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As filed with the Securities and Exchange Commission on November 21, 2000
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PLANETCAD INC.
(Name of Small Business Issuer in its charter)
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DELAWARE 7372 84-1035353
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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2520 55TH STREET, SUITE 200
BOULDER, COLORADO 80301
(303) 209-9100
(Address and telephone number of principal executive offices and
Principal Place of Business)
R. BRUCE MORGAN
2520 55TH STREET, SUITE 200
BOULDER, COLORADO 80301
(303) 209-9100
(Name, address and telephone number of agent for service)
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Copies to:
STEVEN A. COHEN, ESQ.
WHITNEY HOLMES, ESQ.
HOGAN & HARTSON L.L.P.
ONE TABOR CENTER
1200 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
TELEPHONE: (303) 899-7300
FACSIMILE: (303) 899-7333
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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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. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(d) 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. [ ]
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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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Title of each class of Proposed maximum Proposed maximum aggregate Amount of
securities to be registered Amount to be registered offering price per share offering price registration fee
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Common stock, par value
$.01 per share............. 3,655,556 $2.125(*) $7,768,056.00(*) $2,050.77
=================================================================================================================================
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(*) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
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.
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SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2000
PLANETCAD INC.
3,655,556 SHARES OF COMMON STOCK
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SECURITIES OFFERED.................... This Offering relates to the possible sale from time to time of
certain shares of PlanetCAD common stock and shares of PlanetCAD
common stock underlying warrants owned by certain of our
stockholders. A list of the selling stockholders and the securities
(including the securities underlying the warrants) being registered
on their behalf is included in "Selling Security Holders" beginning
on page 11 of this prospectus. The selling stockholders may sell the
shares being registered from time to time at the prevailing market
rate or in negotiated transactions. The selling stockholders may
sell such shares directly to purchasers or through brokers or
dealers. Brokers or dealers may receive compensation in the form of
discounts, concessions or commissions for the selling stockholders.
No period of time has been fixed within which the shares being
registered may be offered or sold.
USE OF PROCEEDS......................... We will not receive any of the proceeds from the sale of shares of
common stock by the selling stockholders. However, if one or more of
the selling stockholders exercise their rights under the warrants, we
could receive up to $7.8 million in gross proceeds representing the
exercise price for the shares of common stock underlying the
warrants. All proceeds we receive, if any, will be used for general
corporate purposes. We will not pay any underwriting commissions or
discounts in the offering of these shares. We will, however, pay
certain 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. For more information, see
"Plan of Distribution" on page 35 of this prospectus.
MARKET FOR THE SHARES............. Our common stock is traded on the over-the-counter market through the
American Stock Exchange under the symbol "PCD".
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INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. THEREFORE, WE URGE
YOU TO READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON
PAGE 4 IN ITS ENTIRETY BEFORE MAKING AN INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SECURITIES DISCUSSED IN THIS PROSPECTUS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Prospectus dated November 21, 2000.
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TABLE OF CONTENTS
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Page
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PROSPECTUS SUMMARY..........................................................1
The Company...........................................................1
The Selling Stockholders..............................................1
Risk Factors..........................................................1
The Offering..........................................................2
Summary Financial Information.........................................2
RISK FACTORS................................................................4
We are Implementing a New and Unproven Business Model.................4
Our Business Model is Subject to Risks Associated with the Internet...4
We have a Limited Operating History...................................5
We have a History of Losses and Expect Losses to Continue for the
Foreseeable Future..................................................5
We Depend on Swift and Timely Introduction of New Products............
We are Vulnerable to System Failures..................................5
We May Experience System Capacity Constraints Due to Increased Use of
Services............................................................5
We May Not be Able to Discover Software Defects.......................5
We May be Unable to Raise Additional Capital on Favorable Terms or at
All.................................................................6
Our Products May Contain Undetected Errors............................6
Competition in Our Industry is Intense................................6
We Depend on Timely Introductions of New Products.....................6
We are Dependent Upon Key Personnel and the Ability to Hire Additional
Personnel...........................................................7
We May Not be Able to Effectively Manage Our Growth...................7
We May be Exposed to Risks of Intellectual Property and Proprietary
Rights Infringement.................................................7
We May be Unable to Protect Against Online Security Breaches..........8
Future Sales of Our Common Stock May Depress Our Stock Price..........8
Our Stock Price is Highly Volatile....................................8
We Face Difficulties Doing Business in International Markets..........8
Our Business Faces Uncertainties and Potential Government Regulations
Regarding the Internet..............................................9
We and Our Customers May be Subject to Internet Related Taxes.........9
USE OF PROCEEDS.............................................................10
SELLING SECURITY HOLDERS....................................................11
DIRECTORS AND EXECUTIVE OFFICERS............................................12
Directors.............................................................12
Executive Officers....................................................13
EXECUTIVE COMPENSATION......................................................15
Summary Compensation Table............................................15
Option Grants in Last Fiscal Year.....................................16
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values.......................................................16
Compensation of Directors.............................................16
Employment Agreements.................................................17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................19
PLANETCAD'S BUSINESS........................................................20
Background............................................................20
Business Development..................................................20
Disposition of Component Software Division............................20
Intellectual Property Agreements Entered into with Dassault...........20
PlanetCAD Employees...................................................20
The Opportunity.......................................................20
Our Applications and Services.........................................21
Our Strategy..........................................................22
Our Business Model....................................................22
Usage of Public Internet Site By Second Tier and Third Tier
Suppliers...........................................................24
Co-Branding Relationships.............................................25
Competition...........................................................26
Customers.............................................................26
Effect of Government Regulations......................................26
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Research and Development Expenditures.................................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS............................................................28
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
September 30, 1999..................................................28
1999 Compared to 1998.................................................29
1998 Compared to 1997.................................................29
Liquidity and Capital Resources.......................................30
New Accounting Pronouncements.........................................30
Fluctuations in Quarterly Results.....................................31
DESCRIPTION OF PROPERTY.....................................................32
LEGAL PROCEEDINGS...........................................................32
DESCRIPTION OF SECURITIES...................................................33
Common Stock..........................................................33
Preferred Stock.......................................................33
Certain Provisions Relating to a Change of Control....................33
Indemnification of Directors and Officers.............................33
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.....................................................34
Transfer Agent........................................................34
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....................35
PLAN OF DISTRIBUTION........................................................35
LEGAL MATTERS...............................................................36
EXPERTS ....................................................................36
WHERE YOU CAN FIND MORE INFORMATION.........................................36
FINANCIAL STATEMENTS.......................................................F-i
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information in our financial statements and notes to those statements appearing
elsewhere in this prospectus. The following summary information is qualified in
its entirety by the information contained elsewhere in this prospectus.
THE COMPANY
We develop, market and support business-to-business Internet-based
tools, applications and services for professional design and manufacturing
engineers and companies involved in the manufacturing industry with special
focus on the computer-aided design ("CAD"), manufacturing ("CAM"), engineering
("CAE") and architecture markets for 3D modeling software and services. We focus
on the development, marketing, sales, support and integration of a
business-to-business platform, application services and supporting services for
the CAD/CAM/CAE and architecture market segments. We provide Internet-based
tools and applications that maximize the value of the engineering data in the
Internet-based manufacturing design and procurement supply chain. Our powerful
business-to-business platform, applications and services enable efficient
engineering information exchange for the more than ten million professional
manufacturing and design engineers worldwide and for information technology and
engineering professionals managing the manufacturing supply chain. These
engineers and managers benefit from more efficient Internet-based manufacturing
design and procurement processes, lower cost of production, and faster delivery
of products to market.
We intend to execute a business model combining Internet-based
"enterprise solutions" sold directly to large manufacturing enterprise
customers, and a public Internet portal and engineering application service for
the manufacturing industry. We are designing our Internet-based applications
service to eventually make available a broad set of Web-hosted software
applications, Internet-based commerce, content and community services to
manufacturing and design engineers worldwide.
We were incorporated under Delaware law on July 7, 1986, and had been
operating under the name Spatial Technology Inc. since that time until November
14, 2000. We changed our name to PlanetCAD Inc. on November 14, 2000 in
connection with the sale of our Component Software Division to Spatial Corp., a
wholly owned subsidiary of Dassault Systemes Corp. Our principal executive
offices are located at 2520 55th Street, Suite 200, Boulder, Colorado 80301, and
our telephone number is (303) 209-9100. Our Web site is www.planetcad.com.
Information contained in our Web site or any Web site referenced by our Web site
is not part of this prospectus.
THE SELLING STOCKHOLDERS
We have prepared this prospectus in connection with the registration of
certain shares of our common stock previously issued to various investors in
PlanetCAD in February 2000 and November 2000, and additional shares of common
stock underlying certain warrants issued to those same investors in February
2000. For a list of these investors and their common stock and warrant holdings,
see "Selling Security Holders" beginning on page 11 of this prospectus. We have
an obligation to register these shares under the terms of registration rights
agreements entered into between these selling stockholders and PlanetCAD in
connection with their February 2000 and November 2000 investments.
RISK FACTORS
See "Risk Factors" beginning on page 4 of this prospectus for a
discussion of certain factors that you should consider in evaluating an
investment in our common stock.
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THE OFFERING
COMMON STOCK OUTSTANDING 12,442,863 Shares
SHARES OF COMMON STOCK AND SHARES
UNDERLYING WARRANTS BEING REGISTERED
FOR SELLING STOCKHOLDERS 3,655,556 Shares
USE OF PROCEEDS We will not receive any of the
proceeds from the sale of shares of
common stock by the selling
stockholders. However, if one or
more of the selling stockholders
exercise their rights under the
warrants, we could receive up to $7.8
million in gross proceeds
representing the exercise price for
the shares of common stock underlying
the warrants. All proceeds we
receive, if any, will be used for
general corporate purposes.
AMEX OVER-THE-COUNTER SYMBOL "PCD"
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SUMMARY FINANCIAL INFORMATION
The following table presents a summary of our financial information for the
periods indicated. It should be read in conjunction with our consolidated
financial statements and the section "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" included elsewhere in this
prospectus. The summary financial information as of and for the nine months
ended September 30, 1999 and 2000, is unaudited and, in the opinion of
management reflects all adjustments that are necessary for the fair statement of
the financial position and the results of operations of the periods presented.
The results for the nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the full year. The information
below is historical and does not reflect pro forma adjustments for the purchase
of Prescient Technologies, Inc. and the sale of the component software division
which are shown in the pro forma financial statements included elsewhere in this
registration statement.
STATEMENT OF OPERATIONS DATA:
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Year ended Nine months ended
December 31, September 30,
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1998 1999 1999 2000
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Revenue ..................................................... $ -- $ 824 $ 643 $ 1,632
Cost of revenue ............................................. -- 191 157 699
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Gross profit .............................................. -- 633 486 933
Total operating expenses .................................... -- 1,741 1,312 8,169
--------- -------- -------- --------
Net loss from continuing operations ....................... -- (1,108) (826) (7,236)
--------- -------- -------- --------
Discontinued operations:
Income (loss) from discontinued operations ................ 201 (1,753) (229) (3,352)
--------- -------- -------- --------
Net income (loss) ........................................... $ 201 $ (2,861) $ (1,055) $(10,588)
========= ======== ======== ========
Basic and diluted income (loss) per common share:
Continuing operations ..................................... $ -- $ (0.12) $ (0.09) $ (0.64)
Discontinued operations ................................... $ 0.02 $ (0.19) $ (0.02) $ (0.30)
--------- -------- -------- --------
Net income (loss) ................................ $ 0.02 $ (0.31) $ (0.11) $ (0.94)
========= ======== ======== ========
Basic and diluted weighted average number of
common shares outstanding ................................. 9,199 9,345 9,323 11,206
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BALANCE SHEET DATA:
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Year ended
December 31, September 30,
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1998 1999 2000
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Total assets ...................... $ 9,720 $ 8,151 $10,687
Working capital ................... $ 7,881 $ 5,842 $ 1,524
Total liabilities ................. $ 1,918 $ 2,273 $ 7,119
Shareholders' equity ......... $ 7,802 $ 5,878 $ 3,568
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RISK FACTORS
An investment in our common stock involves risk. You should carefully
consider the risks described below and the other information in this prospectus
including our financial statements and the related notes before you decide to
buy our common stock. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment.
WE ARE IMPLEMENTING A NEW AND UNPROVEN BUSINESS MODEL
Our business model is new and unproven and may never be successful. The
success of the business plan depends on a number of factors. These factors
include:
o acceptance by consumers of 3D modeling application services as
a replacement or supplement to the traditional use of custom
developed or licensed software; and
o our ability to implement new and additional services useful to
the engineering software market.
We will need to develop application services that stimulate and satisfy
customer demand while safeguarding copyright and other commercial rights of the
licensors of the application software made available on our Web site. If we fail
to achieve these objectives, our business may not be viable. End-users may fail
to adopt 3D modeling application services for a number of reasons, including:
o lack of awareness of 3D modeling application services;
o limited access to 3D modeling application services;
o the look and feel of 3D modeling application services; or
o actual or perceived limitations in selection and availability
of 3D modeling application services.
OUR BUSINESS MODEL IS SUBJECT TO RISKS ASSOCIATED WITH THE INTERNET
Because we are in the early stage of development, our ability to
successfully implement our new business plan is subject to significant
uncertainties. Our business and prospects must be considered in light of the
risks, expenses and difficulties encountered by companies in their early stages
of development, particularly companies in new and rapidly evolving markets such
as Internet services. Risks and uncertainties include, among other things, that
we may not:
o be able to develop awareness and brand loyalty for our
products and services;
o be able to anticipate and adapt to the changing market for
Internet services and Internet-based commerce;
o be able to expand our sales and marketing efforts;
o be able to continue to upgrade and enhance our technologies to
accommodate expanded service offerings;
o successfully respond to competitive developments; and
o be able to develop and renew strategic relationships.
One of the principal risks of our business is that our customers may be
unwilling to use the Internet for proprietary or design data, which could limit
our retail customer base. Additionally, a number of factors may inhibit Internet
usage, including inadequate network infrastructure, security concerns,
inconsistent quality of service and lack of availability of cost-effective,
high-speed service. If Internet usage grows, the Internet infrastructure may not
be able to support the demands placed on it by this growth and its performance
and reliability may decline. If Internet outages or delays occur frequently in
the future, Internet usage as well as Internet-based commerce and the usage of
our products and services could grow more slowly or decline.
We may not be successful in accomplishing any or all of these
objectives, which could materially harm our business. In this case, the value of
your investment may decline.
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WE HAVE A LIMITED OPERATING HISTORY
PlanetCAD operations began under Spatial Technology Inc. in June 1999,
and we launched our first application service in November 1999. We sold the
assets comprising the Component Software Division to Spatial Corp., a wholly
owned subsidiary of Dassault Systemes Corp., in November 2000. The limited
history of PlanetCAD operations makes it difficult to evaluate our business and
prospects. Our prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies attempting to use
technology to change long-established businesses and consumer behavior. These
risks and uncertainties are discussed throughout this section. If we fail to
address these risks and uncertainties, we may be unable to grow our business,
increase our revenue or become profitable.
WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE
FUTURE
As of September 30, 2000, we had an accumulated deficit of $30.5
million. On a stand-alone basis, the PlanetCAD division of Spatial Technology
Inc. experienced operating losses in each quarterly period since its inception.
We expect to continue to incur net losses for the foreseeable future because our
expected operating expenses associated with capital expenditures and marketing
will increase significantly during the next several years as we attempt to grow
our business. With increased expenses, we will need to generate significant
additional revenue to achieve profitability. As a result, we may never become
profitable. Even if we do achieve profitability in any period, we may not be
able to sustain or increase profitability on a quarterly or an annual basis.
WE ARE VULNERABLE TO SYSTEM FAILURES
Interruptions in our computer systems or Web site operations could
cause our revenue to decline and impose substantial unforeseen costs on our
operations. If customers experience significant interruptions or slow response
times in our Web services, the attractiveness of 3D engineering data management
and integration services as a viable alternative to traditional licensed or
custom developed software will decrease. Unexpected events such as natural
disasters, power losses and vandalism could damage our systems. Also,
telecommunications failures, computer viruses, electronic break-ins or other
similar disruptive problems could adversely affect the operation of our systems.
Our insurance policies may not adequately compensate the company for any losses
that may result from these types of system problems.
WE MAY EXPERIENCE SYSTEM CAPACITY CONSTRAINTS DUE TO INCREASED USE OF SERVICES
A substantial increase in the use of our products and services could
strain the capacity of our systems, which could lead to slower response time or
system failures. These failures or slowdowns could frustrate customers and harm
our business. Although we have designed and tested our system to handle several
times the highest daily traffic volume we have experienced to date, we cannot be
certain that our systems will be able to meet sporadic or sustained increases in
our Web site traffic. As a result, our ability to scale up to our expected
traffic levels while maintaining satisfactory performance may be compromised. As
traffic volume increases, we will need to purchase additional servers and
networking equipment to maintain adequate data transmission speeds. The
availability of these products and related services may be limited or their cost
may be significant.
WE MAY NOT BE ABLE TO DISCOVER SOFTWARE DEFECTS
Our platform depends on complex computer software, both internally
developed and licensed from third parties. Complex software often contains
defects, particularly when first introduced or when new versions are released.
Although we conduct extensive testing, we may not discover software defects that
affect our new or current services or enhancements until after they are
deployed. If we experience service interruptions or market products and services
that contain errors or that do not function properly, we may experience negative
publicity, loss of or delay in market acceptance, or claims against us by
customers, any of which could harm our business.
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WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL ON FAVORABLE TERMS OR AT ALL
In addition to the proceeds of the recent sale of our component
software division to Dassault and the recent investment by Dassault in
PlanetCAD, we may need to raise additional capital to fund operating losses,
develop and enhance our services and products, fund expansion, respond to
competitive pressures or acquire complementary products, businesses or
technologies. We may not be able to raise additional financing on favorable
terms, if at all. If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders will
be reduced and the securities issued may have rights, preferences or privileges
senior to those of our common stock. If we cannot raise adequate funds on
acceptable terms, our ability to fund growth, take advantage of business
opportunities, develop or enhance services or products or otherwise respond to
competitive pressures will be significantly limited.
OUR PRODUCTS MAY CONTAIN UNDETECTED ERRORS
Our products or services may contain undetected errors when first
introduced or as modifications 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 use. Any errors, whether discovered before or after
commercial introduction of the product or service, 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 or service errors, such claims
might be brought against us in the future.
COMPETITION IN OUR INDUSTRY IS INTENSE
The markets for our products and services 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 we do.
Actions by competitors that could materially adversely affect our business,
financial condition and results of operations include:
o a reduction in prices for their products or services;
o increased promotion;
o accelerated introduction of, or the announcement of, new or
enhanced products, services or features;
o acquisitions of software applications or technologies from
third parties; or
o product or service giveaways or 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 DEPEND ON SWIFT AND TIMELY INTRODUCTIONS OF NEW PRODUCTS
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 to enhance our existing products accordingly. We have
experienced delays in the development of certain new products and product
versions. Additionally, we use third party development partners to facilitate
the development of product enhancements and 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.
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WE ARE DEPENDENT UPON KEY PERSONNEL AND THE ABILITY TO HIRE ADDITIONAL PERSONNEL
Our executive officers and key employees are vital assets. We depend on
the 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 and Web-based software is intense. There are a limited number of
experienced people in the United States with the skills and training we require.
