Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included in this 6-K. The discussion below contains forward-looking statements (within the meaning of the United States federal securities laws) that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Forward-looking Statements and Factors that May Affect Future Results of Operations” and “Risk Factors”, below, as well “Risk Factors in Item 3.D of our Annual Report on Form 20-F for 2012.

Overview of Business and Trend Information

     We are a leading global provider of additive manufacturing, or AM, solutions for the creation of parts used in the processes of designing and manufacturing products and for the direct manufacture of end parts. Our solutions are sold under seven brands. Our suite of AM systems includes affordable desktop 3D printers for idea and design development, various systems for rapid prototyping and production systems for direct digital manufacturing, or DDM. We also develop, manufacture and sell materials for use with our systems and provide various services to our customers. We believe that the range of more than 130 3D printing consumable materials that we offer is the widest in the industry. We conduct our business globally and our main operational facilities are located in Brazil, Germany, Israel, Japan and the United States. We have more than 1,100 employees and hold more than 500 granted or pending additive manufacturing patents globally.

     We are the product of the 2012 merger of two leading additive manufacturing companies, Stratasys, Inc. and Objet Ltd., which we refer to as the merger. Pursuant to the merger, which closed on December 1, 2012, Stratasys, Inc. became an indirect, wholly-owned subsidiary of Objet Ltd., and Objet Ltd. changed its name to Stratasys Ltd. Immediately after giving effect to the issuance of our ordinary shares to the former stockholders of Stratasys, Inc. in the merger, approximately 55% of our ordinary shares were held by the former stockholders of Stratasys, Inc. and the remaining 45% of our ordinary shares, on a fully diluted basis (using the treasury stock method), were held by persons and entities who acquired our ordinary shares prior to the merger.

     Accordingly, Stratasys, Inc. is treated as the acquiring company in the merger for accounting purposes, and the merger was accounted for as a reverse acquisition under the acquisition method of accounting for business combinations. As a result, the consolidated financial statements of Stratasys, Inc. became our consolidated financial statements. The consolidated financial statements included in this report on Form 6-K include the operations of Stratasys Ltd. (formerly Objet Ltd.) for the quarter ended March 31, 2013, but not for the quarter ended March 31, 2012 because the merger was consummated on December 1, 2012. Therefore, unless otherwise indicated or as the context otherwise requires, the historical financial information included in this quarterly report on Form 6-K for periods preceding the merger is that of Stratasys, Inc. For information regarding the historical results of the operations and financial condition of Objet Ltd., please refer to the separate Registration Statement on Form F-4 (Commission File No. 333-182025) that we filed with the Securities and Exchange Commission, which includes historical financial information for Objet Ltd., including for the last full fiscal year of Objet Ltd. as a stand-alone company (2011).

     We expect that the adoption of 3D printing will continue to increase over the next several years, both in terms of Idea and Design applications, on the one hand, and DDM applications, on the other hand. We believe that the expansion of the market will be spurred by increased proliferation of 3D content and 3D authoring tools (3D CAD and other simplified 3D authoring tools). We also believe that increased market adoption of 3D printing will be facilitated by continued improvements in 3D printing technology and greater affordability and ease of use of entry-level systems.

     We expect to broaden our installed base through increased adoption of our Idea series of products, featuring our recently introduced easy-to-use Mojo family of lower capacity entry-level systems, which are offered at lower price points than our other product families. Our Idea series 3D printers are expected to penetrate a broad addressable market, targeting small design teams within large organizations, small and medium-sized businesses and individual designers. Our scalable technology allows us to provide the same high resolution and accuracy of our high-end printers, but with a smaller feature set. We expect to incorporate certain additional features of our Design series of printers into the Idea series over time. We believe this will further accelerate market adoption of our products.

     We believe that the proliferation of 3D content, advancements in AM technology platforms and the introduction of improved materials will continue to drive market growth. Accordingly, we will continue to invest in our R&D efforts, which focus on enhancing our AM technologies and developing consumables that offer an even broader array of physical, mechanical and aesthetic properties, thereby broadening user applications. We also intend to invest in the identification of new DDM applications for which our proprietary printing technologies and materials are appropriate. We also intend to encourage existing and potential customers to identify new applications in part by increasing awareness of the features of our technology and product offerings. 

