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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPATIAL TECHNOLOGY INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1035353
(State of Incorporation) (I.R.S. Employer Identification No.)
2425 55TH STREET, SUITE 100
BOULDER, CO 80301
(303) 544-2900
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
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R. BRUCE MORGAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SPATIAL TECHNOLOGY INC.
2525 55TH STREET, SUITE 100
BOULDER, CO 80301
(303) 544-2900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
MICHAEL L. PLATT, ESQ.
COOLEY GODWARD LLP
2595 CANYON BLVD., SUITE 250
BOULDER, CO 80302-6737
(303) 546-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Class of Offering Aggregate Amount of
Securities to be Registered Amount to be Registered Price per Share (1) Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
COMMON STOCK, par value 1,850,000 shares $3.8125 $7,053,125.00 $1,961.00
$0.01 per share
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 based upon the
average of the high and low prices of Spatial's common stock as reported
the American Stock Exchange on February 16, 1999.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION (FEBRUARY 22, 1999)
PROSPECTUS
SPATIAL TECHNOLOGY INC.
1,850,000 SHARES
COMMON STOCK
This Prospectus covers 1,850,000 shares of common stock of Spatial
Technology Inc. The selling stockholders identified in this prospectus may sell
these shares of common stock from time to time on terms to be determined at the
time of sale. We will not receive any of the proceeds from the sale of shares
by the selling stockholders.
Our shares trade on the American Stock Exchange under the symbol "STY." On
February 19, 1999, the closing sale price of the common stock, as reported on
the American Stock Exchange, was $3.50.
INVESTING IN SPATIAL COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The selling stockholders may sell the shares of Spatial common stock
described in this prospectus in public or private transactions, on or off the
American Stock Exchange, at prevailing market prices, or at privately
negotiated prices. The selling stockholders may sell shares directly to
purchasers or through brokers or dealers. Brokers or dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders. We have agreed to indemnify the selling stockholders and
certain other persons against certain liabilities, including liabilities under
the Securities Act of 1933.
We will not be paying any underwriting commissions or discounts in the
offering of these shares. We will, however be paying for the expenses incurred
in the offering of the shares. For their shares, the selling stockholders will
receive the purchase price of the shares sold less any agents' commissions and
underwriters' discounts and other related expenses. More information is
provided in the section titled "Plan of Distribution" on page 18.
Our address and telephone number are: Spatial Technology Inc., 2425 55th
Street, Suite 100, Boulder, CO 80301, (303) 544-2900.
THE DATE OF THIS PROSPECTUS IS , 1999.
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information..............................................................................1
Disclosure Regarding Forward-Looking Statements..................................................................2
Risk Factors.....................................................................................................2
Use Of Proceeds..................................................................................................7
Business.........................................................................................................8
Selling Stockholders............................................................................................17
Plan Of Distribution............................................................................................18
Legal Matters...................................................................................................19
Experts .......................................................................................................19
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WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy these reports, proxy statements and other
information at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Our common stock is quoted on
the American Stock Exchange. You can also inspect such materials at the
American Stock Exchange, 86 Trinity Place, New York, NY 10006.
Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference rooms. Our SEC filings are also available at
the SEC's web site at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 10-KSB for the year ended December 31, 1998, filed
February 22, 1999;
o Current Report on Form 8-K, filed January 7, 1999; and
o The description of the common stock contained in Spatial's Registration
Statement on Form 8-A filed with the SEC under the Securities Exchange Act
of 1934.
You may request a copy of these filings, at no cost to you, by writing,
telephoning or e-mailing us at the following address:
Spatial Technology Inc.
2425 55th Street, Suite 100
Boulder, CO 80301
(303) 544-2900
Attention: Investor Relations
http://www.spatial.com
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided
in this prospectus and the registration statement.
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In this prospectus, the "Company," "Spatial," "we," "us," and "our" refer
to Spatial Technology Inc. (unless the context requires otherwise).
1.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements about our expectations and all other statements made in this
registration statement or incorporated by reference hereby, other than
historical facts, are forward-looking statements. Those statements include
words such as "anticipate," "estimate," "project," "intend" and similar
expressions which we have used to identify these statements as forward-looking
statements. These statements appear throughout this prospectus and are
statements regarding our intent, belief, or current expectations, primarily
with respect to the operations of Spatial or related industry developments. You
are cautioned that any such forward-looking statements do not guarantee future
performance and involve risks and uncertainties, and that actual results could
differ materially from those discussed here and in the documents incorporated
by reference in this prospectus. These factors, as and when applicable, are
discussed in Spatial's filings with the Securities and Exchange Commission,
including its most recent 10-KSB, a copy of which may be obtained from Spatial
without charge. See "Where You Can Find More Information."
RISK FACTORS
An investment in the shares of Spatial common stock being offered by this
prospectus involves a high degree of risk. You should not make such an
investment if you cannot afford the loss of your entire investment. If any of
the events described in the following risks actually occur, our business,
financial condition and results of future operations could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
In addition to the other information in this prospectus, you should
consider carefully the following factors in evaluating Spatial and its business
before purchasing any shares of the Spatial common stock.
OUR OPERATING RESULTS FLUCTUATE SUBSTANTIALLY
Our operating results have fluctuated significantly in the past and we
expect them to continue to fluctuate due to factors that affect two of
Spatial's principal sources of revenue: license fees and royalties.
Quarterly revenues from royalties may fluctuate significantly. Revenues
from royalties are based on sales by our customers of products incorporating
the ACIS 3D modeling software and, therefore, our customers' sales fluctuations
are reflected in our royalty revenue stream.
Quarterly revenues from license fees may be affected by a number of
factors, including:
o the volume of orders received within a quarter;
o demand for our products and the product mix purchased by our customers;
o competing capital budget considerations of our customers;
o introduction and enhancement of products by us and our competitors;
o market acceptance of new products;
o reviews in the industry press concerning our products or those of our
competitors;
o seasonal factors, such as the timing of new product release, year-end
purchasing and trade shows;
o delays in the introduction or availability of hardware and software
products from third parties;
o changes or anticipated changes in our pricing or that of our
competitors; and
o general economic conditions.
2.
<PAGE> 5
In addition, the timing of our license fees fluctuates quarterly because we
generally ship products as we receive orders and, therefore, we have little or
no backlog. Additionally, we have generally shipped products and recognized
most of our license fee revenues near the end of each quarter, thus recognizing
the majority of license fee revenue in the last few days of the quarter. Our
operating expenses are to a large extent fixed and are based in part on
anticipated revenues. As a result, it is difficult for us to reduce expenses in
time to compensate for any unexpected revenue shortfall. Accordingly, any
significant unanticipated shortfall in sales could materially adversely affect
operating results.
Many of these factors are described in more detail in this "Risk Factors"
section.
WE OFFER AN UNDIVERSIFIED PRODUCT LINE TO A CONCENTRATED CUSTOMER BASE
We generate substantially all of our revenues from license fees, royalties
and maintenance and training contracts relating to the ACIS 3D modeling
software. Any decline in demand for the ACIS 3D modeling software could
materially adversely affect our business, operating results and financial
condition. Any of the following factors could cause such a decline in demand:
o failure to achieve market acceptance of any new version of ACIS 3D;
o increased competition;
o technological superiority of a competitor; or
o our failure to release new versions of ACIS 3D modeling software on a
timely basis.
Historically, most of our revenues have come from sales to a few large CAD
software developers such as Autodesk, Baystate Technologies, Inc. and Visionary
Design Systems, Inc. Our growth strategy is to target smaller 3D applications
software developers. This new market segment may have lower profit margins and
higher credit risks than we have experienced previously. Revenues from our
current customers may decline, or we may be unable to expand our customer base
profitably.
WE DEPEND ON SWIFT AND TIMELY INTRODUCTIONS OF NEW PRODUCTS; PRODUCT ERRORS
DELAYS IN PRODUCT RELEASES OR POTENTIAL MAY HURT OUR BUSINESS
We compete in an industry faced with evolving standards and rapid
technological developments. New products are introduced frequently and customer
requirements change with technology developments. Our success will depend upon
our ability to anticipate evolving standards, technological developments and
customer requirements and enhance existing products accordingly.
