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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.

INVENTORY

Inventory at December 31, 2012 consists of the following:

3.

PROPERTY AND EQUIPMENT

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

4.

ACCRUED EXPENSES

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

5.

COMMITMENTS AND CONTINGENCIES

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

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

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

Liquidation Preferences — In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, holders of Series B Preferred, in preference to the holders of Series A Preferred and common stock, shall be entitled to be paid out of the assets of the Company that are legally available for distribution, an amount equal to the applicable original issue price per share, for each preferred share held by them, plus all declared and unpaid dividends on the Series B Preferred (the "Series B Preference Amount"). In the event that the assets available for distribution are not sufficient to pay the full Series B Preference Amount, the assets shall be distributed pro rata among the holders of Series B Preferred shares in proportion to the aggregate Series B Preference Amount that each such holder would otherwise be entitled to receive. The aggregate Series B Preference Amount was $10,077 as of December 31, 2012.

After payment of the full liquidation preference of the Series B Preferred, before any distribution or payment shall be made to the holders of common stock, the holders of Series A Preferred shall be entitled to be paid out of the remaining assets of the Company legally available for distribution, if any, an amount equal to the applicable original issue price per share, for each preferred share held by them, plus all declared and unpaid dividends on the Series A Preferred (the "Series A Preference Amount"). In the event that the assets available for distribution are not sufficient to pay the full Series A Preference Amount, the assets shall be distributed pro rata among the holders of Series A Preferred shares in proportion to the aggregate Series A Preference Amount that each such holder would otherwise be entitled to receive. The aggregate Series A Preference Amount was $1,200 as of December 31, 2012.

After payment to the holders of the preferred shares of the respective Series B Preference Amounts and Series A Preference Amounts, the entire remaining assets and funds of the Company legally available for distribution, if any, shall be distributed ratably to the holders of common stock.

Voting — Each holder of shares of preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted at the time of voting.

For so long as any shares of Series B Preferred remain outstanding, in addition to any other vote or consent, the vote or written consent of the holders of a majority of the outstanding Series B Preferred shall be required for effecting or validating certain actions, including: (1) any issuance of Series B Preferred; (2) any amendment, alteration, or repeal of the certificate of incorporation or the bylaws of the Company; (3) any increase or decrease in the authorized number of shares of common stock or preferred stock or any series thereof; (4) any authorization or designation, whether by reclassification or otherwise, of a new class or series of stock; (5) any redemption, repurchase, payment or declaration of dividends or other distributions with respect to common stock and preferred stock, other than certain permitted transactions; (6) any agreement by the Company or its shareholders regarding an asset transfer or acquisition that values the Company at less than a specified amount; (7) any adverse changes to the rights, preferences and privileges of the Series B preferred; (8) any transactions resulting in a reduction of the Company’s ownership interest in any subsidiary, other than an asset transfer or acquisition that has been approved in accordance with the Company’s certificate of incorporation; and (9) any increase or decrease in the authorized number of members of the Company’s board of directors.

Conversion of MakerBot Industries, LLC membership interest units — In July 2010, each of the members of MakerBot exchanged their membership interest units, which totaled 10,355,330 units, for an equivalent number shares of common stock of CTC.

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

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

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

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

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

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

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

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

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

11.

CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS AND VENDORS

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are maintained with high quality financial institutions, the compositions and maturities of which are regularly monitored by management.

For the year ended December 31, 2012, the number of customers representing greater than 5%, but less than 10%, of the Company’s total revenue was two. At December 31, 2012, the number of customers representing greater than 10% of the Company’s total accounts receivable balances was none.

The Company’s top three vendors accounted for approximately 35% of total raw material and finished product purchases for the year ended December 31, 2012.

12.

SUBSEQUENT EVENTS

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