The loss of any of our key employees could materially adversely affect
our business, financial condition or operating results. Our failure to recruit
executive officers or key sales, management or development personnel would
similarly harm our growth and competitiveness.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH
The anticipated growth in our business may place substantial demands on
our managerial, operational and financial resources. Our future success will
depend upon our ability to:
o continue to enhance the PlanetCAD suite of products,
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 our systems and controls are adequate for our
current level of operations, we may need to add additional personnel and expand
and upgrade our systems and controls to manage possible future growth. 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 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 critical to our success and ability to
compete. We rely on trade secret and copyright laws to protect our proprietary
technologies, but our efforts may be inadequate to protect these proprietary
rights or to prevent others from claiming violations of their proprietary
rights. We have no patents with respect to the technology we use. 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 and consultants. 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 that we have infringed 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 with terms unfavorable to PlanetCAD. 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 or redesign or discontinue
such products, any of which could have a material adverse effect on our
business, financial condition or results of operations.
7
<PAGE> 12
WE MAY BE UNABLE TO PROTECT AGAINST ONLINE SECURITY BREACHES
A significant barrier to Internet-based commerce and communications is
the ability to perform secure transmission of confidential, proprietary and
copyrighted information over public networks. Our security software and other
security measures may not prevent security breaches and unauthorized access to
engineering data management and integration services or copying of third-party
software. Substantial or ongoing security breaches of our system or other
Internet-based systems could reduce customer confidence in our Web site, which
could lead to reduced usage and lower revenue. A third party who is able to
circumvent our security systems could steal proprietary information, make and
distribute unauthorized copies of proprietary software or cause interruptions in
our operations. In response to a breach, we would likely incur substantial
remediation and prevention costs. If we suffer significant or repeated breaches
of security, our reputation would be harmed, and we could be exposed to systems
failures, data loss or litigation, any of which could have a material adverse
effect on our results of operations. Moreover, our insurance policies may be
inadequate to reimburse us for losses caused by security breaches.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
After the registration statement filed in connection with this
prospectus is declared effective, the shares offered by this prospectus will be
eligible for resale in the public market without restriction. Sales of a
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:
o fluctuations in our operating results;
o announcements of technological innovations or new software
standards by us or competitors;
o published reports of securities analysts;
o developments in patent or other proprietary rights;
o changes in our relationships with development partners; and
o 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.
WE FACE DIFFICULTIES DOING BUSINESS IN INTERNATIONAL MARKETS
Our ability to sell engineering data management and integration and
other Internet-based engineering services in international markets will depend
in part on several legal issues relating to the Internet and risks inherent in
doing business on an international level. Factors that may affect our
international expansion efforts include:
o our inability to obtain or resolve uncertainties concerning
territorial rights to software;
o copyright laws that are not uniform, or uniformly enforced, in
all countries;
o export restrictions; o export controls relating to encryption
technology;
o longer payment cycles; o problems in collecting accounts
receivable;
o political and economic instability; and
o potentially adverse tax consequences.
8
<PAGE> 13
We have no control over many of these factors and the occurrence of any
of them could harm our international business efforts.
OUR BUSINESS FACES UNCERTAINTIES AND POTENTIAL GOVERNMENT REGULATIONS REGARDING
THE INTERNET
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws to the Internet, could decrease
the demand for our products and services, increase our cost of doing business or
otherwise have a material adverse effect on our business, financial condition
and results of operations. New laws or new applications of old laws could
subject PlanetCAD to content-based claims brought by Internet users.
WE AND OUR CUSTOMERS MAY BE SUBJECT TO INTERNET RELATED TAXES
The tax treatment of the Internet and Internet-based commerce is
currently unsettled, and any legislation that substantially impairs the growth
of Internet-based commerce could seriously harm our revenue and prospects. We do
not collect sales tax or other similar taxes in connection with our sales. One
or more states or the federal government may seek to impose sales tax collection
obligations on out-of-state companies that engage in or facilitate on-line
commerce, and a number of proposals have been made at the state and local level
that would impose additional taxes on Internet-based commerce. The Internet Tax
Freedom Act of 1998 placed a three-year moratorium on selected types of federal,
state and local taxation on Internet commerce. This tax moratorium does not,
however, prohibit states or the Internal Revenue Service from collecting taxes
on income, if any, or from collecting taxes that are due under existing tax
rules. A successful assertion by one or more states, the federal government or
any foreign country that we should pay taxes on the sales of engineering data
management and integration services over the Internet could harm our business.
We cannot assure you that future laws will not impose taxes or other regulations
on Internet commerce, or that the three-year moratorium will not be repealed or
will be renewed, any of which could substantially impair the growth of
Internet-based commerce.
9
<PAGE> 14
USE OF PROCEEDS
The purpose of this offering is to register the shares of common stock
owned and issuable upon exercise of the warrants by the selling stockholders
listed in this prospectus as required by the registration rights agreement
entered into among PlanetCAD and certain investors. The selling stockholders may
sell the shares of common stock described in this prospectus from time to time,
and we will not receive any of proceeds from the sales. However, if one or more
of the selling stockholders exercise their rights under the warrants, we could
receive up to $7.8 million in gross proceeds representing the exercise price for
the shares of common stock underlying the warrants. All proceeds we receive, if
any, will be used for general corporate purposes, including, but not limited to,
sales and marketing, research and development, capital expenditures and working
capital. In addition, we may use a portion of the net proceeds to acquire
complementary products, technologies or businesses or to make strategic
investments. Pending the use of any proceeds in this manner, any net proceeds
will be invested principally in short-term, interest-bearing, investment-grade
securities.
10
<PAGE> 15
SELLING SECURITY HOLDERS
The following table lists the selling stockholders and (i) the number
of shares of our common stock and warrants to purchase our common stock
currently owned by each stockholder, (ii) the number of such shares being
offered for resale by this prospectus by each stockholder, and (iii) assuming
each stockholder sells all of the shares offered for resale, the number of
shares the stockholder will own after the completion of this offering.
Except as otherwise indicated in the footnotes to the table, no selling
stockholder has had any position, office or other material relationship, other
than as a stockholder, with us during the past three years. In connection with
this offering, each of the selling stockholders may sell any or all of the
shares being offered hereby from time to time or may sell none at all. The
registration of the shares offered by this prospectus does not necessarily mean
that a selling stockholder will sell all or any of the shares or exercise all or
any of the warrants owned by such stockholder.
<TABLE>
<CAPTION>
TOTAL NUMBER TOTAL NUMBER OF
OF SHARES SHARES OWNED
NUMBER OF NUMBER OF OFFERED BY ASSUMING SALE OF
NAME OF INVESTOR SHARES OWNED WARRANTS OWNED THIS PROSPECTUS ALL OFFERED SHARES
---------------- ------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Capstone Ventures SBIC, L.P. (1) 481,884 304,348 786,232 -0-
The Roser Partnership III, SBIC, LP 413,044 260,870 673,914 -0-
J.F. Shea Co., Inc. as Nominee 2000-25 316,667 200,000 516,667 -0-
Cypress Growth Fund III, L.P. 275,362 173,913 449,275 -0-
Dassault Systemes Corp. (2) 830,918 173,913 1,004,831 -0-
Dolphin Offshore Partners, L.P. 137,681 86,956 224,637 -0-
--------- --------- --------- ------
TOTAL 2,455,556 1,200,000 3,655,556 -0-
</TABLE>
(1) On February 22, 2000, we issued an aggregate of 1.9 million shares of common
stock and warrants to purchase 1.2 million shares of common stock to certain
investors including Capstone Ventures SBIC, L.P., pursuant to the terms of a
stock purchase agreement. Under the agreement, Capstone has the right to
designate one director to serve on our board of directors for so long as all of
the February 22 investors collectively own 10% of our outstanding shares of
common stock. Mr. Fischer, a member of the general partner of Capstone, was
elected and remains one of our directors as required by the Stock Purchase
Agreement.
(2) On November 14, 2000, Dassault purchased our component software division. In
connection with the sale, we entered into a number of intellectual property
agreements and licenses for various software and other products with Dassault.
11
<PAGE> 16
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The names of the members of the board of directors and certain
information about them are set forth below. Each director was elected to serve
until the next annual meeting of the stockholders and their successor is elected
and duly qualified, or until their resignation, death or removal.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH PLANETCAD
---- --- ----------------------------
<S> <C> <C>
Richard M. Sowar 56 Vice President, Engineering, Chief Technology Officer and
Chairman of the board of directors
R. Bruce Morgan 48 President, Chief Executive Officer and Director
Philip E. Barak (1)(2) 48 Director
Charles Bay 42 Director
Eugene J. Fischer 54 Director
H. Robert Gill (1)(2) 64 Director
M. Thomas Hull (2) 41 Director
</TABLE>
------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
RICHARD M. SOWAR founded our company in 1986 and has served as its
Chairman of the board of directors and Chief Technology Officer since October
1998. He has served as a Director since 1986 and was appointed Vice President,
Engineering in November 2000 after the sale of the component software division
to Dassault. Mr. Sowar served as Treasurer from 1986 to 1988, Vice President
from 1986 to 1992, Senior Vice President, Advanced Technology from 1992 to 1994
and Chief Executive Officer from 1994 to October 1998. From 1980 to 1986, Mr.
Sowar served as Vice President, Research and Development of Graftek, Inc., a
CAD/CAM software company. Mr. Sowar received a B.S. in Mathematics from Marietta
College and a M.S. in Operations Research from the University of Dayton and
completed doctoral studies in Computer Science at the University of Colorado.
R. BRUCE MORGAN has served as a director of PlanetCAD since July 1997.
Mr. Morgan was named President and Chief Executive Officer of PlanetCAD in
October of 1998 after serving as PlanetCAD's President and Chief Operating
Officer since July of 1997. Prior to joining, Mr. Morgan served at ANSYS Inc. in
senior marketing and business development positions. He was responsible for
developing and implementing a strategy that helped re-establish ANSYS as a
market leader in the computer-aided engineering industry. From 1991 through
1995, Mr. Morgan was Vice President of Sales and Marketing at PlanetCAD. He
developed and executed the OEM business strategy that established PlanetCAD's
ACIS Geometric Modeler as the de facto standard for geometry creation in the
mechanical computer-aided design industry. Prior to his position at PlanetCAD,
Mr. Morgan held executive Sales and Marketing management positions at Convergent
Technology and Burroughs Corporation (Unisys). Mr. Morgan holds a B.A. degree in
Economics from Carleton University.
PHILIP E. BARAK has served as a Director of PlanetCAD since October
1994. Mr. Barak joined Nazem & Company in 1983 as Chief Financial Officer and is
a special limited partner of Nazem & Associates II, L.P., which is the general
partner of Nazem & Company II, L.P. Additionally, he is a general partner of
Nazem & Associates IV, L.P., the general partner of Nazem & Co. IV, L.P., and
Nazem & Associates Transatlantic, L.P., a general partner of Transatlantic
Venture Fund, both affiliated venture capital funds. Mr. Barak has served as a
director of various public and privately held companies. Mr. Barak holds a B.S.
in Accounting from Rider University and is a Certified Public Accountant.
CHARLES BAY has served as a Director of PlanetCAD since June 2000. Mr.
Bay is currently the Chief Executive Officer, President and a member of the
board of directors of Broadbase Software, Inc. Mr. Bay joined Broadbase in
January 1998 and previously served as its Chief Financial Officer, General
Counsel and Executive Vice President of Operations. From July 1997 to January
1998, Mr. Bay served as Chief Financial Officer and General Counsel for
Reasoning, Inc., a software company. From January 1995 to August 1997, Mr. Bay
served as Chief Financial Officer and General Counsel, for Pure Atria Software,
Inc., a software company. From April 1994 to January 1995, Mr. Bay served as
President and Chief Financial Officer of Software Alliance Corporation, a
software company. Mr. Bay holds a B.S. degree in business administration from
Illinois State University and a J.D. degree from the University of Illinois.
12
<PAGE> 17
EUGENE J. FISCHER has served as a director of PlanetCAD since March
2000. Mr. Fischer co-founded Capstone Ventures in 1996. His investment
experience includes Internet, software, health care service and other
technology-enabled service companies. Mr. Fischer began his venture capital
career in 1983 with Technology Funding and opened Pathfinder Ventures' West
Coast office in 1988. Prior to 1983 he was the head of Bank of America's
Sunnyvale Corporate Banking Group, managing a $250 million loan portfolio with
clients ranging from venture-backed start-ups to Apple Computer, as well as
several venture capital funds. Mr. Fischer serves as a director of Newgen
Results Corp. Mr. Fisher holds a B.S. from the University of Minnesota and a
M.S. from the University of California, Davis.
H. ROBERT GILL has served as a Director of PlanetCAD since December
1996. Mr. Gill has served as President, Chairman of the board of directors and
Chief Executive Officer of MobileForce Technology, Inc., a company which
provides systems for managing vehicle fleets, since May 1997. Additionally,
since April 1996, Mr. Gill has served as President of the Topaz Group, a
provider of board consulting services. Before joining the Topaz Group, Mr. Gill
served as Senior Vice President and President, Enhanced Products Group of
Frontier Corporation following its merger with ALC Communications Corporation in
December 1995. From January 1989 until the time of such merger, Mr. Gill served
as President and Chief Executive Officer of ConferTech International, a
publicly-traded corporation. Mr. Gill currently serves as a director of Qualmark
Corporation. Mr. Gill received a B.E.E. from Indiana Institute of Technology, a
M.S.E.E. from Purdue University and a M.B.A. from Pepperdine University.
M. THOMAS HULL has served as a Director of PlanetCAD since December
1996. Mr. Hull joined Visio Corporation ("Visio") in July 1994 as Third Party
Sales Manager, was promoted to Director of Corporate and Strategic Sales in June
1996, and was promoted to Vice President Corporate and Direct Sales in October
1998, and Senior Vice President of Worldwide Sales where he managed Visio's 200
person worldwide sales organization. In January 2000, Microsoft Corporation
acquired Visio. Mr. Hull is currently on leave from Microsoft. From December
1991 to June 1994, Mr. Hull held a management position at Traveling Software,
Inc. ("TSI") where he managed sales of TSI products and technologies. Mr. Hull
holds a B.S. in Electrical Engineering from the University of Washington.
EXECUTIVE OFFICERS
The executive officers of PlanetCAD are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH PLANETCAD
---- --- ----------------------------
<S> <C> <C>
R. Bruce Morgan (1) 48 President and Chief Executive Officer
Richard M. Sowar (2) 56 Vice President, Engineering and Chief Technology Officer
Michael Hansen 30 Vice President, Site Production and Product
Management
Ronald J. Zabilski 45 Vice President of Sales
John Racine 37 Vice President, Professional Services
Douglas Hakala 54 Vice President, 3D Share Development
</TABLE>
---------------
(1) The biography of Mr. Morgan is set forth above under the caption
"Directors."
(2) The biography of Mr. Sowar is set forth above under the caption
"Directors."
MICHAEL HANSEN, VICE PRESIDENT, SITE PRODUCTION & PRODUCT MANAGEMENT
Mr. Hansen was appointed Vice President of Site Production in January
2000, with responsibility for product planning, site execution, product quality
and continuous product improvement. Prior to January, he served as Director of
Marketing, and has held positions in the product development, QA, sales and
sales support organizations since joining PlanetCAD in 1993. His extensive
technical and marketing background make him uniquely qualified to oversee the
execution of PlanetCAD's product strategy. From 1990 through 1993, Mr. Hansen
worked at Graftek Corporation, a CAD/CAM, injection molding and analysis
software company, in a variety of technical and customer support positions. Mr.
Hansen holds a B.A. in Mechanical Engineering from the University of Colorado.
13
<PAGE> 18
RONALD J. ZABILSKI, VICE PRESIDENT OF SALES
Mr. Zabilski joined PlanetCAD as Vice President of Sales following our
acquisition of Prescient Technologies Inc. with responsibility for development
of the sales territories outside North America. As Director of International
Sales at Prescient, Mr. Zabilski had responsibility for managing the indirect
sales channel in Europe and Asia, as well as North America. Mr. Zabilski has 15
years experience selling engineering and design software applications and
services into the Aerospace, Automotive and Discrete Manufacturing Industries.
Before becoming Director of International Sales for Prescient, Mr. Zabilski was
Director of Project Consulting and Director of Customer Service. Prior to
joining Prescient, he was responsible for Advanced Construction Systems for
Stone & Webster Engineering Corporation where he directed the development of
integrated 3D CAD with relational databases for managing construction projects.
He has had numerous papers published on these subjects. Mr. Zabilski has a B.A.
in Civil Engineering from Northeastern University, and an MBA from Northeastern
University.
JOHN RACINE, VICE PRESIDENT, PROFESSIONAL SERVICES
Mr. Racine joined PlanetCAD as Vice President of Professional Services
following our acquisition of Prescient. Mr. Racine has overall responsibility
for the implementation and support of infrastructure tools for maximizing the
value of engineering data in the Internet-based manufacturing design and
procurement supply chain. Mr. Racine's skill at building and managing a field
services organization will make an important contribution to PlanetCAD's ability
to provide turnkey installations of Enterprise Solutions. Mr. Racine has over 13
years of experience in professional services management in the software tools
and consulting industry. His expertise includes execution and management of
global implementation services, development of help desk and field service
organizations, sales process and business case development, strategic planning
and the management of industry and customer relationships. Previously, Mr.
Racine was vice president of customer services at Prescient, where he had
overall responsibility for customer-related services, including application
engineering, consulting, implementation services and help desk execution. While
at Prescient, Mr. Racine was instrumental in setting the product vision and
strategic direction that solidified Prescient's position in the digital data
quality field. He also held key positions with Stone & Webster Advanced Systems
Development Services. Mr. Racine holds a B.S. from Southeastern Massachusetts
University and an M.S. from Lehigh University.
DOUGLAS HAKALA, VICE PRESIDENT, 3DSHARE DEVELOPMENT
Mr. Hakala joined PlanetCAD as Vice President of 3DShare after serving
as Vice President of ACIS Development in 1997 and 1998, and Advanced Technology.
Mr. Hakala joined PlanetCAD in 1989 as Director of ACIS Software Development.
His numerous senior development and management positions in geometric modeling
software over the last 20 years have made him a well-known industry expert in
the specialized field of advanced 3D solid modeling development. Mr. Hakala
holds a B.A. and a M.A. in Mathematics from the University of Michigan and also
completed doctoral studies in Computer Science at the University of Michigan.
There are no family relationships among any of the directors, executive
officers, or persons nominated or chosen by PlanetCAD to become directors or
executive officers of PlanetCAD.
14
<PAGE> 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1997, 1998 and 1999, certain compensation awarded or paid to, or earned by,
PlanetCAD's Chief Executive Officer and its four next most highly compensated
executive officers whose salary and bonus exceeded $100,000 for the fiscal year
ended December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY $ BONUS $ OPTIONS (#)(1) COMPENSATION
--------------------------- ---- -------- ------- -------------- ------------
<S> <C> <C> <C> <C> <C>
R. Bruce Morgan 1999 $170,000 $34,125 50,000 $240(2)
President and Chief Executive 1998 154,167 81,250 50,000 240(2)
Officer 1997 75,000 45,000 250,000 17,120(3)
Richard M. Sowar 1999 150,000 13,125 -- 240(2)
Vice President, Engineering and 1998 126,250 40,625 50,000 240(2)
Chief Technology Officer 1997 120,000 35,000 -- 240(2)
Lee Cole(4) 1999 120,000 9,750 60,000 240(2)
Vice President, Engineering
William Turcotte II(5) 1999 110,000 15,750 50,000 20,180(6)
Vice President, Interoperability 1998 -- -- -- --
Solutions
Karlheinz Peters(7) 1999 120,000 21,000 -- 3,494(8)
Senior Vice President, Worldwide 1998 215,685(9) -- 25,000 12,963(10)
Operations 1997 215,371(11) -- -- --
</TABLE>
-------------------------------------------------------------------------------
(1) Options are stock options granted under PlanetCAD equity incentive
plans.
(2) Represents matching payments made by PlanetCAD to the individual's
account under PlanetCAD's 401(k) plan.