     With the introduction of entry level systems, we have seen unit volume increase faster than revenue growth and we expect that trend to continue in the near future. As we have developed appropriate sales channels, unit sales of our more affordable systems have accelerated, resulting in lower overall margins on the sale of our AM systems. We will also address the continuing increased demand in the market for higher end AM systems, through which we believe we will increase our installed base and sales of related consumables and our overall revenues and profits. However, there can be no assurance that we will be able to increase our revenue sufficiently to maintain or increase our current profitability.

     We may make investments in strategic acquisitions, fixed assets, process improvements, information technology, or IT, and human resource activities that will be required for future growth. Our expense levels are based in part on our expectations of future sales and we will make adjustments as we consider appropriate. While we have adjusted, and will continue to adjust, our expense levels based on both actual and anticipated sales, fluctuations in sales in a particular period could adversely impact our operating results.

     Our business, including our ability to implement our strategy for 2013, is subject to numerous uncertainties, many of which are described in “Forward-looking Statements and Factors that May Affect Future Results of Operations”, below, as well in “Risk Factors” in Item 3.D of our Annual Report on Form 20-F for 2012.

Summary of Financial Results

     For the quarter ended March 31, 2013, we recorded a net loss attributable to Stratasys Ltd. of $15.5 million, or $0.40 per diluted share, as compared to net income of $4.5 million, or $0.21 per diluted share, for the quarter ended March 31, 2012. Net loss during the three months ended March 31, 2013 resulted primarily from amortization of intangible assets that resulted from the merger. On a non-GAAP basis for the quarter ended March 31, 2013 and on a pro-forma combined (as if the merger occurred on January 1, 2011) non-GAAP basis (as defined below in “Supplemental Operating Results on a Non-GAAP Basis”) for the quarter ended March 31, 2012, net income attributable to Stratasys Ltd. was $17.6 million and $12.6 million, respectively, representing an increase of 39.7% over comparable results.

     Our revenues in the first quarter of 2013 were $97.2 million as compared to reported revenues of $45.0 million in the first quarter of 2012, representing an increase of 116.2%. First quarter 2013 revenues of $97.2 million rose by 17.1% as compared to revenues for the first quarter of 2012 of $83.0 million a pro forma combined basis that assumes the merger occurred on January 1, 2011.

     As of March 31, 2013, our cash, cash equivalents and short-term bank deposits were approximately $140.9 million, down from $153.9 million at December 31, 2012. We used cash from operations of approximately $12.3 million during the quarter primarily driven by payment of other current liabilities outstanding at year-end relating primarily to non-recurring merger costs. In addition, we used cash to fund our accounts receivable reflecting the growth in our business and the timing of our sales.

Results of Operations

     Our unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. In the opinion of our management, all adjustments considered necessary for a fair presentation of the unaudited interim consolidated financial statements have been included herein and are of a normal recurring nature. The following discussion compares the actual results (on a GAAP basis) for the quarters ended March 31, 2013 and 2012. We are also providing within this section a supplemental discussion that compares the GAAP results for the quarter ended March 31, 2013 to the results for the quarter ended March 31, 2012 on a pro forma combined basis as if the merger had closed on January 1, 2011. Since the merger actually closed on December 1, 2012, the GAAP results for the quarter ended March 31, 2013 include the combined operations of Stratasys, Inc. and Objet Ltd., but the GAAP results for the quarter ended March 31, 2012 reflect only operations of Stratasys, Inc. Therefore, we believe the pro forma combined information for the quarter ended March 31, 2012 provides useful supplemental information.

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

     The following table sets forth for the quarter ended March 31, 2012, (a) unaudited historical GAAP combined condensed statement of operations information, which combine the historical GAAP consolidated statements of operations of Stratasys, Inc. and Objet Ltd., and (b) unaudited pro forma condensed combined statements of operations information, which adjust the combined historical GAAP consolidated statements of operations of Stratasys, Inc. and Objet, giving effect to the merger as if it had been consummated on January 1, 2011 in accordance with SEC Regulation S-X, Article 11.

     This information has been derived from and should be read in conjunction with the audited consolidated financial statements of Stratasys Ltd. included in the Annual Report on Form 20-F for the year ended December 31, 2012.

     The specific pro forma adjustments for the quarter ended March 31, 2012 are as follows:

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     The following table sets forth certain statement of operations data on a dollar (in thousands) and as a percentage of net sales basis for the periods indicated.