Software development is inherently uncertain. We cannot predict the exact
timing of a new product shipment or version release on any particular platform;
we have experienced delays in the development of certain new products and
product versions. Additionally, we utilize third party development partners to
facilitate the development of product enhancements and new component
extensions. Factors beyond our control may affect our partners' ability to
timely deliver product enhancements and new component extensions. Delays in
product development may adversely affect our business, financial condition and
operating results. Negative reviews of new products or product versions could
also materially adversely affect market acceptance.
OUR PRODUCTS MAY CONTAIN UNDETECTED ERRORS
Our software products may contain undetected errors when first introduced
or as new versions are released. In the past, we have discovered software
errors in some new products and enhancements after their introduction. We may
find errors in current or future new products or releases after commencement of
commercial shipments. Any errors, whether we discover them before or after
shipment, may result in delay, which could materially adversely affect our
business, operating results and financial condition. Although we have not
experienced product liability claims by customers in the past as a result of
product errors, such claims might be brought against Spatial in the future.
3.
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COMPETITION IN OUR INDUSTRY IS INTENSE
The markets for our products are highly competitive, rapidly changing and
subject to constant technological innovation. Participants in these markets
face constant pressure to accelerate the release of new products, enhance
existing products, introduce new product features and reduce prices. Many of
our competitors or potential competitors have significantly greater financial,
managerial, technical and marketing resources than us. Actions by our
competitors which could materially adversely affect our business, financial
condition and results of operations include:
o a reduction in product prices;
o increased promotion;
o accelerated introduction of, or the announcement of, new or enhanced
products or features;
o acquisitions of software applications or technologies from third
parties; or
o product giveaways or product bundling.
In addition, our present and future competitors may be able to develop
comparable or superior products or respond more quickly to new technologies or
evolving standards. Accordingly, we may be unable to consistently compete
effectively in our markets, competition might intensify or future competition
may develop, all of which could materially adversely affect our business,
financial condition or results of operations.
WE ARE DEPENDENT UPON KEY PERSONNEL AND THE ABILITY TO HIRE ADDITIONAL
PERSONNEL
Our executive officers and key employees are vital assets. We do not have
employment agreements with any of our executive officers, except for the
president and chief executive officer.
We also depend on our ability to attract, retain and motivate high quality
personnel, especially management, skilled development personnel and sales
personnel. Competition for skilled development personnel with specialized
experience and training relevant to 3D modeling software is intense. There are
a limited number of skilled people in the United States with the skills and
training we require. As our sales force has grown, we have suffered turnover
among our United States sales force that has, in some cases, delayed sales.
The loss of any of our executive officers or other key employees could
materially adversely affect our business, financial condition or operating
results. A failure to recruit executive officers or key sales, management or
development personnel would similarly harm our growth and competitiveness.
WE ARE DEPENDENT UPON THIRD PARTY DEVELOPERS
We rely on a number of development partners and third party licensors for
the development and enhancement of portions of the ACIS 3D modeling software.
Our plans for the future development of the ACIS 3D modeling technology
continue to rely on these development partners and third party licensors for
further product enhancements and extensions. We share ownership of, or rights
to, the technology developed with certain development partners. In certain
limited circumstances, these partners may use this technology to compete with
us.
All of our development partners and third party licensors may terminate
these agreements under certain circumstances. We may not be able to continue to
use the services of our development partners to augment our development
capabilities or the technologies of third party licensors in our products, and
we may not be able to replace those services or technologies in a timely
manner, if necessary. The loss of any third party licensees could also result
in delays or cancellations in product shipments until equivalent software can
be identified, licensed or developed and integrated with our products.
4.
<PAGE> 7
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH
The growth in our operations has placed substantial demands on our
managerial, operational and financial resources. Our future success will depend
upon our ability to:
o continue to enhance our core 3D modeling technologies and commercialize
products using such technologies;
o respond to competitive developments;
o expand our sales and marketing efforts, and
o attract, train, motivate and retain qualified management and
engineering personnel.
Although we believe that our systems and controls are adequate for the
current level of our operations, we anticipate that we may need to add
additional personnel and expand and upgrade our systems and controls to manage
possible future growth. The failure to do so could have a material adverse
effect upon our business, financial condition and results of operations.
In the future, we may acquire additional complementary companies, products
or technologies. Managing acquired businesses entails numerous operational and
financial risks. These risks include the difficulty in assimilating acquired
operations, diversion of management's attention and the potential loss of key
employees or customers of acquired operations. We may not be able to achieve or
effectively manage growth, and failure to do so could materially adversely
affect our operating results.
WE MAY BE EXPOSED TO RISKS OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
INFRINGEMENT
Our proprietary technologies are crucial to our success and ability to
compete. We rely on trade secret and copyright laws to protect our proprietary
technologies, including our source code, but our efforts may be inadequate to
protect our proprietary rights or to prevent others from claiming violations of
their proprietary rights. We have no patents with respect to the ACIS 3D
modeling technology. Further, effective trade secret and copyright protection
may not be available in all foreign countries.
We generally enter into confidentiality or license agreements with
employees, consultants and customers. Additionally, we generally control access
to and distribution of our software, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. Policing unauthorized use of
our proprietary information is difficult.
The unauthorized misappropriation of our technology could have a material
adverse effect on our business, financial condition and results of operations.
If we resort to legal proceedings to enforce our proprietary rights, the
proceedings could be burdensome and expensive and could involve a high degree
of risk.
We may also be subject to claims alleging infringement by us of third party
proprietary rights. Litigating such claims, whether meritorious or not, could
be costly. These claims might require us to enter into royalty or license
agreements, the terms of which may be unfavorable to us. If we were found to
have infringed upon the proprietary rights of third parties, we could be
required to pay damages, cease sales of the infringing products and redesign or
discontinue such products, any of which could have a material adverse effect on
our business, financial condition or results of operations.
A SUBSTANTIAL PORTION OF OUR SALES ARE SUBJECT TO RISKS OF THE INTERNATIONAL
MARKET
International sales represented a substantial portion of our total revenues
in 1998. We believe that international sales will continue to represent a
significant portion of our total revenues. Inherent risks of conducting
business internationally include:
o unexpected changes in regulatory requirements;
5.
<PAGE> 8
o problems and delays in collecting accounts receivable;
o export license requirements, tariffs and other trade barriers;
o difficulties in staffing and managing foreign operations;
o political instability;
o fluctuations in currency exchange rates;
o seasonal reductions in business activity; and
o potentially adverse tax consequences.
This reliance on international sales makes our business results
particularly vulnerable to changes in overseas markets. These changes are
difficult to anticipate and react to and, therefore, may affect us
disproportionately.
Sales of our products currently are denominated principally in U.S.
dollars. Accordingly, any increase in the value of the U.S. dollar as compared
to currencies in our principal overseas markets would increase the foreign
currency-denominated cost of our products, which may decrease our sales in
those markets. We have not engaged in any currency exchange hedging practices.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
After this registration statement becomes effective, the shares registered
hereunder will be eligible for resale in the market without restriction. Sales
of any substantial number of shares of our common stock in the public market
may have an adverse effect on the market price of our common stock. The average
daily trading volume of our common stock has been very low. Any sustained sales
of shares by our existing or future stockholders or any increase in the average
volume of shares traded in the public market may adversely affect the market
price of our common stock.
OUR STOCK PRICE IS HIGHLY VOLATILE
The market price of our common stock has been highly volatile and is likely
to continue to be volatile. Factors affecting our stock price may include:
fluctuations in our operating results, announcements of technological
innovations or new software standards by us or competitors, published reports
of securities analysts, developments in patent or other proprietary rights,
changes in our relationships with development partners and general market
conditions, especially regarding the general performance of comparable
technology stocks. Many of these factors are beyond our control. These factors
may materially adversely affect the market price of our common stock,
regardless of our operating performance.
OUR SYSTEMS AND THOSE OF OUR CUSTOMERS MAY NOT BE YEAR 2000 COMPLIANT
Many currently installed computer systems and software products accept only
two digit entries in the date code field. These date code fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, by the end of this year computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements.