(3) Includes: (i) $17,000 reimbursement for relocation expenses and (ii)
$120 matching payment made by PlanetCAD to Mr. Morgan's 401(k) account.
(4) Mr. Cole started employment with PlanetCAD in January 1999. Mr. Cole's
employment with PlanetCAD terminated June 30, 2000.
(5) Mr. Turcotte started employment with PlanetCAD in December 1998. Mr.
Turcotte's employment with PlanetCAD terminated March 31, 2000.
(6) Includes: (i) $20,000 reimbursement for relocation expenses and (ii)
$180 matching payment made by PlanetCAD to Mr. Turcotte's 401(k)
account.
(7) Mr. Peters' employment with PlanetCAD terminated March 31, 2000.
(8) Includes: (i) $3,264 reimbursement for relocation expenses and (ii)
$230 matching payment made by PlanetCAD to Mr. Peters' 401(k) account.
(9) Salary is based on an exchange rate of 1.7576 DM/$, which is based on a
five quarter average from the last quarter of 1997 and each of the four
quarters in 1998. Includes commission in the amount of $73,446, earned
in fiscal 1998.
(10) Represents amounts paid for relocation from Germany to the United
States.
(11) Salary is based on an exchange rate of 1.7036 DM/$, which is based on a
five quarter average from the last quarter of 1996 and each of the four
quarters in 1997. Salary also includes commission in the amount of
$86,231, earned in fiscal 1997.
15
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted to each of the executive officers named in the Summary Compensation
Table above during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE
NAME GRANTED(1) 1999(%)(2) ($/SHARE)(3) EXPIRATION DATE
---- ---------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
R. Bruce Morgan.................50,000 7.95% $2.9375 May 2009
Lee A. Cole.....................50,000 7.95% $3.7500 September 2000
10,000 1.59% $2.9375 September 2000
William Turcotte II.............50,000 7.95% $3.7500 June 2000
</TABLE>
(1) Options granted are immediately exercisable and are subject to
repurchase by PlanetCAD prior to the completion of the vesting of such
shares.
(2) Based on 628,811 options granted in 1999.
(3) The exercise price per share of options granted was equal to the fair
market value of the common stock on the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to (i) the
exercise of stock options by the executive officers named in the Summary
Compensation Table above during the fiscal year ended December 31, 1999, (ii)
the number of securities underlying unexercised options held by such named
executive officers as of December 31, 1999 and (iii) the value of unexercised
in-the-money options (that is, options for which the fair market value of the
common stock at December 31, 1999 exceeded the exercise price) as of
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END (1) FISCAL YEAR-END (1) (2)
ACQUIRED ON ------------------------------- -----------------------
NAME EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
R. Bruce Morgan.............. -- 168,750 181,250 $504,468 $479,688
Richard M. Sowar............. -- 123,333 57,500 $35,938 $107,813
Lee A. Cole.................. -- -- 60,000 -- $68,125
William Turcotte II.......... -- 12,501 37,499 $12,501 $37,499
Karlheinz Peters............. 8,333(3) 58,333 33,333 $31,770 $51,563
</TABLE>
-------------------------------------------------------------------------------
(1) For purposes of this table, valuation is based on vested options for
each named executive officer set forth in the Summary Compensation
Table above. Certain options granted to such individuals include early
exercise provisions, the value of which is not included in this table.
(2) Based on the fair market value of the common stock as of December 31,
1999 as reported on the American Stock Exchange, $4.75, minus the
exercise price, multiplied by the number of shares underlying the
option.
(3) Mr. Peters exercised all of these options in July 1999, at a price of
$3.00 per share.
COMPENSATION OF DIRECTORS
Each of our directors is entitled to be reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at each meeting of
the board of directors. Additionally, each of our non-employee directors
receives $1,000 compensation for each regular or special meeting of the board of
directors at which he is in attendance and $500 compensation for each committee
meeting of the board of directors at which he is in attendance.
Each of our non-employee directors also receives stock option grants
pursuant to the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only directors of PlanetCAD who are not otherwise employed by PlanetCAD
or an affiliate of PlanetCAD are eligible to receive such options. Options
granted to non-employee directors are non-discretionary. Each non-employee
director is automatically granted an option to purchase 15,000 shares of common
stock on the date such non-employee director is elected to the board of
directors. Additionally, on the date of each annual stockholders' meeting of
16
<PAGE> 21
PlanetCAD, each non-employee director who has been a non-employee director
continuously for the preceding year will automatically be granted an option to
purchase 7,500 shares of common stock. Each other non-employee director will
automatically be granted an option to purchase a number of shares of common
stock equal to 7,500 multiplied by a fraction, the numerator of which will be
the number of days such person has been a non-employee director of PlanetCAD and
the denominator of which will be 365. The exercise price of options granted to
non-employee directors will be the fair market value of the common stock on the
date of grant. Options granted pursuant to the Directors' Plan vest in four
equal annual installments beginning one year from the date of grant and are
immediately exercisable, subject to repurchase by PlanetCAD prior to the vesting
of such shares upon the optionee's cessation of service to PlanetCAD.
On July 7, 2000, we entered into a consulting agreement with Charles
Bay, a non-employee director of PlanetCAD. Under this agreement, we agreed to
issue options to purchase an additional 65,000 shares of PlanetCAD common stock
to Mr. Bay in addition to the non-discretionary grant of options to purchase
15,000 shares of PlanetCAD common stock. Of the additional grant, 25,000 options
will vest in equal annual increments over four years, and the remaining 40,000
options will vest on the fifth anniversary of the date of the option grant.
However, we may accelerate the vesting of the 40,000 options based on Mr. Bay's
performance of strategic and financial consulting services for PlanetCAD and our
achieving financial milestones.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with R. Bruce Morgan, an
executive officer of PlanetCAD, on July 1, 1997. This agreement provides for (i)
an annual base salary of $170,000, (ii) a discretionary bonus in an amount up to
$25,000 per quarter determined solely by the compensation committee of the board
of directors, (iii) one-time relocation expenses up to a maximum of $25,000 in
the aggregate, (iv) eligibility for standard benefits of PlanetCAD and (v) a
loan by PlanetCAD to Mr. Morgan in the amount of $25,000. The agreement may be
terminated by either PlanetCAD or Mr. Morgan at any time, with or without cause
or advance notice. In the event that PlanetCAD terminates Mr. Morgan's
employment without cause, Mr. Morgan will receive a lump sum severance payment
in an amount equal to six months of his base salary in exchange for the
execution of a release of all claims against PlanetCAD by Mr. Morgan. The board
of directors subsequently increased the base compensation payable to Mr. Morgan
to $250,000 per year and changed the quarterly discretionary bonus to an amount
up to $18,750.
We entered into a separation agreement with Karlheinz Peters on April
1, 2000. Under the terms of the agreement, Mr. Peters will receive six months of
his normal salary, a lump sum payment of $30,000 in lieu of any relocation
expenses, the laptop computer used during his employment, payment for 138 hours
of unused vacation and acceleration of his remaining unvested stock options. In
return for such payments, Mr. Peters agreed to release and waive any current or
future claims he may have against PlanetCAD under any applicable laws.
We entered into a separation agreement with Lee Cole as of July 1,
2000. Under the terms of the agreement, Mr. Cole received a lump sum payment of
$77,500, payment for unused vacation accrued through June 30, 2000, medical,
vision and dental benefits through December 31, 2000, and vesting of options to
purchase 25,000 shares of PlanetCAD common stock not vested as of June 30, 2000.
In return for such payments, Mr. Cole agreed to release and waive any current or
future claims he may have against PlanetCAD under any applicable laws.
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<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of PlanetCAD's common stock as of November 20, 2000 by (i) each
director; (ii) each of the executive officers named in the Summary Compensation
Table above; (iii) all executive officers and directors of PlanetCAD as a group;
and (iv) all those known by PlanetCAD to be beneficial owners of more than five
percent of its common stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
NAME AND ADDRESS OF -----------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL(2)
---------------- ---------------- -------------------
<S> <C> <C>
Special Situations Fund III(3)............................ 1,418,100 11.40%
153 E. 53rd Street, 51st Floor
New York, New York 10022
New York Life Insurance Company(4)........................ 967,547 7.78%
51 Madison Avenue, Room 206
New York, New York 10010
Capstone Ventures SBIC, L.P.(5)........................... 786,232 6.32%
3000 Sand Hill Road
Building 1, Suite 290
Menlo Park, CA 94025
The Roser Partnership III, SBIC, L.P.(6).................. 673,914 5.42%
1105 Spruce Street
Boulder, CO 80302
Dassault Systemes Corp.................................... 1,004,831 8.08%
9 Quai Marcel Dassault
BP 310
2150 Suresnes Cedex
France
Eugene J. Fischer(7)...................................... 808,732 6.50%
Richard M. Sowar(8)....................................... 376,968 3.03%
R. Bruce Morgan(9)........................................ 298,334 2.40%
Philip E. Barak(10)....................................... 58,697 *
Todd S. Londa(11)......................................... 42,128 *
H. Robert Gill(12)........................................ 40,500 *
M. Thomas Hull(12)........................................ 40,500 *
Chuck Bay(13)............................................. 22,500 *
William Turcotte II(14)................................... 432,550 3.48%
Karlheinz Peters(14)(15).................................. 101,799 *
Lee Cole(14).............................................. 40,001 *
All executive officers and directors as a group (10 2,222,708 17.86%
persons)(16)
</TABLE>
--------------------------------------------------------------------------------
* Less than one percent.
(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 PlanetCAD common
stock subject to options and warrants currently exercisable within 60
days of November 20, 2000, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of PlanetCAD common
stock shown as beneficially owned by them.
(2) Percentage of ownership is based on 12,442,863 shares of PlanetCAD
common stock outstanding.
(3) Special Situations Fund III, L.P. ("SSF III"), Special Situations
Technology Fund, L.P. ("Technology fund"), Special Situations Cayman
Fund, L.P. ("Cayman Fund"), MGP Advisers Limited Partnership ("MGP"),
SST Advisers, L.L.C. ("SST"), AWM Investment Company, Inc. ("AWM"),
Austin W. Marxe and David M. Greenhouse have together filed a Schedule
13G/A pursuant to which they report sole or shared voting and
dispositive power over an aggregate of 1,418,100 shares owned as of
December 31, 1999, of which 945,900 shares are owned by SSF III,
171,400 shares are owned by SST and 300,800 shares are owned by the
Cayman Fund. The principal business of SSF III, the Technology fund and
the Cayman Fund (individually, a "Fund" and, collectively, the "Funds")
is to invest in equity and equity related securities. The principal
business of MGP is to act as the general partner of and the investment
adviser of SSF III. The principal business of SST is to act as general
partner of and the investment adviser of the Technology Fund. The
principal business of AWM is to act as the general partner of MGP and
as the general partner of and the investment adviser to the Cayman
Fund. (MGP, SST and AWM are, collectively, the "Advisers"). The
principal occupation of Austin W. Marxe and David Greenhouse is to
serve as officers, directors and members or principal stockholders of
the Advisers.
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<PAGE> 23
(4) Includes 48,676 shares of common stock issuable upon exercise of
outstanding warrants.
(5) Includes 304,408 shares of common stock issuable upon exercise of
outstanding warrants.
(6) Includes 260,870 shares of common stock issuable upon exercise of
outstanding warrants.
(7) Includes 15,000 shares subject to stock options that are exercisable
within 60 days of November 20, 2000, 481,884 shares held of record by
Capstone Ventures SBIC, L.P. and 304,348 shares of common stock
issuable upon exercise of outstanding warrants held by Capstone. Mr.
Fischer is a managing partner of Capstone. Mr. Fischer shares voting
power with respect to the shares held by Capstone with Barbara L.
Santry.
(8) Includes 155,833 shares subject to stock options that are exercisable
within 60 days of November 20, 2000.
(9) Includes 286,001 shares subject to stock options that are exercisable
within 60 days of November 20, 2000, and 12,333 shares owned by RMI
Inc., an entity of which Mr. Morgan is the sole stockholder. As the
president of RMI Inc., Mr. Morgan exercises controlling authority over
the voting and disposition of the shares.
(10) Includes 37,638 shares subject to stock options and warrants that are
exercisable within 60 days of November 20, 2000.
(11) Includes 41,541 shares subject to stock options that are exercisable
within 60 days of November 20, 2000. Mr. Londa ceased to be an
executive officer of PlanetCAD as of November 14, 2000.
(12) Includes 33,000 shares subject to stock options that are exercisable
within 60 days of November 20, 2000.
(13) Includes 15,000 shares subject to stock options that are exercisable
within 60 days of November 20, 2000.
(14) Messrs. Turcotte, Peters and Cole have ceased to be executive officers
of PlanetCAD since December 31, 1999.
(15) Includes 83,333 shares subject to stock options that are exercisable
within 60 days of November 20, 2000.
(16) Includes an aggregate of 1,031,945 shares subject to stock options and
warrants that are exercisable within 60 days of November 20, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 22, 2000, we issued an aggregate of 1.9 million shares of
common stock at a price of $3.60 per share and warrants to purchase 1.2 million
shares of common stock at $0.05 per warrant, exercisable at $6.50 per share, for
$6.9 million to certain investors including Capstone Ventures SBIC, L.P. Mr.
Fischer is a member of the general partner of Capstone. Mr. Fischer was elected
a director of PlanetCAD pursuant to terms of a share purchase agreement, dated
as of February 22, 2000, by and among PlanetCAD and the aforementioned
investors, which provides that Capstone will have the right designate a director
on PlanetCAD's board of directors for so long at the investors collectively own
10% of PlanetCAD's outstanding common stock.
On November 14, 2000, we issued 555,556 shares of common stock to
Dassault Systemes Corp. for a purchase price of $2,000,000 or approximately
$3.60 per share pursuant to the terms of a share purchase agreement, dated as of
November 14, 2000, by and between PlanetCAD and Dassault.
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<PAGE> 24
PLANETCAD'S BUSINESS
BACKGROUND
Today's manufacturers are faced with significant challenges as they
strive to develop and maintain products throughout a product's lifecycle. To
meet competitive pressures and timely product delivery schedules, manufacturers
frequently outsource the design and manufacture of components and assemblies,
often using many different suppliers and vendors. This chain of suppliers and
vendors is often referred to as the manufacturing supply chain. Managing the
manufacturing supply chain is a challenging task and demands an integrated
approach to developing, procuring, producing, and delivering products. It is
essential that accurate and timely communication of product data is available
throughout the manufacturing supply chain.
Triggered by the rapid growth of electronic commerce of the World Wide
Web, Internet-based supply chains have rapidly become the new model for
manufacturers worldwide. Electronic manufacturing supply chains use the power of
the Internet and the simplicity of a Web browser to meet manufacturers' critical
needs.
As companies move to Internet-based electronic manufacturing supply
chains, the challenge is to find effective Internet infrastructure tools and
applications that add value to the product engineering and manufacturing
process. Several companies have already demonstrated the high value of
delivering Internet-based tools and applications for enhancing business
processes, including procurement operations. These companies have proven that
Internet-based tools and applications can deliver efficiencies and cost savings
in core business processes in the manufacturing sector. We believe that the
Internet is an effective medium for system, process and supplier integration.
To be effective, the Internet-based manufacturing supply chain must be
able to communicate engineering model data unambiguously, regardless of the
format in which the data was originally created. Further, the engineering data
must be integrated with the manufacturer's existing product development
software, including product data management (PDM) and enterprise resource
planning (ERP) systems. To date, we believe that no supplier has provided an
Internet-based software application for the management and integration of
engineering data in the electronic manufacturing supply chain. PlanetCAD was
created to provide Internet-based management and integration resources for CAD
models by capitalizing on the engineering data interoperability expertise and
proprietary technology in model healing and translation developed by us over the
past decade.
BUSINESS DEVELOPMENT
Since our inception, we have specialized in the design, development and
marketing of the ACIS 3D modeling software and related component technology. Our
component software division licensed our 3D software products to OEMs for
building commercially available 3D software products, to large manufacturing
companies for building in-house proprietary 3D applications and to leading
universities and research institutions worldwide. In December 1998, we acquired
all of the outstanding common stock of IDA in a common stock exchange
transaction. Established in 1983, IDA developed and marketed software for the
sharing, access and exchange of electronic product data throughout the
manufacturing process. Throughout 1999, we continued our development schedule
for our flagship product ACIS 3D Toolkit and related component technology. In
addition, two releases of the IntraVISION family of viewing products were
shipped and we continued to lead the 3D component modeling market with a total
of 550 ACIS licensees, more than 210 ACIS-based applications and over 1.5
million end-user seats of ACIS-based products.
The year 1999 involved an important strategic transition for our
company as we moved to capitalize on our wealth of proprietary 3D technology and
offer 3D Web-based B2B application services through the initiation of our
PlanetCAD division in addition to our component software division. The PlanetCAD
Division focused on the development, marketing, sales, support and integration
of 3D B2B application services and supporting technology while the Component
Software Division developed, marketed and supported 3D component software
products for our traditional OEM software market segment and for the PlanetCAD
Division. In November 1999, the PlanetCAD division successfully launched our
first B2B application service, 3Dshare.com, for CAD model interoperability and
became one of the manufacturing industry's first Web-based application services
for professional engineers. We created 3DShare.com as the first Application
Service under the PlanetCAD umbrella.
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<PAGE> 25
In July 2000, we acquired certain assets and liabilities of Prescient
Technologies, Inc. With the acquisition of Prescient in July 2000, we acquired
over one hundred major manufacturing customers in the automotive, aerospace and
discrete manufacturing markets worldwide. These companies are natural consumers
of PlanetCAD Enterprise Solutions. Our applications engineers will provide
technical sales support and implementation services. The engineering team will
help to ensure successful customer implementations, while turning implementation
experiences into new features.
DISPOSITION OF COMPONENT SOFTWARE DIVISION
On November 14, 2000, we completed the sale of the assets of our
component software division to Dassault Systemes Corp. for approximately $25
million, and, at the same time, changed our name from Spatial Technology Inc. to
PlanetCAD Inc. The sale was effected pursuant to a Purchase Agreement dated July
4, 2000, as amended September 2, 2000, among PlanetCAD, Spatial Components, LLC,
and Dassault, pursuant to which we formed Spatial Components, LLC as a wholly
owned subsidiary of PlanetCAD and capitalized it with all of the assets and
certain of the liabilities of our component software division. At the closing of
the sale of the component software division to Dassault, we transferred all of
the membership interests in Spatial Components, LLC to Spatial Corp., a wholly
owned subsidiary of Dassault and the assignee of Dassault under the purchase
agreement. Upon the completion of the transfer, Spatial Components, LLC, and
therefore the component software division, became a wholly owned subsidiary of
Spatial Corp. At the closing, $1 million of the purchase price was escrowed to
partially secure our potential indemnification obligations to Dassault under the
purchase agreement, which amount, or remaining portion thereof, will be released
from escrow to us on the first anniversary of the closing. The sale of the
component software division will permit us to focus our efforts entirely on the
PlanetCAD business.
As an additional inducement to us to enter into the purchase agreement,
Dassault agreed to make a $2.0 million investment in PlanetCAD in exchange for
555,556 shares of our common stock pursuant to a Share Purchase Agreement dated
November 14, 2000. The shares of our common stock issued to Dassault under the
share purchase agreement carry the same rights as the outstanding shares of our
common stock held by our existing stockholders. As a result of the sale,
Dassault owns, in the aggregate (including exercise in full of all outstanding
warrants to acquire shares of our common stock owned by Dassault), 1,004,831
shares of our common stock. The 555,556 shares acquired by Dassault are being
registered hereby in accordance with the terms of the transaction with Dassault.
In September 2000, Dassault loaned to the Company $2 million of the
purchase price for the sale of the component software business in advance of the
closing of the transaction. In November 2000, Dassault loaned us an additional
$2 million of the purchase price in advance of the closing of the transaction.