Discussion of Results of Operations

Net Sales

     Net sales of our products and services for the quarters ended March 31, 2013 and 2012, as well as the percentage change, were as follows (in thousands):

Product Revenues

     Revenues derived from products in the first quarter of 2013 increased by $44.3 million, or 117.9%, as compared to the first quarter of 2012. The number of systems shipped increased by 42.1% to 1,168 units as compared to 822 units shipped in 2012. The increases in both revenue and number of systems shipped primarily reflects the results of the first full quarter of combined operations of our companies after the merger. 

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     Revenues derived from products in the first quarter of 2013 increased by $10.6 million, or 14.8%, as compared to pro forma combined products revenues in the first quarter of 2012. The increase was primarily attributable to sales growth in systems and consumables. The number of systems shipped increased by 4.8%, to 1,168 units as compared to 1,115 units shipped in pro forma combined 2012. The units shipped in 2012 benefited from 238 units shipped pursuant to our OEM agreement with Hewlett-Packard Corporation (“HP”) that was terminated effective December 31, 2012. These increases reflect strong unit sales of our higher-priced Production and Design series systems. The demand for these high-performance systems has been driven by the development of new DDM applications for our Fortus systems and the continued adoption of our Connex systems for complex prototyping using a wide range of materials with diverse mechanical and physical properties. In addition, systems sales increased due to the increased market penetration of our entry-level Idea series systems that also benefited from the introduction of the Mojo 3D printer in the second quarter of 2012. System sales in the first quarter of 2013 included approximately $6.0 million in revenue related to the sale of demo units to our channel partners. These demo system sales are an important part of our reseller cross-training program that is aimed at combining the sales channel and promoting the complementary product lines. Growth in system sales was offset by a $1.0 million non-cash reduction in revenue due to amortization of purchase accounting adjustments related to the merger.

     Consumables revenue in the first quarter of 2013 increased by 158.4% as compared to consumables revenues in the first quarter of 2012. This increase primarily reflects the results of the first full quarter of combined operations of our companies after the merger.

     Consumables revenue in the first quarter of 2013 increased by 17.9% as compared to pro forma combined consumables revenues in the first quarter of 2012, driven by an acceleration in customer usage and our growing installed base of systems. The strong Production series and high-end Design series system sales in prior periods contributed to strong consumables sales growth given their relatively higher consumable utilization rates. We believe that the continued strength in the Production series and high-end Design series system sales and our growing installed base of systems are positive indicators of consumables revenue growth in future periods.

Service Revenue

     Revenues from our service offerings in the first quarter of 2013 increased by $8.0 million, or 107.6%, as compared to the first quarter of 2012. The increase in service revenue primarily reflects the results of the first full quarter of combined operations of our companies after the merger.

     Revenues from our service offerings in the first quarter of 2013 increased by $3.6 million, or 30.5%, as compared to pro forma combined service revenues in the first quarter of 2012. The increase in service revenues is attributable to increased revenue from maintenance contracts and service parts, reflecting our growing base of installed systems. Revenue from our RedEye paid parts service in the first quarter of 2013 increased by 41.2% as compared to the first quarter of 2012 primarily due to an increased demand for large and complex production parts and the continued development of our sales channels.

Revenue by Region

     Net sales and the percentage of net sales by region for the quarters ended March 31, 2013 and 2012, as well as the percentage change were as follows (in thousands):

     Revenue in all regions increased in the first quarter of 2013, as a result of strong sales growth in systems and consumables. In addition, the increase in revenue reflects the results of the merger in December 2012.

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Gross Profit

     Gross profit for our products and services for the quarters ended March 31, 2013 and 2012, as well as the percentage change, was as follows (in thousands):

     Gross profit as a percentage of sales for our products and services for the quarters ended March 31, 2013 and 2012, as well as the percentage change from year to year, was as follows:

     Gross profit from product sales in the first quarter of 2013 increased by $13.0 million, or 66.0%, as compared to the first quarter of 2012, due to the increase in sales discussed above. Gross profit as a percentage of related product sales in the first quarter of 2013 decreased by 12.5 percentage points as compared to the first quarter of 2012. The changes in gross profit from products and gross profit as a percentage of related sales primarily reflects the results of the merger in December 2012, which resulted in an expense of $19.3 million in amortization of intangible assets for the first quarter of 2013.