We have evaluated Year 2000 compliance issues and believe that such issues
will not materially adversely impact our products and internal management
information systems. Our software products do not incorporate date-sensitive
algorithms. Any date codes contained in our software do not affect the
functionality of our products. We also incorporate third party software with
ACIS 3D, our core product. We have concluded that any date codes contained in
such third party software will not materially adversely impact our products.
In addition, we have evaluated our management information systems and have
concluded that they are Year 2000 compliant. Moreover, we manage a low number of
transactions because we depend on low volume, high value orders. As a result, we
believe that any date-sensitive material contained in our software would not
materially adversely affect our
6.
<PAGE> 9
management information systems software. However, to the extent that any of our
foregoing assessments are incorrect, the cost of updating the performance of
software might materially adversely affect our business, financial condition
and results of operations.
Moreover, Year 2000 compliance issues affecting our customers' products and
internal management information systems might have a material adverse effect on
our business, financial condition and results of operations. Our customers'
Year 2000 compliance is beyond our control. As an OEM provider, our products
may be incorporated directly into customers' products. Any Year 2000 issues
affecting our customers might, therefore, also affect our sales.
USE OF PROCEEDS
Spatial will not receive any of the proceeds from the sale of Spatial
common stock by the selling stockholders.
7.
<PAGE> 10
BUSINESS
GENERAL
Spatial Technology Inc. ("Spatial" or the "Company") is a leading software
developer for modeling, viewing and sharing high-fidelity three-dimensional
("3D") digital geometry. The Company operates predominantly in the
manufacturing industry with special focus on the computer-aided design ("CAD"),
manufacturing ("CAM"), engineering ("CAE") and architecture ("AEC") markets for
3D modeling software.
The year 1998 involved important product transitions for Spatial. In
addition to many product advancements made to the Company's flagship product,
the ACIS(R) 3D Toolkit, the Company made a significant move to begin the
development of software solutions for 3D model interoperability. This move was
made to capitalize on the Company's perception that there is a rapidly emerging
market for 3D CAD model interoperability, and to respond to the requests of many
of the Company's traditional OEM customers to make it easier to import non-ACIS
models into their ACIS-enabled applications. Spatial closed 1998 with the
acquisition of InterData Access Inc. ("IDA") in order to broaden the Company's
interoperability expertise and interoperability solutions.
Entering 1999, the Company offers two families of 3D-enabled software
products. These include Component Technologies that address 3D modeling, and
Interoperability Solutions that address viewing, exchanging and sharing of 3D
CAD models among ACIS-enabled and proprietary engineering applications.
Spatial maintains its corporate office in Boulder, Colorado from which all
executive, marketing, finance, administrative and most research and development
functions are executed. The Company has four wholly-owned subsidiaries: Spatial
Technology GmbH (Germany), Spatial Technology K.K. (Japan), and Spatial
Technology Ltd. (England) each of which assist in regional sales and licensing
of the Company's Component and Interoperability products, internationally. A
fourth subsidiary, IDA, is also located in Boulder where it executes the
Company's Interoperability Solutions strategy and business.
COMPONENT TECHNOLOGIES
Since its inception in 1986, the Company has specialized in the design,
development and marketing of the ACIS 3D modeling software and related
component technology. Spatial licenses its 3D software products to OEMs for
building commercially available 3D software products and to large manufacturing
companies for building in-house proprietary 3D applications. The ACIS 3D
modeling engine is also broadly licensed to leading universities and research
institutions worldwide and is the foundation for many of the Company's other
products.
The Company licenses its Component Technologies to software developers
using a direct sales force headquartered in Boulder, Colorado with sales
offices in Monchengladbach, Germany and Tokyo, Japan. Development licenses for
the ACIS 3D Software vary in price depending on the licensed functionality and
distribution rights. Maintenance services, which include product updates, are
available for an annual fee. Most licensees also pay royalties based on a
percentage of net revenue received from applications incorporating the ACIS 3D
Software.
The ACIS 3D modeling software is an open, object-oriented technology that
provides state-of-the-art modeling capabilities to numerous popular CAD/CAM/CAE
software applications. The software has been developed in C++ and employs a
modern "plug-in" architecture that lowers the cost for customer integration and
for Spatial's in-house development. Spatial's software runs on Microsoft(R)
Windows NT (TM), Windows (R) 98 and 95 and the major Unix (R) operating system
platforms.
In 1998, Spatial introduced five product releases of the ACIS 3D Toolkit
and introduced several component software products, including IGES (Initial
Graphics Exchange Standard), Model Healing, and Deformable Modeling that were
well received in the market.
Today, there are over 480 ACIS licensees worldwide and over 175
ACIS-enabled applications that serve more than 1.3 million end-users, making
ACIS one of the most widely used 3D modeling kernels in the world. ACIS
end-users can interchange models with other ACIS end-users via the ACIS SAT(TM)
file format. The ACIS SAT file format is key to 3D model interoperability among
ACIS-enabled applications, including ABAQUS/CAE by Hibbit, Karlsson & Sorensen,
Inc., AutoCAD and Mechanical Desktop by Autodesk, Inc., CADKEY by Baystate
Technologies, Inc., Grade/CUBE II by Hitachi Zosen Information Systems, GSCAD
by Intergraph Corporation, IronCAD by Visionary Design Systems, Inc., Maxwell
3D Field Simulation by Ansoft Corporation, Working Model 3D by
MacNeal-Schwendler, TurboCAD Solid Modeler by IMSI, and Vellum Solids by Ashlar
Inc.
8.
<PAGE> 11
INTEROPERABILITY SOLUTIONS
Interoperability of 3D models makes it possible for an end user to employ
any 3D CAD model in a variety of design, analysis or manufacturing
applications, regardless of which CAD system was used to create the model.
Manufacturers throughout the world have 3D model interoperability requirements
as they exchange models between departments, divisions and external suppliers.
However, interchanging 3D models is significantly more difficult than
interchanging different word processor documents because CAD/CAM/CAE suppliers
often use different mathematical representations of geometry, operate at
different levels of geometric accuracy, and have vastly different data
representations. Inadequate interoperability capabilities in the industry have
led to a pent-up demand for powerful 3D model interoperability solutions and
have led industry analysts to tag interoperability as the most vexing and
costly problem faced by the manufacturing industry today.
Spatial developed a strategy for 3D model interoperability solutions in
1998 after having identified interoperability as a large market opportunity and
after receiving requests from many of the Company's OEM and industrial
customers for such solutions. Spatial believes that the advantage in solving
model interoperability rests in the hands of a 3D modeling company. The Company
further believes that its ACIS modeler, whose SAT file format incorporates the
highest model precision and geometric coverage, is ideally suited to form the
foundation for a broad-based set of interoperability solutions.
The Company's product strategy identifies ACIS as the foundation technology
and calls for three additional technologies: translation software for converting
foreign models into ACIS SAT format; healing software to repair inaccurate
models; and tolerant modeling extensions to the ACIS modeler to handle
inaccurate models that can not be fully healed. These technologies were staffed
and targeted for delivery together with ACIS 5.0. In addition, Spatial
identified a need for expertise in data translation standards, product data
management integration, and enterprise level information technology, all leading
to the IDA acquisition in December 1998.
INTERDATA ACCESS, INC. ACQUISITION
To strengthen Spatial's interoperability expertise and broaden the
Company's interoperability solutions, Spatial acquired IDA in December 1998 by
issuing 1.4 million shares of Spatial's common stock in exchange for all of the
outstanding common stock of IDA. The acquisition has been accounted for as a
pooling of interests.
The IDA acquisition strengthened Spatial's interoperability solutions and
expertise as IDA is recognized as a strategic provider of 3D product data
viewing, exchange software, and consulting services to Fortune 500 industrial
companies worldwide. IDA's most popular products include IntraVISION(TM), Data
Exchange Manager and IGES Quality Control & Development tools to enhance the
implementation of model translation support using the IGES standard. Customers
of IDA's software solutions and consulting services include BMW AG, The Boeing
Company, Harley-Davidson Motor Company, Motorola, Inc., Hitachi, Ltd.,
Bombardier Inc., Caterpillar Inc., Diebold Incorporated, Northrop Grumman
Corporation, Silicon Graphics, Inc., and General Electric Company.