We repaid the aggregate amount of both loans, including accrued and unpaid
interest, as an offset against the purchase price at the closing.
INTELLECTUAL PROPERTY AGREEMENTS ENTERED INTO WITH DASSAULT
The application services offered through PlanetCAD use component
software sold to Dassault in connection with the sale of the component software
division in providing services. In addition, Dassault has licensed PlanetCAD the
right to use certain Dassault software and other intellectual property, and we
have licensed to Dassault software retained by us. In order to define the
relationship, PlanetCAD and Dassault have entered into the intellectual property
agreements described below.
CROSS-LICENSE AGREEMENT
Under the terms of the Cross-License Agreement, Dassault granted back
to us a perpetual, non-exclusive license to use certain 3D component
applications software products sold to Dassault as part of the sale of the
component software division, including ACIS and IntraVISION. In consideration
for Dassault Systemes' license, we will pay Dassault Systemes a royalty equal to
a specified percentage of our net revenue resulting from any Internet services
facilitated by or based on the Dassault Software. The royalty is subject to a
minimum annual payment. We will pay a separate royalty in connection with the
distribution of the IntraVISION and ACIS Open Viewer Plug-Ins application
software.
We have agreed to grant Dassault Systemes a perpetual, royalty-free,
non-exclusive license to use and modify internally certain of our data
translation and data exchange application software including IGES and STEP
Toolkits. Dassault Systemes also has the right to distribute the Software in
run-time or object code format as component products and/or stand-alone software
products or in connection with providing application service provider and other
enterprise services to Dassault Systemes' customers. Dassault Systemes has
agreed to develop CATIA/SAT translator software and grant us a perpetual,
royalty-free, non-exclusive license to use and modify the translator software as
an underlying application for our Internet services and to distribute run-time
versions of the translator software in connection with our internet services.
Each party has agreed to provide the other with maintenance in connection with
the licensed software.
CO-BRANDING AGREEMENT
Under the Co-Branding Agreement, we and Dassault Systemes have agreed
to jointly market translation and healing application services, similar to those
currently offered on our web sites under the product name "3Dshare.com," via one
or more Dassault Systemes web sites. We have granted Dassault Systemes a
royalty-free, non-exclusive license to use our web service infrastructure
software for the purpose of providing the Co-Branded Service to its customers.
We will host the Co-Branded Service and will make the Co-Branded Service
accessible from any Dassault Systemes web site that Dassault Systemes may
request. In consideration of the infrastructure license and performance of our
obligations under the Co-Branding Agreement, we will be entitled to a percentage
of the net revenues derived from the sale of the Co-Branded Service.
SERVER SOFTWARE LICENSE AGREEMENT
Under the terms of the Server Software License Agreement, we have
granted Dassault Systemes a non-transferable, non-exclusive license to certain
of our web site infrastructure applications software. Dassault Systemes will
have the right to use and modify the Server Software internally to provide
application services provider and related Internet services to its customers. In
addition, Dassault Systemes will have the right to distribute the Server
Software in connection with those Dassault Systemes software products and
services in which it has incorporated the Server Software. In consideration for
the license of the Server Software, Dassault Systemes will pay us a royalty
equal to a specified percentage of the net revenue resulting from the sale of
any products or services offered by Dassault Systemes incorporated or
facilitated by the Server Software. Dassault Systemes will also pay us an
initial license fee for use of the Server Software, which will offset a
percentage of the royalty payments due from Dassault Systemes going forward. In
consideration for the license fee and royalty payments, we will provide Dassault
Systemes with maintenance and support services for the Server Software for four
years.
WEB SERVICES AGREEMENT
Under the Web Services Agreement we, will have the right to market and
distribute, via our 3Dshare.com and PlanetCAD.com Web sites, certain Web
services using Dassault Systemes' application software. We will assist Dassault
Systemes in adapting these applications for Internet use by providing a fixed
amount of technical support at no charge to Dassault Systemes and further
support, if necessary, at a discount from our standard consulting rate. We will
also, at our own expense, develop the Web pages and functions needed to market
and distribute the agreed upon Dassault Systemes Web services. We have agreed to
spend a minimum percentage of the revenue generated through the distribution of
each Web service on advertising programs related to that service for thirty
months after the implementation of each service and a minimum amount on
advertising in the first year of each service. As consideration for marketing
and distributing the Web services, we will receive a percentage of net revenues
generated by sales of the Web services on our Web sites.
JOINT SOFTWARE LICENSE AGREEMENT
Under the terms of the Joint Software License Agreement, we have
granted Dassault Systemes, a perpetual, royalty-free license to use, modify and
distribute certain translator and healing software jointly developed by us and
certain third parties and to use and distribute certain software licensed to us
by certain third parties. The license will be exclusive to Dassault Systemes for
use of the Joint Software as component products and non-exclusive for all other
purposes. We will provide Dassault Systemes with maintenance and support
services for the Joint Software for five years from the date of the agreement at
no cost to Dassault Systemes.
MASTER SOFTWARE RESELLER AGREEMENT
Under the terms of the Master Software Reseller Agreement, we have
granted Dassault Systemes a non-exclusive, non-transferable license to market,
promote, reproduce for distribution, distribute and sublicense certain software
products and to use a reasonable number of copies of those products for
demonstration and training purposes only. We will provide Dassault Systemes with
reasonable quantities of standard product marketing materials and product
related training.
INTRAVISION LICENSE AGREEMENT
Spatial Corp., a wholly owned subsidiary of Dassault Systemes, has
agreed to grant PlanetCAD a worldwide, non-exclusive license to use, maintain
and support, access and reproduce the IntraVISION Software Development Toolkit
source code for the purposes of porting, problem identification or fulfilling
escrow obligations to third parties. Dassault Systemes will retain the right to
use the IVSDK for all purposes other than for the development of end user
products.
PLANETCAD EMPLOYEES
As of November 18, 2000, we had 65 full-time employees, including 38 in
product development, quality assurance and technical support, 18 in sales and
marketing and 9 in administration. Our employees are not subject to any
collective bargaining agreements, and management believes its relations with our
employees are good.
THE OPPORTUNITY
Since PlanetCAD was established as a separate division, we have
developed significant software expertise in engineering and 3D software markets
while becoming identified as a neutral supplier of engineering data exchange and
integration solutions. In addition, we have developed customer relationships
with many CAD/CAM/CAE application software providers and been recognized as a
"first mover" Internet-based tools and applications supplier for manufacturers
worldwide. We believe that our new relationship with Dassault Systemes will help
us to become a leading provider of Internet-based tools and applications that
maximize the value of engineering data in the Internet-based manufacturing
design and procurement supply chain. This new relationship with Dassault
Systemes is memorialized in a number of agreements entered into in connection
with the recent sale of our Component Software Division to Dassault. The
industrial market segment, which includes manufacturers of automobiles and
automotive components, airframes, aircraft engines and parts, computers and
peripherals, telephone equipment, molds and dies, and machine tools, among
others, is our primary target market.
OUR APPLICATIONS AND SERVICES
We provide tools and applications that enhance the value of engineering
data in the Internet-based manufacturing design and procurement supply chain. We
enhance engineering data by addressing problems that affect data
interoperability. This includes, but is not limited to, CAD data translation and
3D model healing to enable communication of engineering data with varying
formats and precision. Our business-to-business platform, Internet-based
software applications, and engineering oriented web framework services enable
efficient engineering information exchange and integration for professional
manufacturing and design engineers worldwide. Engineers and managers can benefit
from efficient engineering data integration into Internet-based manufacturing
design and procurement processes, which can lower the cost of production and
speed introduction of products to market.
Our products include PlanetCAD Enterprise Solutions, PlanetCAD
e-Applications(TM) and PlanetCAD.com(R), along with professional services that
help implement a transparent integration of engineering data with existing
manufacturing systems in corporate product design and production processes.
PlanetCAD Enterprise Solutions are Intranet-based software packages
that are installed within a corporate firewall. They help manage transactions
and interactive business processes by simplifying engineering data flows between
design and manufacturing engineers and their suppliers. Key features of
PlanetCAD Enterprise Solutions include:
o installation in the OEM's or first tier supplier's Intranet;
o integration of engineering data flows into CAD, PDM, ERP, and
legacy systems for more efficient management of the
Internet-based manufacturing design and procurement supply
chain;
o simplification of communication of engineering data with
varying formats and precision; and
o optimization of design and manufacturing business processes.
Our products include data interoperability, data quality management,
visualization and collaboration, and process automation solutions. We focus on
providing e-Applications to enhance business practice in the following areas:
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<PAGE> 26
o data interoperability, including such applications such as CAD
data translation, 3D model healing, engineering data quality,
and engineering data distribution;
o visualization and collaboration, including 3D viewing, markup
and collaboration; and
o process automation, including applications for data quality
certification, request for quote management, process planning
and costing, and engineering change order management.
We are pioneers in Internet delivery of engineering application
services, having launched 3Dshare.com in the fourth quarter of 1999 as the first
server-based, pay-per-use engineering service on the Internet. 3Dshare.com
provides automated, online 3D engineering model translation and repair.
3Dshare.com is the CAD/CAM/CAE industry's first-ever Web-based software
application for translating, repairing and improving 3D models. This application
service provides engineers with a cost-effective Web solution for enhancing
translated models, making them more usable in multiple engineering processes,
including design, analysis, and manufacturing. We subsequently launched
3Dpublish.com, a service for providing two-dimensional publishing output from
three-dimensional models.
Another of our products, 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 and provides users the ability to
view, measure, markup and manipulate the accurate data of original designs and
concurrent engineering processes.
We introduced our first third party application service,
Quote-A-part.com, in the fourth quarter of 2000 in partnership with Tecnomatix
Technologies Ltd., a leading supplier of factory automation and process planning
software. Quote-A-part is an automated service for estimating the cost of
producing a physical part from a digital model.
We plan to introduce an important e-Application for secure model
distribution in the fourth quarter of 2000. In addition, we plan to introduce a
service code-named 3Dquality.com, a keystone e-Application for CAD model quality
certification and management that will be based on the Design/QA product from
Prescient Technologies, a company acquired by us in July 2000. We are targeting
to have as many as eight e-Applications available over the next year.
We plan to make our flagship Web site, PlanetCAD.com, the premier
Internet destination for manufacturing and design engineers. PlanetCAD.com
includes all PlanetCAD e-Applications, making them available to a broad public
user base. Manufacturers that use PlanetCAD Enterprise Solutions can also use
PlanetCAD.com to access a broader supplier base and provide incremental
e-Application functionality to corporate users, while suppliers can potentially
access additional manufacturing customers. When enterprise customers of
PlanetCAD Enterprise Solutions establish relationships with new suppliers
through PlanetCAD.com, both they and the new suppliers will be using the same
Internet-based software platform and tools for engineering data
interoperability, minimizing costly engineering data exchange and integration
issues.
OUR STRATEGY
We plan to capitalize on the market opportunity by:
o Providing enterprise and Internet-based applications for
engineering data that give manufacturers a cost-effective
alternative to performing similar tasks with their own staff
or software
o Providing high-value e-Applications to optimize
customer/supplier business processes
o Aggregating in-house and third party e-Applications and
content to deliver comprehensive solutions for the
Internet-based manufacturing design and procurement supply
chain over the Internet
o Leveraging partnerships for marketing, distribution and
technology
o Expanding internationally through distribution partners
overseas
OUR BUSINESS MODEL
We plan to focus on the following revenue sources:
1. Direct sale and implementation of PlanetCAD Enterprise
Solutions into major manufacturing companies and their tier
one suppliers, generating revenue through:
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<PAGE> 27
o Subscription fees from corporate usage of PlanetCAD
Enterprise Solutions and add on e-Applications and
services
o ASP fees from hosting Enterprise Solutions at our
site when requested by the customer
o Professional service fees for implementation,
integration, customization, and training
o Subscription fees for access to selected
functionality of PlanetCAD.com
2. Use by the public of PlanetCAD.com by second tier and third
tier suppliers and enterprise customers will generate revenue
through:
o Subscription and pay-per-use fees from public usage
of e-Applications
o Commissions for business generated through usage of
process automation e-Applications by suppliers
o Subscription fees for access to selected content
o Advertising
o Co-branding partnerships that generate revenue
through private branded versions of our
Internet-based software applications
3. Direct sale and implementation of PlanetCAD Enterprise
Solutions into large manufacturing companies
Our primary focus is to sell and install Enterprise Solutions at large
manufacturing companies worldwide. Revenue from the sale and implementation of
Enterprise Solutions will be generated from monthly leases on a per processor
basis. Monthly hosting fees will be charged when the Enterprise Solution is
provided by us on an application service provider basis. Professional service
fees will be charged for implementation, integration and customization. Finally,
subscription fees will be charged for access to selected additional products and
services from the PlanetCAD.com Web site.
We have sold the first and second installations of our Enterprise
Solutions to large Japanese manufacturers. We plan to license Enterprise
Solutions through our direct sales force and through third party resellers.
To accelerate sales of our Enterprise Solutions, we intend to build on
the strengths of Prescient, a supplier of manufacturing data quality products
that we acquired in July 2000. Prescient provides expertise in enterprise
product packaging, implementation services, end user sales, and over one hundred
major manufacturing customers. We believe that Prescient's customers are ideal
candidates for PlanetCAD's Enterprise Solutions.
We will also seek to use our relationship with Information Services
International-Dentsu Ltd. to capitalize on interest in our Enterprise Solutions
in the Japanese market. In connection with the sale of our Component Software
Division to Dassault, we entered into a reseller agreement for PlanetCAD's
Enterprise Solutions with Dassault Systemes. Dassault Systemes is the leading
Engineering Software supplier in the automotive and aerospace industries
worldwide. In addition, we are seeking to enter into arrangements with
first-tier hardware companies to accelerate sales of Enterprise Solutions in
connection with sales of those companies' products.
Enterprise Solutions are sold on a per-application, per-processor
basis. The base package includes the PlanetCAD business-to-business Integration
Server and software applications for secure data distribution, data quality
management, and data translation and repair, running on a single processor.
Customers can purchase additional e-Applications at any time, on a
per-application basis or as specialized packages targeted at specific vertical
niches, such as mold making or tool and die manufacturing. As a customer reaches
computing limitations of a processor's ability to process jobs, the customer can
subscribe for additional processors to increase capacity. We have adopted this
subscription sales model in order to improve customer acceptance of PlanetCAD
Enterprise Solutions by providing customers with complete control of application
usage and capacity planning.
Subscription fees for e-Applications vary depending on the service
provided, but we believe that we have established prices that are low enough to
make cost justification straightforward.
We will generate incremental revenue by hosting, for an additional fee,
Enterprise Solutions on our own hardware on an application service provider
basis. We will also establish virtual private networks (VPN) for manufacturers
and their suppliers for an incremental fee.
After the initial installation, we expect that some enterprise
customers will purchase additional services for their PlanetCAD Enterprise
Solutions. We will provide implementation consulting, training and support for
PlanetCAD Enterprise
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Solutions, building on the expertise of the Prescient implementation services
team. These scalable services will help our customers maximize the benefit of
their Enterprise Solutions. We will try to build alliances with system
integrators and international consulting companies to help satisfy the expected
demand for implementation services. We also plan to expand our Internet-based
"customer care" services to increase the availability of support tools and
on-line help around-the-clock.
USAGE OF PUBLIC INTERNET SITE BY SECOND TIER AND THIRD TIER SUPPLIERS
We provide PlanetCAD.com as a public Internet service so second tier
and third tier suppliers can benefit from the same e-Applications as enterprise
customers. PlanetCAD.com also provides an evaluation mechanism for enterprise
customers who wish to try new e-Applications before they license them as
Enterprise Solutions. We generate revenue from PlanetCAD.com through usage of
e-Applications on a pay-per-use and subscription basis by registered users of
the public site.
Subscription fees for e-Applications vary depending on the service
provided, but are priced to provide cost efficient services when compared to the
cost of performing similar functions through current business practices. For
example, 3Dshare.com users are charged based on the size (in megabytes) of the
models they wish to have translated and/or healed. Currently, many manufacturing
companies solve difficult CAD data translation and healing problems by having an
employee manually repair an imperfect model using a seat of a CAD system. Often
the engineer does not have experience with the CAD system used to create the
original model, which forces many suppliers to purchase multiple CAD system
licenses and employ specialists in different CAD systems, just to be able to
read and write customer CAD data. 3Dshare.com pricing is approximately 10% of
the expected cost of this manual translation and repair process, and its
pay-per-use or subscription-based pricing model virtually eliminates the cost of
owning multiple CAD systems and employing more CAD specialists than needed for
model interoperability tasks. Quote-A-part.com users will be charged under a
similar pricing strategy. We believe this pricing model will be attractive to
prospective users in small to mid-sized companies.
We expect that some customers will use e-Applications from the public
PlanetCAD.com site before purchasing them as Enterprise Solutions. Fees for
public usage of PlanetCAD e-Applications will be slightly higher than for those
e-Applications installed in a corporate Intranet.
We will provide Internet-based commerce solutions targeted at process
automation for custom manufacturing. We believe that this is a significant
market that is not currently served by other Internet-based service providers.
Our first Internet-based service, Bits2PARTS.com, was launched in a limited
beta-test form in July 2000 and moved into open beta in September 2000.
Bits2PARTS.com allows manufacturers to automate the request for quote process
with third party service bureaus that generate physical prototypes of the
manufacturers' digital model data. The Bits2PARTS.com target market includes
custom manufacturing market segments such as mold, die and machine tool
manufacturing. The Bits2PARTS.com software engine integrates tightly with
PlanetCAD e-Applications such as 3Dshare.com to assure that a high quality model
is delivered with the request for quote to the supplier - a substantial
technical differentiator and barrier to entry for competitors. This tight
integration provides additional benefits to large manufacturing customers of
PlanetCAD Enterprise Solutions, as they integrate their front and back office
business and Internet-based manufacturing design and procurement processes.
The primary revenue streams for Bits2PARTS.com will be subscription
fees charged to suppliers and transaction fees generated when a buyer and seller
agree to do business on a project quoted through Bits2PARTS. We also plan to
generate revenue from advertisements placed by manufacturing sell-side suppliers
and equipment suppliers who want to reach new customers in this highly
specialized custom manufacturing marketplace.
The foundation of the Bits2PARTS e-Application is configurable to
support other similar business process automation applications, such as project
bidding for marketing or sales. We expect this feature will generate incremental
revenue from enterprise customers as they integrate and customize the Bits2PARTS
platform to support these and other business functions. The flexible nature of
the Bits2PARTS platform also provides PlanetCAD with opportunities to leverage
the technology to create new e-Applications at low cost.
PlanetCAD.com will provide a targeted audience for advertisers seeking
to sell products and services to design and manufacturing engineers. We expect
this revenue stream will be small initially, but that it should become more
significant as page views increase. We expect page views to increase as more
large manufacturers form private Internet-based manufacturing design and
procurement supply chain networks with their community of suppliers, and as
smaller manufacturing suppliers leverage PlanetCAD.com as a vehicle to broaden
relationships with large manufacturers.
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CO-BRANDING RELATIONSHIPS
We will provide co-branded versions of e-Applications to engineering
software companies. In a co-branding agreement, a partner's end user customer
will be able to access our e-Applications from the partner's Web site.
Co-branded e-Applications will be customized with the partner's look-and-feel,
while using our Web infrastructure and application back-end. We will retain
prominent branding for each e-Application offered as a co-branded service.
When a customer visits PlanetCAD.com from a co-branded partner site, we
and our co-brand partner will share the revenue generated by the customer based
on the relative contribution of each party to the development, marketing, and
support of the service. We will typically receive between fifty and eighty
percent of this revenue depending on the services provided.