     Gross profit from product sales in the first quarter of 2013 remained essentially unchanged as compared to pro forma combined gross profit from product sales in the first quarter of 2012. Gross profit as a percentage of related product sales in the first quarter of 2013 decreased by 6.0 percentage points as compared to pro forma combined results for the first quarter of 2012. The changes in gross profit from products and gross profit as a percentage of related product sales primarily reflects the results of the merger in December 2012, which resulted in an expense of $19.3 million in amortization of intangible assets for the first quarter of 2013 and an expense of $9.8 million in amortization of intangible assets for the pro forma combined results of operations for the first quarter of 2012. The effect of amortization expense on gross profit from products and gross profit as a percentage of related product sales was partially offset by increased systems and consumables sales volume to cover fixed overhead, a product mix that favored our higher-margin Production series and high-end Design series systems and strong growth in our high-margin consumables sales.

     Gross profit from services in the first quarter of 2013 increased by $1.4 million, or 43.1%, as compared to the first quarter of 2012. Gross profit as a percentage of related service sales in the first quarter of 2013 decreased by 13.5 percentage points as compared to the first quarter of 2012. The change in gross profit and gross profit as a percentage of related service sales primarily reflects the results of the first full quarter of combined operations of our companies and their differing service margins after the merger.

     Gross profit from services in the first quarter of 2013 increased by $1.2 million, or 35.0%, as compared to pro forma combined gross profit from services in the first quarter of 2012. Gross profit as a percentage service revenues in the first quarter of 2013 increased by 1.0 percentage point as compared to the first quarter of 2012. The changes in gross profit from services and gross profit as a percentage of related sales primarily reflects strong growth in our customer service maintenance contracts and spare parts sales. In addition, our RedEye paid parts service experienced an increase in the average sales price of parts which was driven by the demand for large and complex production parts.

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Operating Expenses

     The amount of each type of operating expense for the quarters ended March 31, 2013 and 2012, as well as the percentage change between such quarterly periods, and total operating expenses as a percentage of our total sales in each such quarterly period, was as follows (in thousands):

     Research and development expenses for the first quarter of 2013 increased by 147.9% as compared to the first quarter of 2012. The increase primarily reflects the results of the first full quarter of combined operations of our companies after the merger. Research and development expenses for the first quarter of 2013 increased by 18.9% as compared to pro forma combined research and development expenses for the first quarter of 2012. The increase was driven primarily by increased investment in new product initiatives and an increase in headcount to support these initiatives. Research and development expense as a percentage of sales increased from 55.7% in the first quarter of 2013 as compared to 50.8% in the first quarter of 2012. This increase reflects our intention to continue to invest in research and development efforts, which focus on enhancing our AM technologies and developing consumables that offer an even broader array of physical, mechanical and aesthetic properties, aimed at broadening user applications. The increase was partially offset by an increase in research and development expense reimbursements received in connection with our collaborative agreements discussed below.

     We have agreements with two manufacturing companies under which we jointly advance certain of our proprietary technology with each of those two companies. The agreements entitle us to receive reimbursement payments of costs actually incurred under joint development projects. During the quarters ended March 31, 2013 and 2012 approximately $1.0 million and $150,000, respectively, of research and development expenses were offset by payments that we received from these companies.

     Selling, general and administrative expenses for the first quarter 2013 increased by 280.9% as compared to the first quarter of 2012. The increase primarily reflects the results of the first full quarter of combined operations of our companies after the merger, which included $3.7 million in stock compensation expense and $5.3 million in amortization expense related to intangible assets for the first quarter of 2013.

     Selling, general and administrative expenses for the first quarter of 2013 increased by 30.8% as compared to pro forma combined selling, general and administrative expenses for the first quarter of 2012. The increase was primarily due to significant legal, advisory and integration expenses related to the merger, changes in our product distribution strategy involving independent sales agents and indirect channels involving resellers, which resulted in increased sales commissions, expenses for strategic and marketing initiatives aimed at increasing our market presence and an increase in administrative expenses and headcount to support our growth. In addition, the increase was due to the inclusion of $3.7 million in stock compensation expense and $5.3 million in amortization expense related to intangible assets for the first quarter of 2013 as compared to $4.6 million in stock compensation expense and $2.3 million in amortization expense related to intangible assets for the pro forma combined first quarter of 2012.