The Company's Interoperability Solutions are marketed to both its
traditional OEMs and to large manufacturing enterprises for use by engineers
and other corporate users to access, view, manipulate and exchange 3D model
data as it moves through the product engineering process. The product
engineering process involves moving products from initial concept to a
manufactured product. Interoperability Solutions are targeted toward users and
applications throughout this process.
Spatial's Interoperability Solutions may be used as stand-alone products,
or "clients", often connected through the Internet, corporate intranet or
world-wide web to in-house interoperability applications, or "servers." These
interoperability tools can be combined with other Spatial component
technologies and integrated with corporate data repositories such as Product
Data Management (PDM) or Manufacturing Resource Planning (MRP) systems to form
total interoperability solutions. As such, the Company's Interoperability
Solutions and Component Technologies work together to provide efficient methods
of sharing and accessing product data throughout the engineering and
manufacturing processes, helping companies reduce cost and improve time to
market.
THREE-DIMENSIONAL MODELING OVERVIEW
3D modeling refers to the ability to create, modify and manipulate 3D
objects digitally on a computer. The data used to describe a 3D model can vary
dramatically from system to system. The shape of a 3D object (geometry) is
usually described using mathematical definitions of curves and surfaces which
includes their position in space. Visual attributes such as color, material,
textures and light reflectance can be attached to curves and surfaces of a
model to further describe an object when it is rendered on a computer display
monitor. General purpose attributes such as cost, supplier, and density are
also often attached to models to more fully describe a product's
characteristics. With 3D solid modeling, rigorous definitions of volumes are
maintained in addition to the mathematical definition of curves and surfaces,
thereby enabling the modeling of form features, dimensions and
9.
<PAGE> 12
constraints, plus the automatic calculation of mass, moments, weights,
interference and other physical properties. As a result, 3D applications
employing solid models can incorporate more accurate, lifelike and intuitive
modeling capabilities than other modeling technologies. The Company's ACIS 3D
modeling software enables all of the above in that it supports the modeling of
curves, surfaces and solids and general purpose attributes in one unified
environment.
Historically, CAD has been the primary market for 3D modeling software, and
the use of 3D modeling for CAD applications has become widespread. Today, 3D
modeling software is extending beyond the CAD market and is increasingly
affecting the way people communicate, work, learn and play. 3D modeling
software is already playing a key role in product engineering and manufacturing
process improvements worldwide, and product data interoperability, and related
technologies, are emerging as a key growth area throughout the industry.
PRODUCT DATA INTEROPERABILITY
Nearly all manufacturing organizations in both the public and private
sector use multiple CAD/CAM/CAE (CAx) software products and multiple data
formats to model product designs. Each of these systems produces 3D model
assets that are unique to each combination of product, application and user.
Problems are caused when a user or division wants to share product model
information with another, because each CAx system provides a different set of
modeling capabilities, and operates at a different level of geometric accuracy
and model integrity. These problems are compounded as enterprise manufacturers
distribute their development worldwide and outsource more work to suppliers of
various size and capability, each of whom has yet another combination of CAx
systems. The larger the enterprise, the larger and more costly the problem -
more combinations of CAx systems, larger dependence on external suppliers and
global distribution of manufacturing facilities, some of which had been
acquired at some time with their own set of CAx systems.
Interoperability is the ability for a product model to be shared amongst
different CAx systems from different vendors, regardless of which CAx system
created it. Interoperability requires that the underlying data model
sufficiently span the combined requirements of each of the systems and
processes that will interact with the product model. Providing mission-critical
technologies that enable enterprise manufacturers to exchange these valuable
manufacturing assets between and among their various operations and suppliers
will be beneficial throughout the manufacturing and defense sectors of the
world, leading to cost savings and other derivative benefits.
The Company sees convergence between the requirements for this enterprise
interoperability market and its current and planned products, sales channel and
customer base. Many of Spatial's OEM customers have identified an improved
capability to import and manage 3D models from a wider variety of sources as one
of their most important business requirements. These customers believe that such
"interoperability" technology would enhance their ability to sell their
ACIS-enabled products to the world's manufacturing industry. In addition, the
Company believes the rapid growth of powerful personal computers with advanced
3D graphics capabilities, coupled with strong demand for solutions to these
interoperability problems, will open significantly broader markets for its
software products. Thus, as a complementary target market, the Company also
plans to leverage the strengths of its products and business model to target
this new business opportunity.
PRODUCTS AND TECHNOLOGY
Spatial develops 3D modeling software, complementary products and
consulting services. Spatial's products and services help optimize engineering
processes in companies by enabling commercial software companies to create more
advanced, less expensive product modeling software products, and by enabling
cost-effective access, exchange and sharing of product data throughout the
manufacturing enterprise.
The Company's principal products include the ACIS 3D modeling engine and
associated optional component extensions. The ACIS 3D modeling engine, often
referred to as the ACIS "Kernel", is used for the creation, definition and
manipulation of 3D shapes. ACIS component extensions, also called "Husks",
enhance the modeling engine by providing optional, more advanced or targeted
functionality. The ACIS 3D Toolkit provides a suite of component extensions
packaged with the modeling engine. This packaging allows developers to shorten
the overall development process for 3D software applications, reducing their
development costs and time to market.
The Company's ACIS 3D modeling software is designed as an open,
component-based software technology that is compatible with the most popular
computing platforms. Open architecture allows commercial or corporate software
developers to integrate the ACIS 3D modeling engine and component extensions
with other "best of breed" applications and tools. This allows these developers
to better address the requirements of specific markets, products and
applications. In addition, the ACIS SAT data format has become established as a
de-facto industry standard that allows end-users to share 3D models created
with different ACIS-enabled applications.
The Company's Interoperability Solutions provide product data viewing and
exchange software for end-users in large manufacturing companies.
Interoperability Solutions and consulting services enable customers to optimize
10.
<PAGE> 13
engineering processes by providing efficient methods of sharing and accessing
product data throughout the design and manufacturing process.
In addition, the Company provides consulting services to assist software
developers in the effective use, implementation and deployment of products
based on their enabling products.
ACIS 3D MODELING ENGINE
The ACIS 3D modeling engine is the Company's flagship product and provides
the foundation for many of the Company's other products. ACIS enables solid,
surface and wire-frame modeling in a single modeling environment. The ACIS 3D
modeling engine uses a boundary-representation data format to accurately
represent the volume of a 3D model and uses a mathematical definitions of
curves and surfaces to model the shape of a model. This technique offers
greater precision than other 3D modeling techniques, such as wire-frame,
planar-facet and surface modeling techniques, and is better at producing
complex objects with smooth flowing lines, resulting in richer, more physically
realistic models.
The informational completeness of ACIS models allows software applications
to calculate many other physical properties such as strength, center of
gravity, mass, flexibility and momentum. As a result, 3D applications employing
ACIS 3D models can incorporate many operations for building, manipulating and
analyzing 3D shapes.
ACIS COMPONENT TOOLKITS
ACIS 3D Toolkit
The ACIS 3D Toolkit has been designed for rapid, low cost development of 3D
software applications. The ACIS 3D Toolkit consists of the ACIS 3D modeling
engine and a suite of component extensions to prototype and/or develop
applications that make it easy to create, manipulate, visualize and interact
with 3D models. Component extensions internal to the 3D Toolkit include
geometry construction, which facilitates the creation of geometric shapes,
graphical interaction, a graphical user interface for modeling, and basic
rendering, which applies shading, coloring and other visual features to the
model. The ACIS 3D Toolkit provides a powerful LISP-based scripting language
allowing the Company's customers to quickly prototype ACIS-enabled 3D
applications. Applications developers may also utilize an Applications
Procedural Interface and direct C++ access to tightly integrate the
functionality of the ACIS 3D modeling software into their 3D applications.
The Company offers its customers development licenses for the ACIS 3D
Toolkit which range in price depending on the licensed functionality and
distribution rights. Optional maintenance services, including product updates,
are available for an annual fee. In addition, most licensees are required by
their license agreements to pay royalties typically based on a percentage of
the net revenue generated by their sales of applications incorporating the ACIS
3D Toolkit.