We recently announced co-branding relationships with Dassault Systemes
and Autodesk, Inc., the sixth largest PC software company in the world and the
leading supplier of mass market engineering software. These companies will
provide a co-branded 3Dshare.com service to their customers worldwide to meet
demand for online engineering data translation and quality services. The
co-branding agreement with Dassault Systemes was signed in connection with the
closing of the sale of our component software division. We plan to execute
similar co-branding relationships with additional partners in the coming year.
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COMPETITION
We face potential competition from several fronts, including both
larger mechanical engineering software companies and startups. Management
believes that there are currently no established manufacturing and design
engineering portals or ASPs. Please see "Risk Factors -- Competition in our
Industry is Intense" on page 6 of this prospectus.
CUSTOMERS
We have generated interest from end-users as well as industry press and
analysts. 3Dshare.com has won awards including NASA Technical Brief's Product of
the Year in 1999, the Industry Week 1999 Technology and Innovation Award, and
Cadence magazine's Editor's Choice Award for 1999. PlanetCAD.com had over 9,600
registered users as of November 20, 2000. Many registered users are engineers
from some of the world's foremost manufacturing companies. Below is a sample of
some of the companies whose employees have registered to use PlanetCAD.com:
<TABLE>
<S> <C> <C> <C> <C>
Sony Nokia Toyota Sun Microsystems Qualcomm
Intel Kodak Schlumberger Caterpillar Nissan
Rockwell Siemens Lucent Motorola Honeywell
Boeing Freightliner Iomega Honda Cummins Engine
</TABLE>
3Dshare.com now has registered users in 100 countries around the world.
EFFECT OF GOVERNMENT REGULATIONS
Our business faces impacts from certain existing and potential future
government regulations. For a more detailed explanation of the potential impact
of government regulations on our business see "Our Business Faces Uncertainties
and Potential Government Regulations Regarding the Internet" on page 9 of this
registration statement.
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RESEARCH AND DEVELOPMENT EXPENDITURES
We did not incur research and development expenditures for internet
based products and services until 1999 when we grew our research and development
staff significantly, principally to design, develop and implement our Internet
based business strategy. The development effort began in June 1999 and included
core product, middleware and user interface development. Our first Web based
product, 3DShare.com, was released in November 1999.
Our research and development expenses primarily consist of salaries and
related costs of employees engaged in ongoing research, design and development
activities and subcontracting costs. For the years ended December 31, 1998 and
1999 and the nine months ended September 30, 2000, research and development
expenses were approximately $0, $1.0 million and $4.4 million respectively.
Included in research and development for the nine months ended September 30,
2000 is an expense of approximately $700,000 for outside consulting services
related to development of the JAVA version of PlanetCAD's proprietary Web
framework. Research and development expenses primarily consist of salaries and
related costs of employees engaged in ongoing research, design and development
activities and subcontracting costs.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
financial statements and related notes thereto included elsewhere in this
prospectus. This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements include statements
concerning underlying assumptions and other statements that are other than
statements of historical facts. Forward-looking statements include, but are not
limited to, words such as "anticipate," "estimate," "project," "intend," and
similar expressions which we have used to identify these statements as
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results or outcomes to differ materially.
Our expectations and beliefs are expressed in good faith and we believe them to
have a reasonable basis, but there can be no assurance that management's
expectations, beliefs or projections will be achieved or accomplished. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus. The cautionary statements made in this prospectus should be read as
being applicable to all related forward-looking statements wherever they appear
in this prospectus.
In November 2000, our shareholders approved plans to sell the assets of
its component software business to Dassault Systemes Corp. or its assignee in a
cash transaction for approximately $25.0 million, which sale was consummated on
November 14, 2000. In addition, certain cross licensing agreements for component
and Internet technologies were executed as part of the transaction. As a result,
the results of operations of our component software division have been
reclassified as discontinued operations.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUE. For the nine month period ended September 30, 2000, total
revenue increased 154% to $1.6 million as compared to $643,000 for the same nine
month period in 1999. License fees and royalties increased 150% to $1.2 million
in the nine month period ended September 30, 2000, as compared to $482,000
reported for the comparable prior year period. The increase in license fees and
royalties is primarily due to sales of products acquired in the July 2000
Prescient acquisition. Service revenue increased 166% to $428,000 for the nine
month period ended September 30, 2000, as compared to $161,000 reported for the
comparable period in 1999, reflecting increased services to former Prescient
customers.
COST OF REVENUE. For the nine month period ended September 30, 2000
cost of revenue increased 345% to $699,000 from $157,000 reported in the
comparable prior year period. The increase in cost of revenue was primarily due
to increased customer support costs for Prescient customers including costs
related to employees hired in anticipation of revenues. As a percent of total
revenue, cost of revenue increased to 43% for the nine months ended September
30, 2000, respectively, as compared to 24% for the comparable period in 1999.
OPERATING EXPENSES. For the nine month period ended September 30, 2000
total operating expenses increased 522% to $8.2 million from $1.3 million
reported in the comparable prior year period. The increase in total operating
expenses was primarily due to increased staffing costs associated with the
acquisition of Prescient as well as increased staffing to support the
development of our Web infrastructure for engineering services. Operating
expenses also include an expense of approximately $700,000 for outside
consulting services related to development of the JAVA version of PlanetCAD's
proprietary Web framework. As a percent of total revenue, total operating
expenses increased to 500% for the nine months ended September 30, 2000,
respectively, as compared to 204% for the comparable period in 1999.
SALES AND MARKETING EXPENSES. For the nine month period ended September
30, 2000 sales and marketing expense increased 439% to $2.2 million from
$411,000 reported for the nine month period ended September 30, 1999. Increased
sales and marketing expense in 2000 as compared to 1999 is due to increased
marketing efforts, including advertising, for our Web infrastructure and related
internet-based engineering services. For the nine month period ended September
30, 2000 sales and marketing expense increased as a percent of total revenue to
136% versus 64% for the same prior year period.
RESEARCH AND DEVELOPMENT EXPENSES. For the nine-month period ended
September 30, 2000 research and development expense increased 479% to $4.4
million from $760,000 reported in the comparable period in the prior year.
Increased research and development expense was due to increased staffing in
support of the continued development of our Web infrastructure for engineering
services which includes the following application services: 3Dshare.com,
Bits2Parts.com and 3Dpublish.com as well as products in the Prescient product
line. In addition, research and development expenses for the period also
includes an expense of approximately $700,000 for outside consulting services
related to development of the JAVA version of our proprietary Web framework. As
a percent of total revenue, research and development expense increased to 270%
for the nine month period ended September 30, 2000 from 118% for the comparable
prior year periods.
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased 760% to $1.2 million for the nine month period ended
September 30, 2000 from $141,000 for the same period in 1999. The increase in
general and administrative expenses is due to increased staffing and legal costs
to support the Prescient products as well as support for the increased
activities in the development of our Web infrastructure for engineering
services. As a percent of total revenue, general and administrative expense
increased to 74% for the nine month period ended September 30, 2000, from 22%
for the comparable prior year period.
IN-PROCESS RESEARCH AND DEVELOPMENT. In-process research and
development expense of $332,000 in the nine months ended September 30, 2000
relates to the acquisition of certain assets and liabilities of Prescient
Technologies. There was no acquired in-process research and development expense
for the comparable prior period.
DISCONTINUED OPERATIONS, COMPONENT SOFTWARE. For the nine months ended
September 30, 2000 net loss from discontinued operations increased to $3.4
million from $229,000 reported in the comparable period in the prior year. The
increase in net loss is primarily due to decreased revenue due in part to
increased resistance to upfront license fees by software developers in an
increasingly competitive market, as well as from changes to the pricing model
for our component software products. Under the new pricing model, component
licensees pay only recurring fixed and variable partner fees upon the release
and shipment of a software application that incorporates our component software.
1999 COMPARED TO 1998
REVENUE. For the year ended December 31, 1999, we had $824,000 in
revenue compared to no revenue in the prior year. The revenue is primarily from
the development of an end-use product related to the product purchased in the
December 1998 acquisition of IDA. We acquired all of the outstanding common
stock of IDA in exchange for 1,400,000 shares of our common stock. Established
in 1983, IDA developed and marketed software for the sharing, access and
exchange of electronic product data throughout the manufacturing process.
COST OF REVENUE. For the year ended December 31, 1999, we had $191,000
in cost of revenue as compared to no cost in the prior year primarily due to
services to support the IDA end-use product.
SALES AND MARKETING EXPENSE. For the year ended December 31, 1999, we
had $498,000 in sales and marketing expense compared to no expenses in the prior
year primarily due to expenses to sell and market the IDA end-use product.
RESEARCH AND DEVELOPMENT EXPENSE. For the year ended December 31, 1999,
we had $1,022,000 in research and development expense compared to no expense in
the prior year. Research and development in 1999 was primarily focused on the
development of the IDA end-use product.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
in 1999 was $221,000 compared to no expense in the prior year primarily due to
expenses to support the marketing, sales and development of the IDA end-use
product.
DISCONTINUED OPERATIONS, COMPONENT SOFTWARE. For the year ended
December 31, 2000, discontinued operations reported a loss of $1.7 million as
compared to $172,000 income reported in the comparable period in the prior year.
The increase in net loss is primarily due increased research and development
expenditures to continue development and support of the component software
products.
1998 COMPARED TO 1997
There were no activities in the PlanetCAD division for the years ended
December 31, 1998 and 1997. For the year ended December 31, 1998, we had
$172,000 in income compared to a $1.8 million loss for the year ended December
31, 1997. During 1998, we experienced increased revenues from the products in
the component software division partially offset by increased research and
development expenses.
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had $1.2 million in cash and cash
equivalents. Cash and cash equivalents decreased $96,000 for the nine months
ended September 30, 2000, as compared to a decrease of $1.8 million for the
comparable prior year period. The decrease in cash is primarily due to the net
loss of $10.6 million offset by $6.9 million received in a private equity
transaction and a $2 million loan from Dassault. In a private equity
transaction, we sold 1.9 million shares of common stock at a price of $3.60 per
share and warrants to purchase 1.2 million shares of common stock for $0.05 per
share. The $2 million loan received from Dassault was obtained in connection
with the sale of our component software division to Dassault which we repaid as
an offset against the purchase price received from Dassault at the closing of
the sale transaction. Net cash for the year ended December 31, 1999 decreased
$3.2 million primarily due to a net loss of $2.8 million, $1 million in
equipment purchases and $500,000 cash paid for asset acquired from Sven
Technologies, Inc. In June 1999, we acquired certain assets and liabilities of
Sven Technologies for a total consideration of $1.4 million, including $500,000
cash and 193,861 shares of common stock and a warrant to purchase 250,000 shares
of common stock at $12.50 per share. For the year ended December 31, 1998, net
cash decreased $1.3 million primarily due to equipment and software purchases.
Net cash used for operating activities was $7.3 million for the nine month
period ended September 30, 2000 as compared to net cash used in operations of
$635,000 for the nine month period ended September 30, 1999. Net cash used by
operations in 2000 was primarily the result of the net loss for the nine month
period ended September 30, 2000 partially offset by increased accounts payable.
Cash used in operations in the nine month period ended September 30, 1999 was
primarily the result of increased accrued liabilities associated with cash
payments made by PlanetCAD to Sven Technologies in the third and fourth quarters
of 1999 in connection with the Sven Technologies acquisition, partially offset
by increased accounts receivable and decreased accounts payable. For the year
ended December 31, 1999, net cash used by operations was $1.6 million primarily
due to our net loss of $2.9 million. For the year ended December 31, 1998, net
cash used by operations was $150,000 primarily due to an increase in accounts
receivable.
Net cash used for investing activities totaling $1.8 million for the nine
month period ended September 30, 2000 reflects $1.2 million used for equipment
purchases, $518,000 used for purchased computer software and $100,000 used in
connection with the Prescient acquisition. Net cash used for investing
activities during the nine months ended September 30, 1999 includes $525,000 for
equipment purchases and $694,000 for purchased computer software including
$500,000 in connection with the Sven acquisition. Net cash used by investing
activities for the year ended December 31, 1999 was $1.7 million due to $1
million used for equipment purchases, $219,000 used for purchased computer
software and $500,000 used for the Sven acquisition. For the year ended December
31, 1998, net cash used by investing activities was $1.1 million due to $629,000
used for equipment purchases and $446,000 used for purchased computer software.
Net cash provided by financing activities was $9.1 million for the nine
months ended September 30, 2000, due to proceeds from the $6.9 million equity
transaction in February 2000 as well as proceeds from a $2 million loan from
Dassault. Net cash provided by financing activities for the nine month period
ended September 30, 1999 was $34,000 reflecting cash used for principal payments
on debt partially offset by proceeds from the issuance of common stock in
connection with the exercise of employee stock options. Net cash provided by
financing activities for the year ended December 31, 1999 was $51,000 due to
$141,000 received from the issuance of common stock partially offset by $89,000
used for principal payments on debt. For the year ended December 31, 1998 cash
used by financing activities was $7,000 due to principal payments on debt of
$190,000 offset by $183,000 in proceeds received from the issuance of common
stock.
In November 2000, we sold the assets of our component software business to
Spatial Corp., as wholly owned subsidiary of Dassault Systemes Corp., in a cash
transaction of approximately $25 million, less expenses and certain purchase
price adjustments. Management believes that cash from the sales of the component
software business, together with existing cash and cash generated from
operations, will be sufficient to meet our operating and capital requirements
for the foreseeable future including at least the next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," or SFAS No. 133, was issued by
the FASB in June 1998. Spatial will be required to adopt SFAS No. 133 for the
fiscal year ending December 31, 2001. However, because we do not utilize
derivative financial instruments, we do not believe the impact of SFAS No. 133
will be material to our consolidated financial position or results of
operations.
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In December 1998, the American Institute of Certified Public
Accountants("AICPA") issued Statement of Position 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions" ("SOP
98-9"). SOP98-9 requires use of the "residual method" for recognition of revenue
when vendor-specific objective evidence exists for undelivered elements but does
not exist for delivered elements of a software arrangement. We have adopted SOP
98-9 effective for 1999 with no material effect on our consolidated financial
statements.
In December 1999, the Securities and Exchange Commission released
Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on revenue recognition issues. We do not
anticipate any material effect from SAB 101 on our consolidated financial
statements.
FLUCTUATIONS IN QUARTERLY RESULTS
We have experienced in the past, and expects to continue to experience
in the future, significant fluctuations in quarterly operating results due to a
number of factors that are difficult to forecast, including, among others, the
volume of orders received within a quarter, demand for our products, the product
mix purchased by our customers, competing capital budget considerations of our
customers, introduction and enhancement of products by us and our competitors,
market acceptance of new products, reviews in the industry press concerning the
products of us or our competitors, changes or anticipated changes in pricing by
us or our competitors and general economic conditions. Due to the foregoing
factors, it is possible that our operating results for some future quarters may
fall below the expectations of securities analysts and investors.
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DESCRIPTION OF PROPERTY
Our principal executive office is located at 2520 55th Street, Suite
200, Boulder, Colorado 80301, where we lease approximately 15,600 square feet of
office space. Lease payments commenced in October 2000 for this facility and are
approximately $25,400 per month. The lease obligation escalates 3% per annum.
As a result of the acquisition of Prescient Technologies, we leased
11,300 square feet of office space in Westborough, Massachusetts. The five-year
lease commitment commenced in November 2000 and requires initial monthly
payments of approximately $21,650 for the first three years of the lease and
approximately $22,590 per month for the last two years of the lease.
All of our leased properties are in good condition and are adequately
covered by insurance.
LEGAL PROCEEDINGS
From time to time we are involved in litigation relating to claims
arising out of our operations in the normal course of business. As of the date
of this filing, We are not a party to any legal proceedings, the adverse outcome
of which would, in management's opinion, have a material adverse effect on our
operating results and financial condition.
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DESCRIPTION OF SECURITIES
The following summary of certain provisions of our capital stock is
subject to, and qualified in its entirety by, the provisions of our certificate
of incorporation, as amended, and our bylaws that are referenced as exhibits to
this prospectus and by provisions of applicable law.
COMMON STOCK
We are authorized to issue up to 22,500,000 shares of common stock,
$.01 par value. As of November 17, 2000, there were 12,442,863 shares of common
stock outstanding, held of record by 118 stockholders. The holders of common
stock are entitled to dividends when and as declared by the board of directors
from funds legally available to pay such dividends, and, upon liquidation, are
entitled to share pro rata in any distribution to holders of common stock. No
dividends have ever been declared by our board of directors. We intend to retain
any earnings to grow our business and do not expect to pay any dividends on the
common stock in the foreseeable future. The holders of common stock are entitled
to one vote for each share held of record on all matters to be voted on by
stockholders. There is no cumulative voting with respect to the election of
directors with the result that the holders of more than 50% of the shares of
common stock voted for the election of directors can elect all of the directors.
Holders of the common stock have no preemptive rights and no rights to convert
their common stock into any other securities. All of the outstanding shares of
common stock are duly authorized, validly issued, fully paid and non-assessable.
PREFERRED STOCK
We are authorized to issue up to 2,500,000 shares of preferred stock,
$.01 par value. The preferred stock is issuable from time to time in one or more
series, and our board of directors is authorized to fix or alter from time to
time the designation, powers, preferences and relative rights of the shares of
each series and the qualifications, limitations or restrictions of any wholly
unissued series of preferred stock and establish the number of shares
constituting each series up to the maximum number of shares authorized to be
issued. As of the date of this prospectus, no shares of preferred stock were
issued or outstanding.
CERTAIN PROVISIONS RELATING TO A CHANGE OF CONTROL
We have adopted certain takeover defenses that may deter third parties
from acquiring PlanetCAD and effecting a rapid change of control. Our
certificate of incorporation requires the affirmative vote of two-thirds of the
stockholders to remove a director from the board of directors without cause. The
certificate of incorporation also provides that all board vacancies are to be
filled by the remaining directors. Our stockholders are not entitled to elect
directors to fill vacancies without prior board approval other than at an annual
stockholder's meeting. Finally, our bylaws prohibit less than two-thirds of our
stockholders from calling a special meeting, whether for the purpose of
replacing directors or for any other purpose. As a result, once elected, our
directors may not be removed from office without cause until the next annual
meeting of the stockholders. Therefore, a third party interested in taking
control of PlanetCAD quickly will not be able to do so unless the third party
acquires two-thirds or more of our voting securities at the time of the
acquisition.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporation Law of the State of
Delaware, we have broad powers to indemnify our directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended ("Securities Act").
Our bylaws also provide that we will indemnify our directors and
executive officers and may indemnify our other officers, employees and other
agents to the fullest extent permitted by Delaware law.
In addition, our certificate of incorporation, as amended and in effect
as of the date of this prospectus, provides that the liability of its directors
for monetary damages will 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
PlanetCAD and our 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 directors' duty of loyalty to PlanetCAD, for acts 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 provisions
do not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
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We have entered into indemnification agreements with each of our
directors and executive officers that require us to indemnify each such person
to the fullest extent authorized or permitted by the provisions of our
certificate of incorporation and Delaware law against expenses, judgments,
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 they may be made a party by reason of the
fact that they are or were acting as a director, officer, employee or other
agent of PlanetCAD or any of our affiliated enterprises. Delaware law permits
this indemnification, provided the person acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of PlanetCAD
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, we maintain 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 officers of PlanetCAD.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted for directors and officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
TRANSFER AGENT
The transfer agent and registrar for our common stock is Wells Fargo
Shareowner Services.
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<PAGE> 39
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the over-the-counter market through the
American Stock Exchange under the symbol "PCD." The following table indicates
the high and low sale prices per share reported by the American Stock exchange
for the periods indicated. These prices do not include retail markups, markdowns
or commissions.