Operating Income (Loss)

     Operating income (loss) and operating income (loss) as a percentage of our total revenues for the quarters ended March 31, 2013 and 2012, as well as the percentage change in operating income (loss) between those quarters, were as follows (in thousands):

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     Operating income for the first quarter of 2013 decreased by $24.0 million, or 331.6%, as compared to the first quarter of 2012. The decrease in operating income was primarily attributable to an expense of $23.6 million from amortization of intangible assets and to stock compensation expense of $5.2 million related to acquired Objet stock options. Operating income for the first quarter of 2013 decreased by $10.8 million, or 181.0%, as compared to pro forma combined operating income for the first quarter of 2012 primarily due to the inclusion of amortization expense of $12.1 million from intangible assets and a stock compensation expense of $6.1 million related acquired Objet stock options in the pro forma combined operating income for the first quarter of 2012. The effect of amortization expense on operating income was partially offset by the increased systems, consumables and service sales discussed above. 

Income Taxes (Benefit)

     Income taxes (benefit) and income taxes (benefit) as a percentage of net income (loss) before taxes for the quarters ended March 31, 2013 and 2012, as well as the percentage change in income taxes between those quarters, were as follows (in thousands):

     The effective tax rate of 4.6% on the loss before income taxes for the quarter ended March 31, 2013 was lower as compared to the 39.9% effective rate on the income before income taxes for the same prior-year period. The decrease is primarily due to the lower tax rate on earnings (losses) in Israel as well as the tax benefit as a result of the realization of the deferred tax liability associated with the amortization of the intangible assets. Also, the federal research credit was reinstated on January 2, 2013, so the entire 2012 credit of approximately $0.4 million, as well as the credit for the quarter ended March 31, 2013 of $0.1 million was recorded in the quarter ended March 31, 2013. The federal research credit had expired on December 31, 2011 and, therefore, was not considered in computing the effective rate for the quarter ended March 31, 2012.

Net Income (Loss) Attributable to Stratasys Ltd.

     Net income (loss) and net income (loss) as a percentage of our total revenues for the quarters ended March 31, 2013 and 2012, as well as the percentage change in net income (loss) between those quarters, were as follows (in thousands):

     For the reasons cited previously in this operating and financial review and prospects section, our net income (loss) for the quarter ended March 31, 2013 was lower than the first quarter of the prior year.

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Supplemental Operating Results on a Non-GAAP Basis

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

     The following tables sets forth certain unaudited historical non-GAAP data for the quarter ended March 31, 2013 and unaudited pro forma non-GAAP combined data for the quarter ended March 31, 2012 (in thousands).

     The following table sets forth certain unaudited historical non-GAAP data for the quarter ended March 31, 2013 and unaudited pro forma non-GAAP combined data for the quarter ended March 31, 2012.

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

Discussion of Results of Operations on Non-GAAP Basis

Gross Profit

     Gross profit for the quarters ended March 31, 2013 and 2012, gross profit as a percentage of sales, as well as the percentage change, were as follows (in thousands):

     Non-GAAP gross profit for the first quarter of 2013 increased by $10.8 million, or 23.0%, as compared to the first quarter of 2012. The increase was primarily attributable to sales growth in systems and consumables. The number of systems shipped increased by 4.8%, to 1,168 units as compared to 1,115 units shipped in the first quarter of 2012 on a pro forma combined basis. The units shipped in 2012 included 238 units related to our OEM agreement with HP that was terminated effective December 31, 2012. The increase in system sales in the first quarter of 2013 reflects strong unit sales of our higher-priced Production and Design series systems and increased market penetration of our entry-level Idea series systems as discussed above. Consumables revenue in the first quarter of 2013 increased by 17.9% as compared to pro forma combined consumables revenue in the first quarter of 2012, driven by an acceleration in customer usage and our growing installed base of systems.

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     Non-GAAP gross profit as a percentage of sales increased as compared to the first quarter of 2012 primarily due to increased systems and consumables sales volume to cover fixed overhead, a product mix that favored our higher-margin Production series and high-end Design series systems and strong growth in our high-margin consumables sales.

Operating Income

     Operating income and operating income as a percentage of our total revenues for the quarters ended March 31, 2013 and 2012, as well as the percentage change in operating income between those quarters, were as follows (in thousands):

     Non-GAAP operating income in 2013 increased by $3.8 million, or 23.4%, as compared to pro forma combined 2012. The increase in operating income was primarily due to the increase in sales and gross profit discussed above. The increase in operating income attributable to sales growth was partially offset by an increase in operating expenses related to research and development initiatives, changes in our product distribution strategy involving independent sales agents and indirect channels involving resellers, which resulted in increased sales commissions, expenses for strategic initiatives to increase our market presence by intensifying marketing efforts and an increase in administrative expenses and headcount to support our growth. The growth in operating income as a percentage of sales as compared to the prior year reflects our ability to leverage fixed costs and grow sales faster than operating expenses.