Optional Component Extensions ("Husks")
In addition to the component extensions packaged with the ACIS 3D Toolkit,
the Company offers a series of optional component extensions, or "Husks", that
provide more advanced and specifically targeted functionality for the ACIS 3D
Toolkit. The introduction of new component extensions also enables the Company
to market new products to new and existing customers. Optional component
extensions are priced separately from the ACIS 3D Toolkit. Examples of
component extensions include:
o ADVANCED BLENDING. Advanced Blending allows users to seamlessly connect
or "blend" especially complex combinations of two or more curves or
surfaces. This component extension was developed to meet the advanced
design requirements necessary for consumer product, automotive and
aerospace design, where smooth, flowing surfaces are critical.
o DEFORMABLE MODELING. Deformable Modeling is an interactive sculpting
tool for creating and manipulating free-form curves and surfaces using
forces, pressures and constraints. Its local and global editing
features allow natural manipulation of B-spline and NURB curves and
surfaces to achieve a high level of artistic design while retaining the
ability to generate a precise machinable surface.
o LOCAL OPERATIONS. Local Operations are an advanced editing tool
enabling developers to easily modify features of a model after it has
been constructed. For example, features such as holes can be resized or
relocated on a model or removed completely. This component extension
has broad application throughout the mechanical marketplace,
particularly in manufacturing design.
11.
<PAGE> 14
o SHELLING. Shelling offers the ability to convert a solid volume to a
thin-walled volume by "shelling" out the inside of an object. Since it
is usually faster to model an object as a solid volume and then remove
the interior contents, shelling reduces design time. For example, this
component extension can be used to design thin-walled plastic parts,
such as a computer monitor casing or a telephone handset.
o MODEL HEALING. Many 3D models from legacy systems and models that have
been transferred through neutral file formats can have varying levels
of precision. These models can be inaccurate and, consequently,
unusable in many high-performance modeling applications. ACIS Healing
Husk provides the ability to "heal" (repair) these models. The Husk
detects and corrects a large percentage of tolerance inaccuracies in a
model's geometry. Healing allows users to turn inaccurate models into
precise ACIS models that can easily be shared between different design
environments or with downstream applications that require exact models,
such as computer-aided manufacturing (CAM).
o IGES TRANSLATION. IGES Translation provides the functionality for
exchanging geometric data in IGES format, between proprietary
applications and precision ACIS-enabled applications. This component
also performs limited cleanup and repair of models and compensates for
some of the subtle differences between IGES implementations. It also
provides user-controlled options to tune the import and export of IGES
files.
o VDA-FS TRANSLATION (standard for the transfer of surface data defined
by the German Automotive Manufacturers Association). VDA-FS Translation
provides the functionality for exchanging geometric data in VDA-FS file
format between proprietary applications and precision ACIS-enabled
applications. This component performs limited cleanup and repair of the
model and compensates for some of the subtle differences between VDA-FS
implementations. It also provides user-controlled options to tune the
import and export of VDA-FS files.
ACIS INTEROPERABILITY SOLUTIONS
In 1998, the Company undertook the development and marketing of
interoperability solutions to both its traditional OEM's and to large
manufacturing organizations. These Interoperability Solutions are designed to
help customers use and share 3D content in different areas of an organization.
In addition, Interoperability Solutions create demand for ACIS-enabled
applications and ACIS 3D content, thus driving sales of the Company's ACIS 3D
Toolkit and generating royalty revenues for the Company.
IntraVISION
IntraVISION provides users with a single tool to access various forms of
product data (legacy information, plot files, documents and CAD models)
produced from a variety of different applications, enabling them to share,
communicate and review data used in the creation, support and maintenance of
manufactured products. IntraVISION preserves the intelligence found in the
native CAD/CAM file. This enables users the ability to view, measure, markup
and manipulate the accurate data of original designs and concurrent engineering
processes.
IGES Quality Control and Development Tools
Composed of three products, the IGES Toolkit provides tools for developing
high-level IGES engineering applications. These components are IGESVIEW, IGES
Parser/Verifier, and IGESXpert. IGESVIEW is a graphics viewer for the display,
interrogation and manipulation of IGES files in their graphical form. The IGES
Parser/Verifier is a detailed analysis utility for checking conformance of an
IGES file to the IGES specification and to the CALS and JAMA subsets. IGESXpert
is a powerful IGES file browser and editor for the examination, flavoring, and
repair of IGES files.
ACIS 3D Open Viewer
In 1997, the Company introduced the ACIS 3D Open Viewer. The Viewer is an
end-user application that allows users to view models created by any
ACIS-enabled application. ACIS 3D Open Viewer provides basic visualization
functions for 3D CAD models and serves as a "bridge" to Microsoft Office
applications, allowing users to embed 3D content within their documents and
presentations.
DEVELOPMENT CONSULTING SERVICES
Spatial provides consulting services to both Toolkit and Interoperability
products customers to help the full spectrum of Spatial customers integrate
Spatial's products into their enterprise or customize Spatial's products to
address their unique requirements.
12.
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TRAINING
Spatial offers comprehensive basic and advanced training classes in the use of
OEM and interoperability products. Seminars and focused training materials are
being developed for component extensions (Husks) to the ACIS 3D toolkit.
OEM CONSULTING
Expert consultants are available to further accelerate the delivery of
ACIS-enabled applications to market by our OEM customers. These services
include assistance with application design, prototype product and code reviews,
and shared development.
PRODUCT DATA CONSULTING
Interoperability customers can avail themselves of our extensive background in
developing and providing a variety of custom solutions to product data
integration problems. Coupled with our Interoperability solutions, Spatial
offerings include:
o Data exchange services
o Viewing and PDM integration
o Enterprise data modeling
o Development and implementation of data sharing environments
CUSTOMERS
The Company's customer base of over 2200 licensees generally falls into one
of four categories:
(i) software developers who create commercial ACIS-enabled products for
resale
(ii) large enterprise manufacturing companies who use the Company's
Component Toolkits for internal development of interoperability or 3D
modeling applications
(iii) large enterprise manufacturing companies who use the Company's
Interoperability Solutions to access, exchange and share product data
throughout their engineering and manufacturing processes, to reduce
their cost of innovation and product development
(iv) leading universities and research institutions.
Software application developers represent the majority of the Company's
current customer base and revenue from Component Toolkits. The Company's
Component Toolkit sales to enterprise developers are important because they
create demand for ACIS 3D modeling technology by encouraging additional
commercial software developers to produce more ACIS-enabled applications. In
addition, sales to universities and research institutions have served valuable
roles as (i) a training ground for future software developers for both the
commercial software and enterprise manufacturing industries, (ii) a "global
incubator" for design ideas incorporated by the Company, and (iii) a useful
mechanism to educate staff and students in ACIS 3D modeling technology and
motivate its use in academic research.
In order to encourage the adoption of the ACIS 3D modeling technology by
the CAD market, in June 1991 the Company entered into a strategic relationship
with Autodesk Inc. Pursuant to the Company's agreements with Autodesk, the
Company granted a perpetual nonexclusive license of the ACIS 3D modeling engine
for use in Autodesk's family of products. Autodesk paid the Company an initial
license fee and is required to pay the Company royalties on a quarterly basis
for products sold which incorporate the Company's ACIS 3D modeling software. In
addition, Autodesk is required to pay maintenance fees which entitle Autodesk
to license product upgrades as they are released. Either party may terminate
upon material breach of the agreement. During 1996, 1997 and 1997 Autodesk
accounted for 10%, 11%, and 11% of total revenue, respectively.
Spatial acquired IDA in December 1998 to help accelerate its ability to
deliver interoperability solutions, and to create demand for ACIS-enabled
applications and ACIS 3D content within manufacturing companies, thus driving
sales of the Company's ACIS 3D Toolkit and generating royalty revenues for the
Company. IDA's customer base of over 1800 industrial manufacturing companies
provide a significant realizable market for Spatial's Component Toolkit and
Interoperability Solutions.