<TABLE>
<CAPTION>
1998 1999 2000
---- ---- ----
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $2.69 $1.25 $4.31 $2.69 $12.00 $3.88
Second Quarter $2.75 $1.75 $4.88 $2.56 $ 8.00 $3.13
Third Quarter $2.63 $1.88 $4.94 $3.25 $ 4.44 $1.75
Fourth Quarter $3.56 $1.44 $5.88 $2.88 $ 3.25(1) $1.63(1)
</TABLE>
----------
(1) Through November 17, 2000
As of November 17, 2000, there were approximately 118 holders of record
of PlanetCAD common stock.
PlanetCAD has never declared or paid dividends on the common stock. We
currently intend to retain any further earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future.
PLAN OF DISTRIBUTION
We are registering the shares offered by the selling stockholders
described in this prospectus pursuant to covenants and contractual registration
rights contained in a registration rights agreement, dated as of February 22,
2000, by and among PlanetCAD and the selling stockholders identified in this
prospectus. The selling stockholders may sell all, some or none of the shares of
PlanetCAD 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 selling stockholder or by agreement between the stockholder
and underwriters or dealers who may receive fees of commissions in connection
with the sale.
Any of the selling stockholders may from time to time offer shares of
PlanetCAD 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 PlanetCAD 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.
Alternatively, the selling stockholders may sell all or a portion of the shares
of PlanetCAD 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 include block trades in which brokers or dealers will attempt
to sell the shares of PlanetCAD 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 PlanetCAD 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
PlanetCAD 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 PlanetCAD common stock in the course of hedging the positions they assume
with such selling
35
<PAGE> 40
stockholder, including, without limitation, in connection with distribution of
the shares of PlanetCAD common stock by such broker-dealers. In addition, the
selling stockholder may, from time to time, sell short the shares of PlanetCAD
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 PlanetCAD 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 PlanetCAD common stock offered
hereby may be deemed to be underwriters within the meaning of 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
PlanetCAD common stock described herein, and any selling stockholder may
transfer, devise or gift such securities by other means not described herein.
We have agreed to keep the registration of the shares offered by this
prospectus effective until all of the shares offered by this prospectus either
(1) may be immediately sold to the public without registration or restriction
pursuant to Rule 144(k) under the Securities Act or (2) have been sold. We will
pay substantially all of the expenses incurred by the selling stockholders and
PlanetCAD incident to the offering and sale of the shares described herein,
excluding broker's fees, underwriting discounts, commissions and similar selling
expenses. These expenses may include, but are not limited to, registration,
listing and qualification fees, printers and accounting fees, the fees and
disbursements of our counsel, and the fees and disbursements of counsel for the
selling stockholders not in excess of $15,000. Our expenses in connection with
the offering and sale of these shares are expected to be $150,000. We will not
receive any of the proceeds from the sale of securities by the selling
stockholders. However, if one or more of the selling stockholders exercise their
rights under the warrants, we could receive up to $7.8 million in gross
proceeds, which represents the aggregate exercise price for all of the shares of
common stock underlying the warrants. All proceeds we receive, if any, will be
used for general corporate purposes.
To the extent required, the specific shares of PlanetCAD 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
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.
LEGAL MATTERS
Hogan & Hartson L.L.P. will pass upon certain legal matters for us
regarding the validity of the PlanetCAD common stock described by and offered in
connection with this prospectus.
EXPERTS
The financial statements for PlanetCAD Inc. (formerly Spatial
Technology Inc.) and Prescient Technologies, Inc. as of December 31, 1998 and
1999 and for the years then ended have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements for Sven Technologies, Inc. as of December 31,
1997 and 1998 and for the years then ended have been included herein and in the
registration statement in reliance upon the report of Hood & Strong LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2. It includes all amendments, exhibits and
schedules. This prospectus is part of the registration statement. It does not
contain all of the information that is in the registration statement and the
exhibits and schedule thereto, certain parts of which are omitted in
36
<PAGE> 41
accordance with the rules and regulations of the Securities and Exchange
Commission. For further information regarding our common stock and PlanetCAD,
please review the registration statement, including exhibits, schedules and
reports filed as a part thereof. We are a reporting company and have filed or
intend to regularly file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Statements
contained in this prospectus concerning the provision of documents filed as
exhibits to the registration statement are necessarily summaries that disclose
the material terms of such documents. Each of these statements is qualified in
its entirety by reference to the copy of the applicable document filed with the
Securities and Exchange Commission. You may read and copy all or any portion of
the registration statement or any other document we have filed with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference room's operations. We are required to file these documents with the
Securities and Exchange Commission electronically. The Securities and Exchange
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission at http://www.sec.gov.
37
<PAGE> 42
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PLANETCAD INC. (FORMERLY SPATIAL TECHNOLOGY INC.)
Independent Auditors' Report............................................................................. F-1
Consolidated Balance Sheets as of December 31, 1998 and 1999 and September 30, 2000 (unaudited).......... F-2
Consolidated Statements of Operations, years ended December 31, 1998 and 1999 and
nine months ended September 30, 1999 and 2000 (unaudited).............................................. F-3
Consolidated Statements of Stockholders' Equity, years ended December 31, 1998 and 1999
and nine months ended September 30, 2000 (unaudited)................................................... F-4
Consolidated Statements of Cash Flows, years ended December 31, 1998 and 1999 and
nine months ended September 30, 1999 and 2000 (unaudited).............................................. F-6
Notes to Consolidated Financial Statements............................................................... F-7
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Pro Forma Unaudited Condensed Combined Balance Sheet as of September 30, 2000........................... F-20
Pro Forma Unaudited Condensed Combined Statement of Operations, nine months ended September 30, 2000..... F-21
Pro Forma Unaudited Condensed Combined Statement of Operations, year ended December 31, 1999 ............ F-22
Notes to Unaudited Pro Forma Condensed Combined Financial Statements..................................... F-23
PRESCIENT TECHNOLOGIES, INC.
Independent Auditors' Report............................................................................. F-25
Balance Sheets as of December 31, 1998 and 1999 and June 30, 2000 (unaudited)............................ F-26
Statements of Operations, years ended December 31, 1998 and 1999 and six
months ended June 30, 1999 and 2000 (unaudited)........................................................ F-27
Statements of Stockholders' Deficit, years ended December 31, 1998 and 1999 and
six months ended June 30, 2000 (unaudited)............................................................. F-28
Statements of Cash Flows, years ended December 31, 1998 and 1999 and six months
ended June 30, 1999 and 2000 (unaudited)............................................................... F-29
Notes to Financial Statements............................................................................ F-30
SVEN TECHNOLOGIES, INC.
Independent Auditors' Report............................................................................. F-36
Balance Sheets as of December 31, 1997 and 1998.......................................................... F-37
Statements of Operations, years ended December 31, 1997 and 1998......................................... F-38
Statements of Stockholders' Equity (Deficit), years ended December 31, 1997 and 1998..................... F-39
Statements of Cash Flows, years ended December 31, 1997 and 1998......................................... F-40
Notes to Financial Statements............................................................................ F-41
Condensed Balance Sheet as of June 29, 1999 (unaudited).................................................. F-46
Condensed Statements of Operations and Accumulated Deficit, six months ended June 30, 1998
and June 29, 1999 (unaudited).......................................................................... F-47
Condensed Statements of Cash Flows, six months ended June 30, 1998 and June 29, 1999 (unaudited)......... F-48
Notes to Condensed Financial Statements (unaudited)...................................................... F-49
</TABLE>
F-i
<PAGE> 43
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
PlanetCAD Inc. (formerly Spatial Technology Inc.):
We have audited the accompanying consolidated balance sheets
of PlanetCAD Inc. (formerly Spatial Technology Inc.) and subsidiaries
as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of PlanetCAD Inc. (formerly Spatial Technology Inc.) and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Boulder, Colorado
January 27, 2000, except as to Note 1(j),
which is as of November 14, 2000
F-1
<PAGE> 44
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------
1998 1999 2000
-------- -------- --------
(RESTATED, NOTE 1(j)) (UNAUDITED)
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents .......................................... $ 4,534 $ 1,324 $ 1,228
Accounts receivable, net of allowance of $0, $0
and $49 in 1998, 1999 and 2000 respectively ..................... -- -- 1,169
Prepaid expenses and other ......................................... -- -- 657
Net assets of discontinued operations (note 1(j)) .................. 5,186 6,791 5,589
-------- -------- --------
Total current assets ....................................... 9,720 8,115 8,643
Equipment, net (note 3) .............................................. -- 36 752
Purchased computer software, net (note 2) ............................ -- -- 1,292
-------- -------- --------
Total Assets ....................................................... $ 9,720 $ 8,151 $ 10,687
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................................... $ 626 $ 1,028 $ 3,021
Notes payable (note 4) ............................................. -- -- 2,000
Other accrued expenses ............................................. 1,203 1,245 1,836
Deferred revenue ................................................... -- -- 262
Current maturities of long-term debt (note 4) ...................... 10 -- --
-------- -------- --------
Total current liabilities .................................. 1,839 2,273 7,119
-------- -------- --------
Long-term debt, less current maturities (note 4) ..................... 79 -- --
-------- -------- --------
Stockholders' Equity (note 5):
Preferred stock, $0.01 par value. 2,500,000 shares authorized; none
issued or outstanding ........................................... -- -- --
Common stock, $.01 par value. 22,500,000 shares authorized;
9,239,791, 9,508,179 and 11,837,307 shares outstanding
in 1998, 1999 and 2000 respectively ............................. 92 95 118
Additional paid-in capital ......................................... 24,929 25,828 34,118
Accumulated deficit ................................................ (17,075) (19,936) (30,524)
Accumulated other comprehensive loss ............................... (144) (109) (144)
-------- -------- --------
Total stockholders' equity ................................. 7,802 5,878 3,568
-------- -------- --------
Commitments and contingencies (note 7)
Total Liabilities and Stockholders' Equity ......................... $ 9,720 $ 8,151 $ 10,687
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 45
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------------
1998 1999 1999 2000
-------- -------- -------- --------
(RESTATED, NOTE 1(j)) (UNAUDITED)
Revenue:
<S> <C> <C> <C> <C>
License fees and royalties .......................... $ -- $ 569 $ 482 $ 1,204
Services ............................................ -- 255 161 428
-------- -------- -------- --------
Total revenue ................................... -- 824 643 1,632
-------- -------- -------- --------
Cost of revenue:
License fees and royalties .......................... -- 43 39 13
Services ............................................ -- 148 118 686
-------- -------- -------- --------
Total cost of revenue ........................... -- 191 157 699
-------- -------- -------- --------
Gross profit .......................................... -- 633 486 933
-------- -------- -------- --------
Operating expenses:
Sales and marketing ................................. -- 498 411 2,216
Research and development ............................ -- 1,022 760 4,403
General and administrative .......................... -- 221 141 1,218
Acquired in-process research and
development (note 2) ............................... -- -- -- 332
-------- -------- -------- --------
Total operating expenses ........................ -- 1,741 1,312 8,169
-------- -------- -------- --------
Net loss from continuing operations ................. -- (1,108) (826) (7,236)
-------- -------- -------- --------
Discontinued operations (note 1(j)):
Income (loss) from discontinued operations,
net of income tax expense of $316, $246,
$214 and $161, respectively ...................... 201 (1,753) (229) (3,352)
-------- -------- -------- --------
Net income (loss) ................................... $ 201 $ (2,861) $ (1,055) $(10,588)
======== ======== ======== ========
Other comprehensive income (loss):
Foreign currency translation adjustment ............. (29) 35 (3) (35)
-------- -------- -------- --------
Comprehensive income (loss) ......................... $ 172 $ (2,826) $ (1,058) $(10,623)
======== ======== ======== ========
Basic and diluted income (loss) per common share:
Continuing operations ............................... $ 0.00 $ (0.12) $ (0.09) $ (0.64)
Discontinued operations ............................. $ 0.02 $ (0.19) $ (0.02) $ (0.30)
-------- -------- -------- --------
Net income (loss) ................................... $ 0.02 $ (0.31) $ (0.11) $ (0.94)
======== ======== ======== ========
Basic and diluted weighted average number of
common shares outstanding ........................... 9,307 9,345 9,323 11,206
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 46
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------------- PAID-IN
SHARES AMOUNT CAPITAL
---------- ---------- ----------
<S> <C> <C> <C>
Balances at January 1, 1998 .......................................... 9,141,348 $ 91 $ 24,569
Exercise of common stock options for cash ............................ 1,625 -- 3
Common stock issued under employee stock purchase plan ............... 96,818 1 179
Common stock options issued for purchased computer
software and services .............................................. -- -- 178
Net earnings ......................................................... -- -- --
Foreign currency translation adjustment .............................. -- -- --
---------- ---------- ----------
Balances at December 31, 1998 ........................................ 9,239,791 $ 92 $ 24,929
Exercise of common stock options for cash ............................ 53,321 1 97
Common stock issued under employee stock purchase plan ............... 21,206 -- 43
Common stock and warrant issued in connection with Sven
acquisition ........................................................ 193,861 2 759
Net loss ............................................................. -- -- --
Foreign currency translation adjustment .............................. -- -- --
---------- ---------- ----------
Balances at December 31, 1999 ........................................ 9,508,179 $ 95 $ 25,828
Exercise of common stock options and warrant for cash (unaudited) .... 57,909 1 185
Common stock issued under employee stock purchase
plan (unaudited) ................................................... 71,219 -- 165
Common stock and warrant issued in connection with
Prescient acquisition (unaudited) .................................. 300,000 3 1,054
Common stock options issued for services (unaudited) ................. -- -- 144
Common stock and warrant issued in connection with
private placement (unaudited) ...................................... 1,900,000 19 6,742
Net loss (unaudited) ................................................. -- -- --
Foreign currency translation adjustment (unaudited) .................. -- -- --
---------- ---------- ----------
Balances at September 30, 2000 (unaudited) ........................... 11,837,307 $ 118 $ 34,118
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 47
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
DEFICIT LOSS EQUITY
----------- ------------- -------------
<S> <C> <C> <C>
Balances at January 1, 1998 .......................................... $(17,276) $ (115) $ 7,269
Exercise of common stock options for cash ............................ -- -- 3
Common stock issued under employee stock purchase plan ............... -- -- 180
Common stock options issued for purchased computer
software and services .............................................. -- -- 178
Net earnings ......................................................... 201 -- 201
Foreign currency translation adjustment .............................. -- (29) (29)
-------- -------- --------
Balances at December 31, 1998 ........................................ $(17,075) $ (144) $ 7,802
Exercise of common stock options for cash ............................ -- -- 98
Common stock issued under employee stock purchase plan ............... -- -- 43
Common stock and warrant issued in connection with Sven
acquisition ........................................................ -- -- 761
Net loss ............................................................. (2,861) -- (2,861)
Foreign currency translation adjustment .............................. -- 35 35
-------- -------- --------
Balances at December 31, 1999 ........................................ $(19,936) $ (109) $ 5,878
Exercise of common stock options and warrant for cash
(unaudited) ........................................................ -- -- 186
Common stock and warrant issued in connection with
Prescient acquisition (unaudited) .................................. -- -- 1,057
Common stock issued under employee stock purchase
plan (unaudited) ................................................... -- -- 165
Common stock options issued for services (unaudited) ................. -- -- 144
Common stock and warrant issued in connection with
private placement (unaudited) ...................................... -- -- 6,761
Net loss (unaudited) ................................................. (10,588) -- (10,588)
Foreign currency translation adjustment (unaudited) .................. -- (35) (35)
-------- -------- --------
Balances at September 30, 2000 (unaudited) ........................... $(30,524) $ (144) $ 3,568
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 48
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------------
1998 1999 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................................... $ 201 $ (2,861) $ (1,055) $(10,588)
Adjustments to reconcile net earnings (loss)
to net cash used by operating activities:
Depreciation and amortization ....................... 598 791 574 865
Acquired in-process research and development ........ -- 500 500 332
Stock options issued for services ................... -- -- -- 144
Changes in operating assets and liabilities, excluding
effects of business combinations:
Accounts receivable, net .............................. (1,249) (175) (861) 170
Prepaid expenses and other ............................ (133) (205) (62) (873)
Accounts payable ...................................... 320 402 (8) 1,765
Accrued expenses ...................................... (286) (72) 63 633
Deferred revenue ...................................... 399 52 214 217
-------- -------- -------- --------
Net cash used by operating activities ................. (150) (1,568) (635) (7,335)
-------- -------- -------- --------
Cash flows from investing activities:
Additions to equipment ................................... (629) (1,009) (525) (1,220)
Additions to purchased computer software ................. (446) (219) (694) (518)
Cash paid in business combinations ....................... -- (500) -- (100)
-------- -------- -------- --------
Net cash used by investing activities ............... (1,075) (1,728) (1,219) (1,838)
-------- -------- -------- --------
Cash flows from financing activities:
Notes payable and credit line ............................ -- -- -- 2,000
Principal payments on debt ............................... (190) (90) (89) --
Proceeds from issuance of common stock, net
of issuance costs ................................... 183 141 123 7,112
-------- -------- -------- --------
Net cash provided (used) by financing
activities ..................................... (7) 51 34 9,112
-------- -------- -------- --------
Foreign currency translation adjustment
affecting cash ............................................. (29) 35 (3) (35)
-------- -------- -------- --------
Net decrease in cash and cash equivalents ................ (1,261) (3,210) (1,823) (96)
Cash and cash equivalents at beginning of period ........... 5,795 4,534 4,534 1,324
-------- -------- -------- --------
Cash and cash equivalents at end of period ................. $ 4,534 $ 1,324 $ 2,711 $ 1,228
======== ======== ======== ========
Supplemental cash flow information:
Cash paid for interest ..................................... $ 29 $ 5 $ 5 $ 5
======== ======== ======== ========
Cash paid for income taxes ................................. $ 229 $ 211 $ 150 $ 141
======== ======== ======== ========
Supplemental disclosure of non-cash investing
and financing activities:
Common stock issued for acquisitions ....................... $ -- $ 932 $ 900 $ 1,057
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 49
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Summary of Significant Accounting Policies
(a) Organization and Basis of Financial Statement Presentation
PlanetCAD Inc. (PlanetCAD or the Company) (formerly Spatial
Technology Inc.) was incorporated under the laws of the State of
Delaware on July 7, 1986 to design, develop, and market 3D modeling
software. In November 2000, the Company's shareholders approved plans
to sell the assets of its component software business to Dassault
Systemes Corp. or its assignee in a cash transaction for $25.0
million, subject to certain price adjustments, as well as an
amendment to Article I of the Company's certificate of incorporation
to change its name from Spatial Technology Inc. to PlanetCAD Inc. The
Company consummated the sale to Dassault and effected the name change
on November 14, 2000. The results of operations of the component
software business have been reclassified as discontinued operations
and, accordingly, prior periods have been restated.
The accompanying unaudited financial information as of
September 30, 2000 and for the nine-month periods ended September 30,
1999 and 2000 has been prepared in accordance with generally accepted
accounting principles for interim financial information. All
significant adjustments, consisting of only normal and recurring
adjustments, that, in the opinion of management, are necessary for a
fair presentation of the financial position, results of operations
and cash flows as of September 30, 2000 and for the nine months ended
September 30, 1999 and 2000 have been included. Operating results for
the nine months ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the full year.
These financial statements have been restated to reflect the
discontinued operations associated with the sale of the component
software business as described in Note 1(j).
(b) Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the weighted
average number of common shares outstanding during the period.
Diluted earnings per share is computed based on the weighted average
number of common shares outstanding plus the dilutive effect of
potential dilutive securities. For the years ended December 31, 1999
and 2000 and the nine month periods ended September 30, 1999 and
2000, diluted loss per share is the same as basic loss per share as
the effect of potential dilutive securities is antidilutive. For the
years ended December 31, 1998 and 1999, and nine month periods ended
September 30, 1999 and 2000, the number of potential dilutive
securities excluded from the computation of the diluted weighted
average number of common shares outstanding was 107,587, 420,397,
405,266 and 576,835, respectively, consisting primarily of common
stock options.