Net Income Attributable to Stratasys Ltd.

     Net income and net income as a percentage of our total revenues for the quarters ended March 31, 2013 and 2012, as well as the percentage change in net income between those quarters, were as follows:

     Non-GAAP net income for the first quarter of 2013 increased by $5.0 million, or 39.7%, as compared to pro forma combined for the first quarter of 2012. In addition to the factors discussed above, net income increased as compared to the first quarter of the prior year primarily due to a decrease in the effective tax rate. The decrease is primarily due to the lower tax rate on earnings in Israel. In addition, the federal research credit was reinstated on January 2, 2013, so the entire 2012 credit of approximately $0.4 million, as well as the credit for the quarter ended March 31, 2013 of $0.1 million was recorded in the quarter ended March 31, 2013. The federal research credit had expired on December 31, 2011 and, therefore, was not considered in computing the effective rate for the quarter ended March 31, 2012.

     A significant portion of our income after the December 1, 2012 merger date will be taxed in Israel. We expect to realize significant tax savings based on the determination that some of our industrial projects that have been granted “Approved Enterprise” and “Privileged Enterprise” status, which provides certain benefits, including tax exemptions for undistributed income and reduced tax rates. In addition, we are a Foreign Investors Company and Industrial Company as defined by the Israeli Investment Law, which entitles us to further reductions in the tax rate normally applicable to Approved Enterprises and Privileged Enterprises, depending on the level of foreign ownership, and certain tax benefits including accelerated depreciation, deduction of public offering expenses in three equal annual instalments and amortization of other intangible property rights for tax purposes.

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     The entitlement to the above benefits is conditional upon our fulfilling the conditions stipulated by the Investment Law and related regulations. Should we fail to meet such requirements in the future, income attributable to our Approved Enterprise and Privileged Enterprise programs could be subject to the statutory Israeli corporate tax rate and we could be required to refund a portion of the tax benefits already received with respect to such programs.

     For additional information relating to the Israeli tax benefits that we expect to receive, please refer to “Israeli Tax Considerations and Government Programs” in Item 4.B of our annual report on Form 20-F for the year ended December 31, 2012.

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

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Liquidity and Capital Resources

     A summary of our statement of cash flows for the quarters ended March 31 2013 and 2012 is as follows (in thousands):

     Our cash and cash equivalents balance decreased by $68.3 million to $65.5 million at March 31, 2013 from $133.8 million at December 31, 2012. The decrease was primarily due to $60.6 million of cash used in investing activities, which reflected the purchase of short term deposits, property and equipment and intangibles. In addition, cash used in operating activities was $12.3 million.

Cash flow from operating activities

     We had a $12.3 million deficit in cash from operating activities during the three months ended March 31, 2013. The net loss of $15.5 million was favorably adjusted due to non-cash charges of $29.3 million in depreciation and amortization and a stock-based compensation expense of $5.5 million. Non-cash charges that unfavorably affected cash from operating activities were a $3.9 million deferred tax benefit and a $1.0 million excess tax benefit from stock option exercises. Changes in working capital using cash from operations included a $9.7 million increase in accounts receivable due to strong order flow and the merger and an increase in inventory of $7.1 million in anticipation of strong order flow expected as a result of the merger. In addition, a decrease in accounts payable and other current liabilities primarily driven by an overall increase in operating expenses and timing of payments for merger related expenses resulted in cash used in operating activities of $13.8 million. Changes in working capital providing cash from operations included a $3.0 million increase in unearned revenues and a $1.2 million decrease in prepaid expenses.

     We generated $6.9 million in cash from operating activities during the three months ended March 31, 2012, primarily driven by net income of $4.5 million. Net income was favorably adjusted due to non-cash charges of $2.6 million in depreciation and amortization and a stock-based compensation expense of $0.5 million. Non-cash charges that unfavorably affected cash provided by operating activities were related to the excess tax benefits on stock option exercises of $0.2 million. Changes in working capital using cash from operations included a $1.9 million increase in accounts receivable due to strong order flow and a $0.6 million increase in receivables from sales-type leases reflecting strong sales growth and continued success of our leasing program. Changes in working capital providing cash from operations included a $0.8 million increase in unearned revenues and a $0.6 million decrease in prepaid expenses.