RESEARCH AND PRODUCT DEVELOPMENT
The Company believes that its continued growth will depend in large part on
its ability to maintain and enhance its current products, develop new products
and maintain technological competitiveness. The Company has built a development
group with specialized expertise in geometric modeling techniques, advanced
mathematics and C++
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<PAGE> 16
programming techniques. Spatial finished 1998 with 64 people in software
development, including third party developers, 22 of whom have doctorates. The
development organization is recognized as one of the technology centers of
excellence for 3D modeling worldwide. During 1996, 1997, and 1998 research and
development expenses were $4.2 million, $4.6 million, and $5.7 million,
respectively.
To maintain and improve its competitive position, the Company is committed
to providing its customers technological innovations and product upgrades. In
April 1998, the Company released ACIS 4.0, which dramatically improved the
performance of the product, providing customers with additional competitive
advantages in the 3D marketplace. The Company has since executed an aggressive
schedule of follow-up releases approximately every two to three months, to
extend it's leading position in the marketplace. In January 1999, the Company
released version 5.0 of the ACIS 3D Toolkit, again extending the functionality
and performance of its flagship product.
The Company identifies customer requirements for product enhancements and
new products through an analysis of current customer requests communicated
through the Technical Support Department and new customer requests communicated
through the Sales and Marketing Department. In order to enhance the level of
communication with its customers, the Company holds an annual developer
conference. See "Risk Factors - We Depend On Swift And Timely Introductions of
New Products; - Our Products May Contain Undetected Errors."
The Company augments its internal development capabilities through a
network of development partners possessing geometric modeling expertise. The
Company has development relationships with recognized leaders in 3D modeling.
The Company typically co-owns the technology with the development partner and
has the exclusive right to market and distribute that technology.
The Company also resells certain rendering component extensions from other
third party software developers. Although the Company has a license to
distribute these products, the developer retains ownership of this software and
there can be no assurance that the Company will be able to control the
development of such extensions.
SALES, MARKETING AND DISTRIBUTION
To date, the Company has focused its sales, marketing and distribution
efforts primarily on the CAD software market. The Company has also marketed and
sold its 3D modeling software to emerging 3D markets including multimedia,
technical documentation, architecture, virtual reality, animation, and
professional filmmaking. Beginning in late-1998, with the emergence of new
products that address interoperability problems in manufacturing companies, and
with the acquisition of IDA and its products that target these same companies,
the Company expects to expand its sales, marketing and distribution to include
large discrete manufacturing companies worldwide.
The Company markets its Component Toolkits to software developers worldwide
through a direct sales force serviced by the Company's Boulder, Colorado
facility and its sales offices in Monchengladbach, Germany and Tokyo, Japan.
The Company's sales cycle for new customers of its Component Toolkits is
generally three to nine months. Following identification of a prospect, the
Company trains prospects in design and programming techniques. The sales cycle
then entails a preliminary agreement that, for a fee, entitles the customer to
a one to three month limited license primarily for product evaluation.
Following a satisfactory evaluation, the Company typically licenses the ACIS 3D
modeling software and other components on a non-exclusive, perpetual use basis.
The Company generally ships products as orders are received and, therefore, has
little or no backlog. See "Risk Factors--Our Operating Results Fluctuate
Substantially."
The market for the Company's ACIS Interoperability Solutions has
significantly different characteristics than the Component Toolkits. In
addition, the Company anticipates a much broader market base for ACIS
Interoperability Solutions. Thus Spatial expects to use a multi-channel
distribution model for Interoperability Solutions, employing a combination of
the Company's existing direct sales force and value-added resellers who provide
local sales and support, worldwide.
The Company's sales cycle for Interoperability Solutions is generally
shorter than for Component Toolkits. Smaller unit purchases are often made in a
few weeks, while larger purchases are generally more "corporate" in nature and
often follow the implementation of database, product data management (PDM) and
related software purchases. These large corporate agreements often take many
months to unfold but are typically large in scale and scope.
For its Interoperability Solutions, the Company uses all common
merchandising techniques, such as advertising, direct mail and trade shows,
with good return on marketing investments. The Company also uses extensively a
web-based distribution model for demonstration versions of its Interoperability
Solutions. A typical prospect contacts Spatial either by responding to its
direct marketing, or personally accesses and downloads demonstration versions
of one or more products, after which contact is made to the Company's sales
force or VAR channel.
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In addition, the Company believes that users targeted for ACIS
Interoperability Solutions will purchase substantial numbers of products over
the Internet. Accordingly, the Company anticipates marketing ACIS
Interoperability Solutions through the Internet, leading electronic catalogs,
feature story writing for visual programming trade publications, and attendance
at key conferences. Furthermore, the Company expects to provide add-on
Component Products ("plug-ins") through its web site for purchase and download
directly by prospects with little or no intervention.
CUSTOMER SERVICE AND SUPPORT
The Company believes that customer service and support is critical to the
success of its products. Customer phone calls or e-mails are answered and
managed by support professionals who review customer communications with the
appropriate development group and coordinate the response to the customer.
As part of its licensing arrangements for all products, the Company offers
maintenance services including technical updates and product support. To date,
a majority of customers have purchased these maintenance services which are
offered on a renewable basis for an annual fee. These services allow customers
full access to the products they have licensed, including all new releases,
telephone support and other support required to utilize the Company's products
effectively.
COMPETITION
The markets for the Company's products are highly competitive, subject to
rapid change and characterized by constant demand for new product features and
pressure to accelerate the release of new products and product enhancements and
to reduce prices.
COMPONENT TOOLKIT COMPETITION
A number of companies currently offer products that compete directly or
indirectly with one or more of the Company's products. These companies include,
among others, Shape Data, Ltd. (a subsidiary of Unigraphics.) and Ricoh Corp.
In addition, the Company also competes with in-house proprietary development
programs producing modeling tools and 3D products. While the Company is not
aware of any competitor providing solid modeling tools to the visual
programming market, other companies may have introduced other modeling
technologies to this market. Many of the Company's competitors or potential
competitors have or may have significantly greater financial, management,
technical and marketing resources than the Company. A variety of potential
actions by any of the Company's competitors, including announcement or
accelerated introduction of new or enhanced products or features, increased
promotion or a reduction of product prices could have a material adverse effect
on the Company's business, operating results and financial condition. In
addition, the Company's present and future competitors may be able to develop
products comparable or superior to those offered by the Company or adapt more
quickly than the Company to new technologies or evolving market requirements.
The Company believes that the primary competitive factors affecting the market
for the Company's products include performance, features, quality, name
recognition, reputation, access to channels of distribution, the quality of
documentation, customer support and price. Although the Company believes that
it competes favorably with respect to these factors, there can be no assurance
that the Company will be able to continue to compete effectively with respect
to these or any other competitive factors. See "Risk Factors--Competition In
Our Industry Is Intense."
INTELLECTUAL PROPERTY
The Company regards its technology as proprietary and relies primarily on a
combination of copyright, trademark and trade secret laws, employee and third
party nondisclosure agreements, and other intellectual property protection
methods to protect its products and technology. The Company has no patents with
respect to its ACIS 3D modeling technology. The Company believes that the
ownership of patents is not presently a significant factor in its business and
that its success does not depend on the ownership of patents, but primarily on
the innovative skills, technical competence and marketing abilities of its
personnel. Existing copyright laws afford only limited protection, and it may
be possible for unauthorized third parties to copy the Company's products or to
reverse engineer or obtain and use information that the Company regards as
proprietary. The Company licenses portions of the technology used in the ACIS
3D modeling engine and component extensions. See "Business--Research and
Product Development." The Company also resells certain component extensions of
third party software developers. See "Risk Factors--We Are Dependent on Third
Party Developers" and "--We May Be Exposed To Risks Of Intellectual Property
and Proprietary Rights Infringements."
While the Company is not aware that any of its products infringe the
proprietary rights of any third parties, there can be no assurance that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that it could increasingly be subject to
such claims as the number of products and competitors in the 3D modeling
software market grows and the functionality of such products overlaps with
other
15.
<PAGE> 18
industry segments. See "Risk Factors-- We May Be Exposed To Risks Of
Intellectual Property and Proprietary Rights Infringements."
EMPLOYEES
As of December 31, 1998, the Company had 102 full-time employees,
including 54 in product development, quality assurance and technical support,
34 in sales and marketing and 14 in administration. The Company's employees are
not subject to any collective bargaining agreements, and the Company believes
its relations with its employees are good.