(c) Cash and Cash Equivalents
The Company considers all highly liquid investment instruments
purchased with an original maturity of three months or less to be
cash equivalents.
(d) Revenue Recognition
The Company recognizes revenue in accordance with the
provisions of Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2") which requires that revenue for licensing,
selling, leasing, or otherwise marketing computer software be
recognized when evidence of an arrangement exists, delivery of the
product has occurred, collectibility of the related receivable is
assured and the vendor's fee is fixed or determinable. In addition,
revenue is recognized for the multiple elements of software
arrangements based upon the vendor specific objective evidence of fair
value for each element. Accordingly, revenue from products or services
is recognized based upon shipment of products or performance of
services. In December 1998, the American Institute of Certified Public
Accountants ("AICPA")
F-7
<PAGE> 50
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
issued SOP No. 98-9, "Modification of SOP No. 97-2, Software Revenue
Recognition, with Respect to Certain Transactions." SOP No. 98-9
clarifies certain provisions of SOP No. 97-2, and effectively defers
the required adoption of those provisions until the Company's fiscal
year beginning January 1, 2000. Effective January 1, 1999, the
Company adopted the provision of SOP No. 98-9, and the impact on the
Company's results of operations, financial position or cash flows was
not material. License fee revenue is recognized upon completion of a
signed contract and shipment of the software. Revenue from royalties
is generally recognized upon receipt of payment. Revenue from
maintenance contracts is deferred and recognized ratably over the
period of the agreement. Training and consulting revenue is
recognized upon completion of the training or performance of
services, respectively.
(e) Equipment and Purchased Computer Software
Equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the
respective assets, which range from five to seven years. Purchased
computer software represents software enhancements acquired from
third parties, and is amortized over its estimated useful life of
three to seven years, beginning when the software is incorporated
into the Company's products.
(f) Stock-Based Compensation
The Company accounts for its stock-based compensation plans
using the intrinsic value based method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations (APB 25). The Company has
provided pro forma disclosures of net earnings (loss) and earnings
(loss) per share as if the fair value based method of accounting for
these plans, as required by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation (SFAS
123)", had been applied. See note 5. The Company accounts for stock
awards to non-employees under SFAS 123 and Emerging Issues Task Force
Abstract No. 96-18 "Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services."
(g) Impairment of Long-Lived Assets
The Company accounts for long lived assets under the
provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121") which requires that
long-lived assets and certain identifiable intangibles, including
goodwill, held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. An impairment loss
is recognized when estimated undiscounted future cash flows expected
to be generated by the asset are less than its carrying value.
Measurement of the impairment loss is based on the fair value of the
asset, which is generally determined using valuation techniques such
as discounted present value of expected future cash flows.
F-8
<PAGE> 51
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(h) Research and Development Costs
Costs to establish the technological feasibility of computer
software products are expensed as incurred. Generally, products are
ready for sale upon establishment of technological feasibility.
Accordingly, no software development costs have been capitalized by
the Company in 1998, 1999 and 2000.
(i) Income Taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109). SFAS
109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to
differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities.
(j) Discontinued Operations
On September 30, 2000, the Company had two operating
divisions, the PlanetCAD division and the component software
division. The component software division, which the Company sold to
Dassault on November 14, 2000, develops, markets and supports 3D
component software products for the Company's traditional OEM
software market segment and for the Company's PlanetCAD division. The
PlanetCAD division develops, markets, sells and supports enterprise
wide solutions and products directly to end-users. With the
acquisition of Prescient, the Company's PlanetCAD division expanded
its product and service offerings with the addition of data analysis
products and services. As the Company has consummated the sale of the
component software division to Dassault, the results of operations of
the Company's component software division for all periods have been
presented as discontinued operations in the Company's consolidated
financial statements and the net assets from discontinued operations,
consisting of accounts receivable, prepaid expenses, equipment,
computer software and deferred revenue, have been reclassified to a
single line presentation in the accompanying consolidated balance
sheets. The Company estimates that the gain on this transaction will
be approximately $17 million, net of income taxes. Included in this
amount is management's estimate of the amount of expected future
losses during the phase-out period.
Summary operating results of the discontinued operations were as
follows:
<TABLE>
<CAPTION>
Year ended Nine months ended
December 31, September 30,
------------------------- -------------------------
1998 1999 1999 2000
-------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C>
Revenue .......................................... $ 14,350 $ 14,076 10,786 8,808
Cost of revenue .................................. 764 941 683 1,494
-------- -------- -------- --------
Gross profit ..................................... 13,586 13,135 10,103 7,314
Operating expenses ............................... 13,307 14,781 10,240 10,629
-------- -------- -------- --------
Operating income from discontinued
operations ................................... 279 (1,646) (137) (3,315)
Other income (expense) ........................... 238 139 122 124
-------- -------- -------- --------
Income (loss) from discontinued operations
before income taxes .......................... 517 (1,507) (15) (3,191)
Income tax expense ............................... (316) (246) (214) (161)
-------- -------- -------- --------
Income (loss) from discontinued
operations ................................... $ 201 $ (1,753) $ (229) $ (3,352)
======== ======== ======== ========
</TABLE>
F-9
<PAGE> 52
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Acquisitions and In-process Research and Development
In connection with the sale of the component software
division, the Company entered into several intellectual property
license agreements which include royalties to be paid and received on
the net revenues derived from the sale of specified software products
and services by the Company or Dassault and also require both parties
to provide maintenance and support for specified software for periods
up to five years.
In June 1999, the Company acquired certain assets and
liabilities of Sven Technologies, Inc. ("Sven") for a total
consideration of $1.4 million, including $500,000 cash and 193,861
shares of common stock and a warrant to purchase 250,000 shares of
common stock at $12.50 per share. The acquisition was accounted for
using the purchase method, and the purchase price was allocated to the
assets acquired based on their estimated fair values, including
$932,000 of purchased computer software and $500,000 of in-process
research and development projects. The purchased computer software will
be amortized over seven years. The Company charged the in-process
research and development to operations at the date of acquisition as
such technology had not reached technological feasibility and had no
probable alternative future use by the Company.
In July 2000, the Company acquired certain assets and
liabilities of Prescient Technologies, Inc. ("Prescient") for a total
consideration of approximately $1.3 million, including $100,000 cash
and between 300,000 and 350,000 shares of the Company's common stock,
depending on the achievement of certain performance objectives. The
acquisition was accounted for using the purchase method and
accordingly, results of operations of Prescient have been included in
the Company's financial statements from the date of acquisition. The
purchase price was allocated to the assets and liabilities acquired
based on their estimated fair values including $298,000 of accounts
receivable, $209,000 in furniture and equipment, $174,000 in other
assets, and the assumption of $493,000 in liabilities. In addition, the
Company allocated $773,000 of the purchase price to software costs and
other intangible assets and $332,000 to in-process research and
development projects. The software costs and other intangible assets
will be amortized over 3 years. The Company charged the in-process
research and development to operations as of the date of acquisition as
such technology had not reached technological feasibility and had no
probable alternative future use by the Company.
The summary table below, prepared on an unaudited pro forma
basis, combines the Company's consolidated results of operations with
the results of operations of Prescient as if the acquisition took place
on January 1, 1999 and Sven as if the acquisition took place on
January 1, 1998 (in thousands, except per share data).
F-10
<PAGE> 53
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------- Nine months ended
1998 1999 September 30, 2000
-------- -------- ------------------
<S> <C> <C> <C>
Revenue ................................ $ -- $ 3,937 $ 2,656
Net loss from continuing operations..... $ -- $ (6,048) $ (9,554)
Net loss ............................... $ (1,019) $ (7,998) $(12,906)
Basic and diluted loss per share from
continuing operations................. $ -- $ (0.62) $ (0.84)
Basic and diluted loss per share........ $ (0.11) $ (0.82) $ (1.13)
</TABLE>
In December 1998, the Company acquired all of the outstanding
common stock of IDA in exchange for 1,400,000 shares of the Company's
common stock. Established in 1983, IDA develops and markets software
for the sharing, access and exchange of electronic product data
throughout the manufacturing process. The merger was accounted for as
a pooling of interests and, accordingly, the financial statements for
all periods presented were restated to include the assets,
liabilities and operations of IDA. Total charges associated with the
merger were approximately $319,000 and represent legal, accounting
and other costs associated with the integration of the two companies.
These costs were charged to operations in December 1998.
F-11
<PAGE> 54
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Equipment
Equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
------------ -------------
1998 1999 2000
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Computer equipment.................................. $ - $ 36 $ 851
Furniture and office equipment...................... - - 10
Leasehold improvements.............................. - - 33
-------------- ------------ -------------
- 36 894
Less accumulated depreciation....................... - - (142)
-------------- ------------ -------------
$ - $ 36 $ 752
============== ============ =============
</TABLE>
(4) Notes Payable
IDA issued subordinated promissory notes to two stockholders.
Each promissory note bore interest at 10% per annum, and requires
monthly payments of $760 through 2005. Both promissory notes were paid
in full during 1999.
In September 2000, Dassault made a loan to the Company for $2
million of the purchase price for the sale of the component software
business in advance of the closing of the transaction, which amount,
including accrued and unpaid interest, was repaid by the Company as an
offset against the purchase price at the closing. In November 2000,
Dassault advanced an additional $2 million to the Company, which was
also repaid at the closing date.
(5) Stockholders' Equity
Preferred Stock
In June 1996, the Board of Directors of the Company
authorized, at its discretion, the issuance of up to 2,500,000 shares
of preferred stock in one or more series and to fix the rights,
preferences, and privileges of such series. As of December 31, 1999,
no shares of preferred stock were outstanding.
Stock Options
In November 2000, the shareholders of the Company approved the
2000 Stock Incentive Plan (2000 Plan). Up to 2,000,000 shares of Common
Stock may be issued pursuant to the 2000 Plan. Under the 2000 Plan, the
Company may issue incentive stock options, which are granted at an
exercise price equal to the fair market value of the stock on the date
of grant. Vesting and option term, which may not exceed ten (10) years
from the date of grant, are determined by the Board of Directors at the
time of grant.
In July 1998, the Board of Directors of the Company approved
the 1998 Non-officer Stock Option Plan (1998 Plan). Up to 505,000
shares of Common Stock may be issued pursuant to the 1998 Plan. Under
the 1998 Plan, the Company may issue nonqualified stock options, which
are granted at an exercise price equal to the fair market value of the
stock on the date of grant. Vesting and option term, which may not
exceed ten (10) years from the date of grant, are determined by the
Board of Directors at the time of grant. As of December 31, 1999
options to purchase 312,200 shares of common stock under the 1998 Plan
were outstanding at a weighted average exercise price of $3.55.
F-12
<PAGE> 55
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1996, the Board of Directors of the Company approved
the 1996 Equity Incentive Plan (1996 Plan). Up to 1,350,000 shares of
Common Stock may be issued pursuant to the 1996 Plan. Under the 1996
Plan the Company may issue incentive stock options and nonqualified
stock options. Incentive stock options are granted at an exercise price
not less than the fair market value of the stock on the date of grant,
vest over a four-year employment period, and are exercisable over a
maximum ten-year employment period. The Company also grants
nonqualified stock options under the 1996 Plan that vest over a
four-year period or earlier upon the attainment of specific performance
objectives, and are exercisable over a maximum ten-year period or upon
attainment of such objectives. As of December 31, 1999 options to
purchase 1,268,794 shares of common stock under the 1996 Plan were
outstanding at a weighted average exercise price of $3.05.
In June 1996, the Board of Directors approved the 1996
Non-Employee Directors' Stock Option Plan (Directors' Plan). Up to
250,000 shares of Common Stock may be issued pursuant to the Directors'
Plan. Stock options granted under the Directors' Plan are granted at
not less than the fair market value of the stock on the date of grant
and are immediately exercisable over a ten-year period from date of
grant. As of December 31, 1999, options to purchase 141,000 shares of
common stock under the Directors' Plan were outstanding at a weighted
average exercise price of $3.42.
In August 1996, the Company's Board of Directors approved the
termination, effective upon the initial public offering described
above, of the Amended and Restated 1987 Stock Option Plan (1987 Plan).
Under the 1987 Plan the Company issued incentive stock options and
nonqualified stock options. Incentive stock options were granted at an
exercise price not less than the fair market value of the stock on the
date of grant, vest over a four-year employment period, and are
exercisable over either a five-year or ten-year employment period. The
Company also granted nonqualified stock options under the 1987 Plan
that vest over a four-year period or upon the attainment of specific
performance objectives, and are exercisable over a five-year period or
upon attainment of such objectives. As a result of such termination, no
additional options may be issued under the 1987 Plan. The options to
purchase 51,931 shares of Common Stock at a weighted average exercise
price of $4.05 outstanding as of December 31, 1999, will remain
exercisable until they expire or terminate pursuant to their terms.
On July 7, 2000, the Company entered into a consulting
agreement with Charles Bay, a non-employee director. Under this
agreement, the Company agreed to issue options to purchase an
additional 65,000 shares of common stock to Mr. Bay in addition to the
non-discretionary grant of options to purchase 15,000 shares of common
stock. Of the additional grant, 25,000 options will vest in equal
annual increments over four years, and the remaining 40,000 options
will vest on the fifth anniversary of the date of the option grant.
However, the Company may accelerate the vesting of the 40,000 options
based on Mr. Bay's performance of strategic and financial consulting
services and the achievement of certain financial milestones by the
Company.
F-13
<PAGE> 56
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's fixed option plans as
of December 31, 1998 and 1999 and September 30, 2000 (unaudited) and
changes during the periods then ended is presented below:
<TABLE>
<CAPTION>
Year ended Nine months ended
December 31, September 30,
--------------------------------------------------------- --------------------------
1998 1999 2000
---- ---- ----
(Unaudited)
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Prices Shares Prices Shares Prices
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period ................ 1,170,649 $3.18 1,207,930 $2.78 1,773,925 3.20
Granted .................... 416,800 2.12 658,811 3.93 894,684 5.00
Exercised .................. (1,625) 1.88 (37,673) 2.59 (57,909) 3.23
Forfeited .................. (377,894) 3.28 (55,143) 3.38 (563,315) 4.64
---------- ---------- ----------
Outstanding at end of
period ................... 1,207,930 2.78 1,773,925 3.20 2,047,385 3.47
========== ========== ==========
Weighted-average fair
value of options granted
during the period at
exercise prices equal
to market price at
grant date ............... $ 1.33 $ 2.71 $ 3.26
========== ========== ==========
</TABLE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
----------------------------------------------------- ---------------------------------
Weighted- Number
Number Average Exercisable
Range of Outstanding at Remaining at
Exercise December 31, Contractual Weighted-Average December 31, Weighted-Average
Prices 1999 Life Exercise Price 1999 Exercise Price
------ ---- ---- -------------- ---- --------------
<S> <C> <C> <C> <C> <C>
$1.63-2.00 591,566 7.8 $ 1.84 287,312 $ 1.82
$2.31-3.84 590,783 8.6 3.04 174,159 2.83
$4.13-5.00 591,576 7.1 4.71 372,593 4.82
--------- ------------
1,773,925 7.8 3.20 834,064 3.37
========= ============
</TABLE>
The fair value of options granted during 1998 and 1999 was estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Risk free interest rate............ 5.19% 6.60%
Expected life...................... 4 years 4 years
Volatility......................... 68% 73%
</TABLE>
F-14
<PAGE> 57
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pro forma financial information assuming the use of SFAS 123 in
accounting for stock based compensation is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1998 1999
---- ----
<S> <C> <C>
Net earnings (loss):
As reported.................................................................. $ 201 $ (2,861)
Adjusted pro forma........................................................... (219) (4,080)
Basic and diluted earnings (loss) per share:
As reported.................................................................. $ 0.02 $ (0.31)
Adjusted pro forma........................................................... (0.02) (0.44)
</TABLE>
Employee Stock Purchase Plan
In June 1996, the Board of Directors approved the Employee
Stock Purchase Plan. Up to 300,000 shares of common stock may be issued
pursuant to the plan. Employees may elect to withhold up to 15% of
their compensation for the purchase of the Company's common stock. The
amounts withheld are used to purchase the Company's common stock at a
price equal to 85% of the fair market value of shares at the beginning
or end of each purchase period. As of December 31, 1999 the Company has
issued an aggregate of 174,988 shares at an average price of $1.85.
Warrants
A summary of outstanding common stock purchase warrants as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Shares Exercise Expiration
Price Date
----- ----
<S> <C> <C>
6,666 ............................... $ 8.22 2000
166,665.............................. 8.22 2001
210,000.............................. 6.50 2001
22,500............................... 8.22 2003
250,000(a)........................... 12.50 2004
</TABLE>
(a) These warrants were issued in connection with the Sven
acquisition, as described in note 2, and were valued using the
Black-Scholes option pricing model with the following assumptions; no
dividends, volatility of 68%, risk free interest of 6.60% and an
expected life of two years.
In addition, 1,200,000 warrants with an exercise price of
$6.50 per share were issued in connection with the private placement of
1,900,000 shares of the Company's common stock on February 22, 2000.
The warrants expire in 2005.
F-15
<PAGE> 58
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Taxes
Tax expense for 1999 is comprised solely of taxes on foreign
sales. Tax expense for 1998 consists of foreign taxes for the Company
and federal and state income tax expense for IDA.
Income tax expense differs from the amount computed by
applying the statutory federal income tax rate to loss from continuing
operations before income taxes as follows (in thousands):
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------
1998 1999
-------- --------
<S> <C> <C>
Expected income tax expense ...................... $ -- $ (388)
Change in deferred tax valuation allowance
related to continuing operations ............... -- 424
State taxes, net of federal benefit .............. -- (36)
-------- --------
Actual income tax expense ........................ $ -- $ --
======== ========
</TABLE>
The tax effects of significant temporary differences that
result in deferred tax assets and liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1999
-------- --------
<S> <C> <C>
Accounts receivable, primarily due to differences
in accounting for bad debts ......................... 37 79
Property and equipment, primarily due to
differences in depreciation ......................... (51) (20)
Deferred revenue, due to differences in
revenue recognition for financial statement
and income tax purposes ............................. 22 1
Accrued expenses, primarily due to difference in
the period of recognition for financial statement
and income tax purposes ............................. 122 182
Purchased software, primarily due to differences
in carrying values for financial statement and
income tax purposes ................................. (94) (254)
Acquired in-process research and development,
amortized for income tax purposes ................... -- 172
Research and development and other tax credit
carryforwards ....................................... 1,307 1,896
Net operating loss carryforwards ...................... 5,495 6,620
-------- --------
Total deferred tax assets ........................... 6,838 8,676
Less valuation allowance .............................. (6,838) (8,676)
-------- --------
Net deferred tax assets ............................. $ -- $ --
======== ========
</TABLE>
F-16
<PAGE> 59
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1999 and September 30, 2000, the Company had net
operating loss carryforwards for regular income tax purposes of
approximately $16,176,000 and $27,400,000, respectively, which if not
utilized, expire in the years 2003 through 2020. The Company has
provided a valuation allowance for the entire deferred tax balance due
to uncertainty of the realization of the asset. Such carryforwards may
also be limited under Section 382 of the Internal Revenue Code.
At December 31, 1999 and September 30, 2000 the Company also
had research and development credit carryforwards for income tax
purposes available totaling approximately $1,495,000 and $1,800,000,
respectively, which if not utilized, expire in the years 2003 through
2020. Such carryforwards may also be limited under Section 383 of the
Internal Revenue Code.