Cash flow from investing activities

     Our investing activities used cash of $60.6 million and $3.7 million in the three months ended March 31, 2013 and 2012, respectively.

     Property and equipment acquisitions, net of sales, totaled $5.0 million and $2.5 million in the three months ended March 31, 2013 and 2012, respectively. Our principal property and equipment acquisitions were for manufacturing or engineering development equipment, tooling, property, leasehold improvements and the acquisition of computer systems and software applications. Payments for intangible assets, including patents and capitalized software, amounted to $252,000 and $706,000 in the three months ended March 31, 2013 and 2012, respectively.

     In the three months ended March 31, 2013, $55.3 million was used in the purchasing of short-term bank deposits. In the three months ended March 31, 2012, $0.5 million for investing activities was used in the purchasing of investments, net of sale and maturity of investments and redemption of short-term bank deposits.

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Cash flow from financing activities

     Proceeds from the exercise of stock options and the related excess tax benefit provided cash of $4.6 million and $1.0 million in the three months ended March 31, 2013 and 2012, respectively.

Capital resources and capital expenditures

     Our total current assets amounted to $317.2 million at March 31, 2013, most of which consisted of cash and cash equivalents, short-term bank deposits, accounts receivable, and inventories. Total current liabilities amounted to $83.6 million. We believe that we will have adequate cash and cash generated from operating activities to fund our ongoing operations for the next 12 months. We may make investments in fixed assets, process improvements, information technology, or IT, and human resource development activities that will be required for future growth. We estimate that we will spend between approximately $35.0 million and $45.0 million in 2013 for property and equipment.

     As part of our business strategy, we plan to consider and, as appropriate, make acquisitions of other businesses, products, product rights or technologies. Our cash reserves and other liquid assets may be inadequate to consummate such acquisitions and it may be necessary for us to issue stock or raise substantial additional funds in the future to complete future transactions. In addition, as a result of our acquisition efforts, we are likely to experience significant charges to earnings and significant cash outflows for merger and related expenses (whether or not our efforts are successful) that may include transaction costs, closure costs or costs of restructuring activities.

Critical Accounting Policies

     We have prepared our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America. This has required us to make estimates, judgments, and assumptions that affected the amounts we reported. Actual results may differ from those estimates. To facilitate the understanding of our business activities, certain accounting policies that are important to the presentation of our financial condition and results of operations and the require management’s subjective judgments are described in our Annual Report on Form 20-F for the year ended December 31, 2012. We base our judgments on our experience and various assumptions that we believe to be reasonable under the circumstances.

Forward-looking Statements and Factors That May Affect Future Results of Operations

     Certain information included or incorporated by reference in this report on Form 6-K may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

     These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

     Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

     Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

• our ability to efficiently and successfully integrate the operations of Stratasys, Inc. and Objet Ltd. after their merger;
   
• the overall global economic environment;
   
• the impact of competition and new technologies;
   
• general market, political and economic conditions in the countries in which we operate;
   
• projected capital expenditures and liquidity;
   
• changes in our strategy;

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• government regulations and approvals;
   
• changes in customers’ budgeting priorities;
   
• litigation and regulatory proceedings; and
   
• those factors referred to in Item 3.D “Key Information - Risk Factors”, Item 4 “Information on the Company”, and Item 5 “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2012, as well as in this annual report generally.

     Readers are urged to carefully review and consider the various disclosures made throughout this report on Form 6-K and our Annual Report on Form 20-F for the year ended December 31, 2012, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

     Any forward-looking statements in this report on Form 6-K are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT RISK

     Reference is made to "Quantitative and Qualitative Disclosures About Market Risk" (Item 11) in our Annual Report on Form 20-F for the year ended December 31, 2012.

LEGAL PROCEEDINGS

     We are subject to various litigation and other legal proceedings. For a discussion of certain of these matters that we deem to be material to the Company, see "Contingencies," Note 10 to the consolidated financial statements included in this report.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Stratasys Ltd.
(Registrant)

Date: May 13, 2013

By: /S/ Erez Simha

Name: Erez Simha

Title: Chief Financial Officer

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