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SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders, the
number of shares of Spatial common stock owned by each of them as of the date
of this prospectus and the number of shares of Spatial common stock which may
be offered pursuant to this prospectus. The selling stockholders may offer all,
some or none of their shares of Spatial common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BEING SHARES BENEFICIALLY OWNED AFTER
NAME PRIOR TO OFFERING(1)(2) OFFERED OFFERING (2)
- -------------------------- ------------------------- ------------ -------------------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
William Turcotte(3) (4) 715,000 7.69% 665,000 50,000 *
ProSTEP 665,000 7.19% 665,000 0 0
Produktdatentechnologie
GmbH(4)
Robert Crawford(4) 35,000 * 35,000 0 0
Charlene Hess(4) 35,000 * 35,000 0 0
Ian Braid(5) 33,333 * 33,333 0 0
Judith Braid(5) 50,000 * 50,000 0 0
Brendel W. Lang(5) 41,667 * 41,667 0 0
Charles A. Lang(5) 41,667 * 41,667 0 0
Alan Grayer & Joan 83,333 * 83,333 0 0
Grayer(5)
Richard Sowar(6) 401,968 4.26% 200,000 201,968 2.14%
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
issuable upon exercise of options currently exercisable, or exercisable
within 60 days of the date of this prospectus, are deemed outstanding for
computing the percentage of the person holding such securities but are
not outstanding for computing the percentage of any other person. Subject
to community property laws where applicable, the persons named in the
above table have sole voting and investment power with respect to all
shares of Spatial common stock shown as beneficially owned by them.
(2) Although the selling stockholders have not expressed a specific intention
as to the number of shares of common stock to be sold, the table shows
the beneficial ownership that would result if all such shares were sold.
Percentage calculations are based upon 9,252,291 shares of Spatial common
stock outstanding as of January 29, 1999.
(3) William Turcotte has served as an executive officer of the Company as
Vice President, Enterprise Division since January 26, 1999. Of the
715,000 shares of common stock owned by Mr. Turcotte, (a) 221,666 shares
are subject to repurchase by the Company until fully vested on December
31, 1999 and (b) 50,000 shares are issuable upon exercise of a stock
option that is currently exercisable.
(4) William Turcotte, ProSTEP Produktdatentechnologie GmbH, Charlene Hess and
Robert Crawford (the "IDA Selling Shareholders") previously held shares
of IDA. On December 23, 1998, Spatial acquired all the capital stock of
IDA in exchange for shares of the Company's common stock pursuant to a
Stock Purchase Agreement among Spatial, IDA and the IDA Selling
Shareholders (the "IDA Purchase Agreement"). Pursuant to the IDA Purchase
Agreement, each of the IDA Selling Shareholders, in exchange for their
shares of common stock of IDA, received the shares of the Company's
common stock set forth in the table above. Each of the IDA Selling
Shareholders who were employees of IDA has been offered employment with,
and is now employed by, Spatial.
(5) On December 31, 1997, the Company issued an aggregate of 250,000 shares
of the Company's common stock to persons affiliated with Three-Space
Limited (the "TSL Shareholders"), a limited company organized under the
laws of England ("TSL"), pursuant to the Development Agreement, between
the Company and TSL, dated December 31, 1997 (the "Development
Agreement"). Pursuant to the Development Agreement, each of the TSL
Shareholders received the shares of the Company's common stock set forth
in the table above.
(6) Includes 180,833 shares issuable upon exercise of stock options that are
currently exercisable. Mr. Sowar is a party to the Investors' Rights
Agreement among the Company and the parties named therein, dated as of
February 4, 1993 (the "Investors' Rights Agreement"), pursuant to which
Mr. Sowar has registration rights with respect to a portion of the shares
of the Company's common stock set forth in the table above.
17.
<PAGE> 20
PLAN OF DISTRIBUTION
Spatial is registering the shares offered by the selling stockholders
hereunder pursuant to covenants and contractual registration rights contained
in the IDA Purchase Agreement, the Registration Rights Agreement, by and
between the Company and TSL, dated December 31, 1997 (the "Registration Rights
Agreement"), and the Investors' Rights Agreement. The selling stockholders may
sell all, some or none of the shares of Spatial common stock offered by this
prospectus from time to time directly to purchasers in one or more
transactions. Sales may be made on the American Stock Exchange or in private
transactions or in a combination of such methods of sale. Such transactions may
be at a fixed price, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and
underwriters or dealers who may receive fees of commissions in connection
therewith.
Any of the selling stockholders may from time to time offer shares of
Spatial common stock beneficially owned by them through underwriters, dealers
or agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the selling stockholders and the purchasers of
the shares for whom they may act as agent. Each selling stockholder will be
responsible for payment of commissions, concessions and discounts of
underwriters, dealers or agents. The aggregate proceeds to the selling
stockholders from the sale of the shares of Spatial common stock offered by
them will be the purchase price of such shares less discounts and commissions,
if any. Each of the selling stockholders reserves the right to accept and,
together with their agents from time to time to reject, in whole or in part,
any proposed purchase of shares to be made directly or through agents. Spatial
will not receive any of the proceeds from this offering. Alternatively, the
selling stockholders may sell all or a portion of the shares of Spatial common
stock beneficially owned by them and offered hereby from time to time on any
exchange on which the securities are listed on terms to be determined at the
times of such sales. The selling stockholders may also make private sales
directly or through a broker or brokers. Transactions through broker-dealers
may, including block trades in which brokers or dealers will attempt to sell
the shares of Spatial common stock as agent but may position and resell the
block as principal to facilitate the transaction, or one or more underwritten
offerings on a firm commitment or best effort basis.
From time to time, the selling stockholders may transfer, pledge, donate or
assign shares of Spatial common stock to lenders or others and each of such
persons will be deemed to be a "selling stockholder" for purposes of the
prospectus. The number of the selling stockholders' shares beneficially owned
by a selling stockholder who transfers, pledges, donates or assigns shares of
Spatial common stock will decrease as and when they take such actions. The plan
of distribution for selling stockholders' shares sold hereunder will otherwise
remain unchanged, except that the transferees, pledgees, donees or other
successors will be selling stockholders hereunder.
A selling stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the shares
of Spatial common stock in the course of hedging the positions they assume with
such selling stockholder, including, without limitation, in connection with
distribution of the shares of Spatial common stock by such broker-dealers. In
addition, the selling stockholder may, from time to time, sell short the shares
of Spatial common stock, and in such instances, this prospectus may be
delivered in connection with such short sales and the shares offered hereby may
be used to cover such short sales. The selling stockholders may also enter into
option or other transactions with broker-dealers that involve the delivery of
the shares of Spatial common stock to the broker-dealers, who may then resell
or otherwise transfer such shares. The selling stockholders may also loan or
pledge the shares to a broker-dealer and the broker-dealer may sell the shares
as loaned or upon a default may sell or otherwise transfer the pledge shares.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of the shares of Spatial common stock offered
hereby may be deemed to be underwriters within the meaning of the Securities
Act of 1933 (the "Securities Act"), and any discounts, commissions or
concessions received by them and any provided pursuant to the sale of shares by
them might be deemed to be underwriting discounts and commissions under the
Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. There is no
assurance that any selling stockholder will sell any or all of the shares of
Spatial common stock described herein, and any selling stockholder may
transfer, devise or gift such securities by other means not described herein.
To the extent required, the specific shares of Spatial common stock to be
sold, the names of the selling stockholders, the respective purchase prices and
public offering prices, the names of any agent, dealer or
18.
<PAGE> 21
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part. Spatial entered into a stock purchase
agreement in connection with exchange of the shares of common stock which
required it to register the shares of Spatial common stock under applicable
federal and state securities laws under certain circumstances and at certain
times. The stock purchase agreement provides for cross-indemnification of the
selling stockholders and Spatial and their respective directors, officers and
controlling persons against certain liabilities in connection with the offer
and sale of the shares of Spatial common stock, including liabilities under the
Securities Act, and to contribute to payments the parties may be required to
make in respect thereof.
