanding exchange forward contracts, not designated as hedging instruments, were $41.6 million, and were used to reduce foreign currency exposures. With respect to such derivatives, gain of $2.4 million and loss of $0.5 million were recognized under financial expenses, net for the three-month periods ended June 30, 2022 and 2021, respectively and gain of $3.1 million and gain of $1.7 million were recognized under financial expenses, net for the six-month periods ended June 30, 2022 and 2021, respectively. Such gains or losses partially offset the foreign currency revaluation changes of the balance sheet items. These foreign currencies revaluation changes are also recognized under financial expenses, net.
Cash Flow Hedging - Hedges of forecasted foreign currency payroll and other operating expenses
As of June 30, 2022, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of $35.1 million into NIS. The Company uses short-term cash flow hedge contracts to reduce its exposure to variability in expected future cash flows resulting mainly from payroll costs and other operating expenses denominated in NIS. The changes in fair value of those contracts are included in the Company’s accumulated other comprehensive loss.
Cash Flow Hedging - Hedges of forecasted foreign currency revenue
As of June 30, 2022, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of 27.4 million Euro into U.S. dollars. The Company transacts business in U.S. dollars and in various other currencies. The Company may use foreign exchange or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months. The Company enters into these foreign exchange contracts to hedge a portion of its forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Equity
a. Stock-based compensation plans
Stock-based compensation expenses for equity-classified stock options, restricted share units (“RSUs”), performance-based restricted share units (”PSUs”) and Employee Share Purchase Plan ("ESPP") were allocated as follows:
A summary of the Company’s stock option activity for the six months ended June 30, 2022 is as follows:
As of June 30, 2022, the unrecognized compensation cost of $1.6 million related to all unvested, equity-classified stock options is expected to be recognized as an expense over a weighted-average period of 2.55 years.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
A summary of the Company’s RSUs and PSUs activity for the six months ended June 30, 2022 is as follows:
The fair value of RSUs and PSUs is determined based on the quoted price of the Company’s ordinary shares on the date of the grant.
As of June 30, 2022, the unrecognized compensation cost of $72 million related to all unvested, equity-classified RSUs and PSUs is expected to be recognized as expense over a weighted-average period of 2.66 years.
Employee Stock Purchase Plan
On October 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). According to the ESPP, eligible employees may use up to 15% of their salaries to purchase ordinary shares. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the beginning of each offering period or on the purchase date. The first offering period commenced on June 1, 2022 and will end on November 30, 2022.
In accordance with ASC Topic 718, the ESPP is considered compensatory and, as such, results in recognition of stock-based compensation expenses.
b. Accumulated other comprehensive loss
The following tables present the changes in the components of accumulated other comprehensive income (loss), net of taxes, for the six months ended June 30, 2022 and 2021, respectively:
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
c. Rights plan
On July 24, 2022, the Company’s Board of Directors adopted a rights plan (the “Rights Plan”) to protect the interests of the Company’s shareholders. Each Right entitles the registered holder thereof to purchase from the Company one Ordinary Share at a price of $0.01 per share, subject to adjustment, once the Rights become exercisable, and subject to the exercise terms and conditions thereof described in the Rights Agreement. The rights would become exercisable only if an entity, person, or group acquires beneficial ownership of 15% or more of the Company’s outstanding ordinary shares in a transaction not approved by the Company’s Board. The Rights Plan has a 364-day term, expiring on July 24, 2023.
The adoption of the Rights Plan is intended to protect the long-term interests of Stratasys and all Stratasys shareholders. The Rights Plan is designed to reduce the likelihood that any entity, person, or group would gain control of, or significant influence over, Stratasys through the open-market accumulation of the Company’s shares without appropriately compensating all Stratasys shareholders for control. The Rights Plan will encourage anyone seeking to gain a significant interest in Stratasys to negotiate directly with the Board prior to attempting to control or significantly influence the Company. Further to those goals, the Rights may cause substantial dilution to a person or group that acquires 15% or more of the ordinary shares, par value NIS 0.01, of the Company (“Ordinary Shares”) or any existing holder of 15% or more of the Ordinary Shares who shall acquire any additional Ordinary Shares.
d. Public offering of ordinary shares
During March 2021, the Company completed a public offering of its ordinary shares that raised $218.9 million, net of underwriting discounts and offering expenses. The total number of shares sold by the Company in the public offering was 7,931,034.
A deferred tax asset in an amount of $1.3 million was recorded in respect of a tax benefit, arising from the underwriting discounts and offering expenses, as an increase to Additional Paid-In Capital.
Note 12. Contingencies
Legal proceedings
During the fourth quarter of 2021, the Company reached preliminary settlement on an employee-related litigation matter in the US. The financial statements for the period ended June 30, 2022 and the year ended December 31, 2021 include a provision in respect of this settlement.
The Company is a party to various legal proceedings from time to time, the outcome of which, in the opinion of management, will not have a significant effect on the financial position, profitability or cash flows of the Company.
*Includes $22.7 million and $21.1 million under long-term deferred revenue in the Company's consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. 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