Pursuant to the terms of the IDA Purchase Agreement, the Registration
Rights Agreement and the Investors' Rights Agreement, Spatial has agreed to
register shares of Spatial's common stock held by the IDA Shareholders, the TSL
Shareholders and the parties to the Investors' Rights Agreement under
applicable federal and state securities laws. Pursuant to those agreements, the
Company has filed a registration statement related to such shares offered
hereby. Spatial has agreed to keep such registration statement effective until
the completion of the sale of the Company's common stock held by the IDA
Shareholders in the case of the Purchase Agreement, for a period of up to
ninety days in the case of the Registration Rights Agreement and for a period
of up to one hundred twenty (120) days in the case of the Investors' Rights
Agreement. The Company will pay substantially all of the expenses incurred by
the selling stockholders and the Company incident to the offering and sale of
the shares of the Company's common stock, excluding any underwriting discounts
or commissions. Such expenses are estimated to be $60,000.00.
LEGAL MATTERS
The validity of the shares of Spatial common stock offered hereby will be
passed upon for Spatial by Cooley Godward LLP, Boulder, Colorado.
EXPERTS
The financial statements of Spatial as of December 31, 1997 and 1998, and
for each of the years in the three year period ended December 31, 1998 have
been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
19.
<PAGE> 22
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE NOTES OR CONVERSION SHARES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
NOTES OR CONVERSION SHARES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR IMPLY THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
1,850,000 SHARES
SPATIAL TECHNOLOGY INC.
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
, 1999
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the registrant in connection with the
sale of the common stock being registered. All the amounts shown are estimates
except for the registration fee and the AMEX filing fee.
<TABLE>
<S> <C>
Registration fee $ 1,961
AMEX filing fee $ 17,500
Printing and engraving expenses $ 1,000
Legal fees and expenses $ 30,000
Accounting fees and expenses $ 7,500
Miscellaneous $ 2,039
---------
Total $ 60,000
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended ("Securities Act").
The registrant's Bylaws also provide that the registrant will indemnify its
directors and executive officers and may indemnify its other officers,
employees and other agents to the fullest extent permitted by Delaware law.
In addition, the registrant's Restated Certificate of Incorporation
("Restated Certificate") provides that the liability of its directors for
monetary damages shall be eliminated to the fullest extent permissible under
Delaware law. Pursuant to Delaware law, this includes elimination of liability
for monetary damages for breach of the directors' fiduciary duty of care to the
registrant and its stockholders. These provisions do not eliminate the
directors' duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the registrant, for
act or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for any transaction from which the director derived
an improper personal benefit, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
also does not affect a director's responsibilities under any other laws, such
as the federal securities laws or state or federal environmental laws.
The registrant has entered into indemnification agreements with each of its
directors and executive officers that require the Company to indemnify such
persons to the fullest extent authorized or permitted by the provisions of the
Restated Certificate and Delaware law against expenses, judgements, fines,
settlements and other amounts actually and responsibly incurred (including
expenses of a derivative action) in connection with any proceeding, whether
actual or threatened, to which any such person may be made a party by reason of
the fact that such person is or was a director, officer, employee or other
agent of the registrant or any of its affiliated enterprise. Delaware law
permits such indemnification, provided such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the registrant and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
indemnification agreements also set forth certain procedures that will apply in
the event of a claim for indemnification thereunder. In addition, the
registrant maintains director and officer liability insurance which, subject to
certain exceptions and limitations, insures directors and officers for any
alleged breach of duty, neglect, error, misstatement, misleading statement,
omission or act in their respective capacities as directors and officer of the
registrant.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
II-1
<PAGE> 24
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ---------------------------------------------------------------
<S> <C>
3(i).3* Restated Certificate of Incorporation.
3(ii).5* Bylaws.
4.1 Reference is made to Exhibits 3(i).3 and 3(ii).5.
5.1 Opinion of Cooley Godward LLP.
10.3* Investors' Rights Agreement, by and among Spatial and the
investors listed on Schedule A thereto, dated as of February 4,
1993.
10.31** Registration Rights Agreement, by and between Spatial and Three
Space Limited, dated as of December 31, 1997.
10.33*** Stock Purchase Agreement, by and between Spatial, IDA and the
IDA Selling Shareholders named therein, dated as of December 23,
1998.
23.1 Consent of KPMG LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
*Incorporated by reference to the registrant's Registration Statement on Form
SB-2, File No. 333-5416-D, as amended.
**Incorporated by reference to the registrant's Current Report on Form 8-K,
File No. 000-28842, filed on January 16, 1998.
***Previously filed with the Securities and Exchange Commission as an exhibit
to the Schedule 13D (File No. 005-47261) filed by William Turcotte II on
January 4, 1999 and incorporated herein by reference thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee table in the
registration statement;
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided however, that paragraphs (1)(a) and (1)(b) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated
by reference in the registration statement.
II-2
<PAGE> 25
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to provisions described in Item 15 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(7) (a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to the initial bona fide offering thereof.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Boulder, State of Colorado, on February 22, 1999.
By: /s/ R. Bruce Morgan
---------------------------------------
R. Bruce Morgan
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints R. Bruce
Morgan and Todd S. Londa his or her true and lawful attorney-in-fact and agent,
each acting alone, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to the
registration statement on Form S-3, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Richard M. Sowar Chief Technical Officer and Chairman February 22, 1999
- ------------------------------------------------------ of the Board of Directors
Richard M. Sowar
/s/ R. Bruce Morgan President, Chief Executive Officer and February 22, 1999
- ------------------------------------------------------ Director (Principal Executive and
R. Bruce Morgan Financial Officer)
/s/ Todd S. Londa Vice President, Administration, February 22, 1999
- ------------------------------------------------------ Corporate Controller and Secretary
Todd S. Londa (Principal Accounting Officer)
/s/ Philip E. Barak Director February 22, 1999
- ------------------------------------------------------
Philip E. Barak
/s/ H. Robert Gill Director February 22, 1999
- ------------------------------------------------------
H. Robert Gill
/s/ M. Thomas Hull Director February 22, 1999
- ------------------------------------------------------
M. Thomas Hull
/s/ Fred F. Nazem Director February 22, 1999
- ------------------------------------------------------
Fred F. Nazem
</TABLE>
II-4
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------------------------------------------------
<S> <C>
3(i).3* Restated Certificate of Incorporation.
3(ii).5* Bylaws.
4.1 Reference is made to Exhibits 3(i).3 and 3(ii).5.
5.1 Opinion of Cooley Godward LLP.
10.3* Investors' Rights Agreement, by and among Spatial and the
investors listed on Schedule A thereto, dated as of February 4,
1993.
10.31** Registration Rights Agreement, by and between Spatial and Three
Space Limited, dated as of December 31, 1997.
10.33*** Stock Purchase Agreement, by and between Spatial, IDA and the IDA
Selling Shareholders named therein, dated as of December 23,
1998.
23.1 Consent of KPMG LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
*Incorporated by reference to the registrant's Registration Statement on Form
SB-2, File No. 333-5416-D, as amended.
**Incorporated by reference to the registrant's Current Report on Form 8-K,
File No. 000-28842, filed on January 16, 1998.
***Previously filed with the Securities and Exchange Commission as an exhibit
to the Schedule 13D (File No. 005-47261) filed by William Turcotte II on
January 4, 1999 and incorporated herein by reference thereto.
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Cooley Godward LLP]
February 22, 1999
Spatial Technology Inc.
2425 55th Street, Suite 100
Boulder, Colorado 80301
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Spatial Technology Inc. (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission covering the registration of up to 1,850,000 shares of the
Company's Common Stock, $.01 par value (the "Shares") which are owned by
certain selling stockholders named in the Registration Statement (the "Selling
Shareholders").
In connection with this opinion, we have examined the Registration Statement
and related Prospectus, the Company's Certificate of Incorporation and Bylaws,
as amended to date, and such other documents, records, certificates, memoranda
and other instruments as we deem necessary as a basis for this opinion. We have
assumed the genuineness and authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares are validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ Michael L. Platt
-------------------------
Michael L. Platt
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Spatial Technology Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
/s/ KPMG LLP
Boulder, Colorado
February 19, 1999