(7) Commitments and Contingencies
The Company leases its office facilities and various office
equipment under noncancelable operating leases. Future minimum rental
payments on these leases were as follows at December 31, 1999 (in
thousands):
<TABLE>
<S> <C>
2000 ............................................. $ 452
2001 .............................................. 152
2002 .............................................. 105
2003 .............................................. 98
2004 .............................................. 72
------
Total future minimum lease payments.......... $ 879
======
</TABLE>
Rent expense was approximately $528,000, $555,000, $396,000
and $530,000 in 1998, 1999 and the nine months ended September 30, 1999
and 2000, respectively.
In June 2000, the Company leased 15,600 square feet of
additional office space in Boulder, Colorado. The five-year lease
commitment commenced in October 2000 and requires initial monthly
payments of approximately $25,400. The lease obligation escalates 3%
per annum.
As a result of the acquisition of Prescient Technologies (see
note 2) the Company leased 11,300 square feet of office space in
Westborough, Massachusetts. The five-year lease commitment will
commence in November 2000 and requires initial monthly payments of
approximately $21,650 for the first three years of the lease and
approximately $22,590 per month for the last two years of the lease.
The Company executed a long-term development agreement with
Three-Space Limited, a United Kingdom corporation (TSL), in 1989 (the
1989 Development Agreement) obligating the Company to pay approximately
$30,000 per month for specified research and marketing activities. The
Company terminated the 1989 Development Agreement and entered into a
Software Consulting Agreement with substantially the same financial
obligation to the Company. Expenses under the 1989 Development
Agreement and the software consulting agreement were approximately
$400,000, $398,000 and $200,000 in 1998, 1999 and 2000 respectively.
The Company has entered into various licensing agreements,
which require the Company to pay royalties on each sale of the licensed
software products. Royalty expense under these agreements is included
in costs of sales and totaled approximately $291,000, $349,000 and
$265,000 in 1998, 1999 and 2000 respectively.
F-17
<PAGE> 60
PLANETCAD INC.
(FORMERLY SPATIAL TECHNOLOGY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Concentration of Credit Risk
The Company is exposed to potential concentrations of credit
risk from its accounts receivable with its various customers. The
Company's accounts receivable are from both large multinational
corporate customers and smaller companies in a variety of industries,
with no concentration in a single industry. However, the Company is
subject to credit risk due to economic events or circumstances in the
various international and domestic markets in which the Company
operates. To reduce this risk, the Company evaluates the
creditworthiness of its customers prior to the shipment of software or
performance of services.
F-18
<PAGE> 61
PLANETCAD INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On July 12, 2000, the Company acquired substantially all of
the net assets of Prescient Technologies, Inc. ("Prescient) for total
consideration of $1.3 million, including $100,000 cash and 300,000
shares of common stock. In addition, the Company may be required to
issue an additional 50,000 shares of common stock if certain
performance objectives are met. The additional shares, if any, will be
recorded as additional acquisition consideration at the time of
issuance. On November 14, 2000 the Company sold the component software
business to Dassault Systems for $25 million and Dassault concurrently
increased its minority investment in the Company by $2 million. In
September 2000, Dassault made a loan to the Company for $2 million of
the purchase price for the sale of the component software business in
advance of the closing of the transaction, which amount, including
accrued and unpaid interest, was repaid by the Company as an offset
against the purchase price at the closing. The accompanying historical
financial statements have been restated to reflect the reclassification
of the component software business to discontinued operations.
The unaudited pro forma condensed combined statements of
operations of the Company for the nine months ended September 30, 2000
and the year ended December 31, 1999 assume that the Prescient
acquisition was completed on January 1, 1999. The unaudited pro forma
condensed combined balance sheet of the Company as of September 30,
2000 assumes the sale of the component business was completed on that
date.
The unaudited pro forma condensed combined financial
statements have been derived from the historical financial statements
of the Company. The pro forma adjustments and the assumptions on which
they are based are described in the accompanying notes to the unaudited
pro forma condensed combined financial statements. The unaudited pro
forma condensed combined financial statements, including the notes
thereto, are qualified in their entirety by reference to, and should be
read in conjunction with the historical financial statements and the
notes thereto of the Company and Prescient, which are included herein.
The unaudited pro forma condensed combined financial
statements are not necessarily indicative of the financial position or
operating results that would have occurred had the acquisition of
Prescient been completed at that date, or at the beginning of the
period for which the transactions have been given effect, nor the
financial results of the Company in the future.
F-19
<PAGE> 62
PLANETCAD INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE SALE OF
COMPONENT
SOFTWARE
PLANETCAD DIVISION TOTAL
--------- --------------- --------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................. $ 1,228 $ 19,974(a) $ 21,202
Restricted cash............................ -- 1,000(a) 1,000
Accounts receivable, net .................. 1,169 -- 1,169
Prepaid expenses and other ................ 657 -- 657
Net assets of discontinued operations ..... 5,589 (5,589)(b) --
-------- -------- --------
Total current assets ................. 8,643 15,385 24,028
Equipment, net .............................. 752 -- 752
Purchased computer software and
other intangibles, net .................... 1,292 -- 1,292
-------- -------- --------
$ 10,687 $ 15,385 $ 26,072
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable .......................... $ 3,021 $ -- $ 3,021
Notes payable ............................. 2,000 (2,000)(c) --
Accrued expenses .......................... 1,836 -- 1,836
Deferred revenue .......................... 262 -- 262
-------- -------- --------
Total current liabilities ............. 7,119 (2,000) 5,119
-------- -------- --------
Stockholder's Equity
Common stock .............................. 118 -- 118
Additional paid-in capital ................ 34,118 -- 34,118
Accumulated deficit ....................... (30,524) 17,385(d) (13,139)
Other comprehensive loss .................. (144) -- (144)
-------- -------- --------
Total stockholders' equity ............ 3,568 17,385 20,953
-------- -------- --------
$ 10,687 $ 15,385 $ 26,072
======== ======== ========
</TABLE>
F-20
<PAGE> 63
PLANETCAD INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PLANETCAD PRESCIENT
NINE MONTHS SIX MONTHS
ENDED ENDED PRO
SEPTEMBER 30, JUNE 30, FORMA
2000 2000 ADJUSTMENTS TOTAL
------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Revenue ................................ $ 1,632 $ 1,024 $ -- $ 2,656
Cost of revenue ...................... 699 559 129(e) 1,387
-------- -------- -------- --------
Gross profit ........................... 933 465 (129) 1,269
Operating expenses:
Sales and marketing ............... 2,216 1,757 -- 3,973
Research and development .......... 4,403 630 -- 5,033
General and administrative ........ 1,218 267 -- 1,485
Acquired in-process research
and development ................. 332 -- -- 332
-------- -------- -------- --------
Total operating expenses ............... 8,169 2,654 -- 10,823
-------- -------- -------- --------
Loss from continuing
operations ....................... (7,236) (2,189) (129) (9,554)
======== ======== ======== ========
Basic and diluted loss per
common share from
continuing operations ................ $ (0.65) $ (0.84)
Basic and diluted weighted
average number of shares
outstanding ......................... 11,206 210(f) 11,416
</TABLE>
F-21
<PAGE> 64
PLANETCAD INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO
FORMA
PLANETCAD PRESCIENT ADJUSTMENTS TOTAL
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenue ................................ $ 824 $ 3,113 $ -- $ 3,937
Cost of revenue ...................... 191 1,179 258(e) 1,628
-------- -------- -------- --------
Gross profit ........................... 633 1,934 (258) 2,309
Operating expenses:
Sales and marketing ................ 498 4,279 -- 4,777
Research and development ........... 1,022 1,701 -- 2,723
General and administrative ......... 221 1,136 -- 1,357
Acquired in-process research
and development .................. -- -- -- --
-------- -------- -------- --------
Total operating expenses ............... 1,741 7,116 -- 8,857
Loss from continuing
operations ........................ $ (1,108) $ (5,182) $ (258) $ (6,548)
======== ======== ======== ========
Basic and diluted loss per
common share from
continuing operations ................ $ (0.12) $ (0.68)
Basic and diluted weighted
average number of shares
outstanding ......................... 9,345 300(f) 9,645
</TABLE>
F-22
<PAGE> 65
PLANETCAD INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Disposition of Component Software Division - Pro forma notes
The pro forma adjustments for the sale of the component software
division have been prepared on the basis of assumptions described in
the following notes and includes an estimate of the gain on sale. The
actual gain on the sale will be calculated based on the actual assets
and liabilities disposed of on the closing date of the transaction.
The Company has agreed to modify the stock options of certain
employees of the component software division to allow them to continue
to vest during their employment by Dassault. If the employees are still
employed by Dassault one year after the closing of the sale, the
options will vest. Estimates of the fair values of the options will be
calculated at interim periods and included in loss from discontinued
operations. Ultimately, the fair value of the remaining options at the
date of vesting will be included in loss from discontinued operations.
The fair value of the options are not significant as of the initial
filing date of this registration statement.
In connection with the sale of the component software division,
Dassault purchased 555,556 shares of the Company's common stock for
$2.0 million, which is not shown in the unaudited pro forma condensed
combined financial statements.
The pro forma financial statements give effect to the following
pro forma adjustments related to the sale of the component software
division:
(a) To record the cash proceeds from the sale of the component
software business pursuant to the Purchase Agreement entered
into on July 4, 2000 with Dassault, as amended.
Consideration consists of $25.0 million in cash, including
$1,000,000 in escrow related to general representations and
warranties, less certain adjustments pursuant to the
Purchase Agreement and certain expenses related to the
transaction totaling approximately $5.0 million.
(b) As of September 30, 2000, the assets and liabilities of the
component software division consisted of the following:
<TABLE>
<S> <C>
Assets:
Accounts receivable, net $3,115
Prepaid expenses and other 1,081
Equipment, net 2,001
Purchased computer software and other intangibles, net 1,711
------
Total Assets 7,908
Liabilities:
Deferred revenue 2,319
------
Net assets of discontinued operations $5,589
======
</TABLE>
(c) To reflect the payment in full of the loan from Dassault to
the Company for $2 million.
(d) An adjustment to accumulated deficit to reflect the estimated
gain on the transaction of $17.4 million.
F-23
<PAGE> 66
Prescient Technologies, Inc. - Pro forma notes
The Prescient acquisition was accounted for using the purchase method
of accounting. The pro forma adjustments have been prepared on the basis of
assumptions described in the following notes and includes assumptions relating
to the allocation of the consideration paid for the assets and liabilities of
Prescient based on estimates of their fair values. In the opinion of the
Company's management, all adjustments necessary to present fairly such pro forma
financial information have been made based on the terms and structure of the
Prescient acquisition agreement. Prescient was acquired by the Company in July
2000. Accordingly, the results of operations of Prescient subsequent to June
30, 2000 have been included in the Company's results of operations.
The pro forma financial statements give effect to the following pro
forma adjustments related to the Prescient acquisition:
(e) To reflect the additional amortization of intangible assets from the
Prescient acquisition. The acquisition of certain assets and
liabilities of Prescient resulted in approximately $773,000 of software
costs and other intangible assets, which are being amortized over their
estimated useful lives of three years.
(f) To reflect the issuance of the 300,000 shares of common stock.
F-24
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Spatial Technology Inc.:
We have audited the accompanying balance sheets of Prescient
Technologies, Inc. as of December 31, 1998 and 1999, and the related statements
of operations, stockholder's deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Prescient
Technologies, Inc. as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Boulder, Colorado
October 6, 2000
F-25
<PAGE> 68
PRESCIENT TECHNOLOGIES, INC.
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Trade accounts receivable, net of allowance
for doubtful accounts of $59, $25 and $25
in 1998, 1999 and 2000, respectively ................ $ 1,005 1,016 298
Prepaid expenses and other ............................ 120 280 209
-------- -------- --------
Total current assets ................................ 1,125 1,296 507
Property and equipment, net ........................... 599 370 209
Capitalized software development costs, net ........... 555 715 817
-------- -------- --------
Total assets ........................................ $ 2,279 2,381 1,533
======== ======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Bank overdraft ........................................ $ -- 130 60
Trade accounts payable ................................ 182 118 181
Due to affiliate, net ................................. 10,707 15,584 16,946
Accrued expenses and other liabilities ................ 140 322 162
Deferred revenue ...................................... 331 490 636
-------- -------- --------
Total liabilities ................................... 11,360 16,644 17,985
-------- -------- --------
Stockholder's deficit
Common stock, $.01 par value, 12,000,000 shares
authorized; 10,000,000 shares issued and
outstanding in 1998, 1999 and 2000 .................. 100 100 100
Additional paid-in capital ............................ 2 2 2
Accumulated deficit ................................... (9,083) (14,265) (16,454)
Subscription receivable ............................... (100) (100) (100)
-------- -------- --------
Total stockholder's deficit ......................... (9,081) (14,263) (16,452)
-------- -------- --------
Commitments and contingencies
Total liabilities and stockholder's deficit ......... $ 2,279 2,381 1,533
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 69
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------- -------------------------
1998 1999 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
License fees ...................... $ 2,081 1,929 906 281
Maintenance ....................... 819 906 449 450
Professional services ............. 865 278 179 293
-------- -------- -------- --------
Total revenue ................... 3,765 3,113 1,534 1,024
-------- -------- -------- --------
Cost of revenue:
License fees ...................... 365 860 258 236
Maintenance ....................... 209 214 71 160
Professional services ............. 464 105 44 163
-------- -------- -------- --------
Total costs of revenue .......... 1,038 1,179 373 559
-------- -------- -------- --------
Gross profit .................... 2,727 1,934 1,161 465
-------- -------- -------- --------
Operating expenses:
Sales and marketing ............... 4,700 4,279 2,123 1,757
Research and development .......... 938 1,701 713 630
General and administrative ........ 1,376 1,136 623 267
-------- -------- -------- --------
Total operating expenses ........ 7,014 7,116 3,459 2,654
-------- -------- -------- --------
Net loss ........................ $ (4,287) (5,182) (2,298) (2,189)
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 70
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDER'S DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN
STOCKHOLDER'S ACCUMULATED SUBSCRIPTION TOTAL
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE DEFICIT
---------- ---------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1998 ................. 10,000 $ -- 2 (4,796) -- (4,794)
Issuance of common stock to affiliate ....... 9,990,000 100 -- -- (100) --
Net loss .................................... -- -- -- (4,287) -- (4,287)
---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1998 ............... 10,000,000 100 2 (9,083) (100) (9,081)
Net loss .................................... -- -- -- (5,182) -- (5,182)
---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1999 ............... 10,000,000 100 2 (14,265) (100) (14,263)
Net loss (unaudited) ........................ -- -- -- (2,189) -- (2,189)
---------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 2000 (unaudited) ....... 10,000,000 $ 100 2 (16,454) (100) (16,452)
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 71
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30
---------------------------- ----------------------------
1998 1999 1999 2000
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $ (4,287) (5,182) (2,298) (2,189)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization ........................ 693 754 365 380
Changes in operating assets and liabilities:
Trade accounts receivable ............................ 930 (11) (208) 718
Prepaid expenses and other assets .................... 207 (160) (43) 71
Trade accounts payable ............................... 121 (64) (23) 63
Due to affiliate ..................................... 3,203 4,877 2,275 1,362
Accrued expenses and other liabilities ............... (174) 182 79 (160)
Deferred revenue ..................................... (150) 159 253 146
------------ ------------ ------------ ------------
Net cash provided by operating activities .......... 543 555 400 391
------------ ------------ ------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment .................. (255) (162) (51) (32)
Capitalized software development costs ................. (454) (523) (349) (289)
------------ ------------ ------------ ------------
Net cash used by investing activities .............. (709) (685) (400) (321)
------------ ------------ ------------ ------------
Cash flows from financing activities - bank overdraft .. -- 130 -- (70)
------------ ------------ ------------ ------------
Net decrease in cash and cash equivalents .......... (166) -- -- --
Cash and cash equivalents at beginning of period ....... 166 -- -- --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period ............. $ -- -- -- --
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 72
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) Organization and Summary of Significant Accounting Policies
(a) Business and Basis of Financial Statement Presentation
Prescient Technologies, Inc. (Prescient or the Company) is a
wholly-owned subsidiary of Stone & Webster, Incorporated, and was
originally incorporated under the laws of the State of Delaware on May
6, 1992 as Stone & Webster Advanced Systems Development Services, Inc.
On June 13, 1996 the incorporation was amended, changing the name to
Prescient Technologies, Inc. Prescient, is a provider of engineering
data quality software solutions for manufactures. The Company's
engineering quality tools are used in aerospace, automotive,
electronics and other discrete manufacturing industries for detecting,
assessing, correcting and preventing product development problems
caused by inaccurate, incomplete or inconsistent design modeling
practices.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
The accompanying unaudited financial information as of June 30, 2000
and for the six months ended June 30, 1999 and 2000 has been prepared
in accordance with generally accepted accounting principles for
interim financial information. All significant adjustments, consisting
of only normal and recurring adjustments, that, in the opinion of
management, are necessary for a fair presentation of the results of
operations and cash flows for the six months ended June 30, 1999 and
2000, have been included. Operating results for the six months ended
June 30, 1999 and 2000 are not necessarily indicative of the results
that may be expected for the full year.
(b) Property and Equipment
Equipment is recorded at cost and depreciated over the useful lives of
the assets, which range from two to three years. Costs of maintenance
and repairs are charged to operations as incurred. Purchased computer
software represents software and enhancements purchased from third
parties, and is amortized over its estimated useful life of two years,
beginning at purchase, or for enhancements, when the software is
incorporated into the Company's products.
(c) Capitalized Software Development Costs
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting
for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed," which provides that capitalization of costs begins when
technological feasibility has been established and ceases when the
product is available for general release to customers, at which time
amortization begins on a product-by-product basis. Capitalized costs
are amortized over the estimated useful life of the product or the
ratio of the current gross revenues to the total of current and
estimated total future gross revenues for the product, whichever is
greater. Software development costs capitalized in the years ended
December 31, 1999 and 2000 and the six months ended June 30, 1999 and
2000 were $457,000, $523,000, $349,000 and $290,000, respectively.
Amortization of software development costs for the years ended
December 31, 1999 and 2000 and the six months ended June 30, 1999 and
2000 was $213,000, $363,000, $165,000 and $187,000, respectively.
F-30
<PAGE> 73
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(d) Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, accounts payable, and accrued expenses
and other liabilities. The carrying values of these financial
instruments approximate fair value because of their short-term nature.
(e) Long-Lived Assets and Assets to Be Disposed Of
In accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the
Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used in operations is
generally measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to
be recognized is equal to the amount by which the carrying amounts of
the assets exceed the fair values. Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less costs
to sell. No asset impairment was recognized in 1998, 1999 or 2000.
(f) Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2)
which requires that revenue for licensing, selling, leasing, or
otherwise marketing computer software be recognized when evidence of
an arrangement exists, delivery of the product has occurred,
collectibility of the related receivable is assured and the vendor's
fee is fixed or determinable. In addition, revenue is recognized for
the multiple elements of software arrangements based upon the vendor
specific objective evidence of fair value for each element.
Accordingly, revenue from products or services is recognized based
upon shipment of products or performance of services. In December
1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP No. 98-9, "Modification of SOP No. 97-2, Software Revenue
Recognition, with Respect to Certain Transactions." SOP No. 98-9
clarifies certain provisions of SOP No. 97-2, and effectively defers
the required adoption of those provisions until the Company's fiscal
year beginning January 1, 2000. Effective January 1, 1999, the Company
adopted the provisions of SOP No. 98-9, and the impact on the
Company's results of operations, financial positions or cash flows was
not material. License fee revenue is recognized upon completion of a
signed contract and delivery of the software. Revenue from maintenance
contracts is deferred and recognized ratably over the period of the
agreement. Training and consulting revenue is recognized upon
completion of the training or performance of services, respectively.
(g) Stock-Based Compensation
The Company accounts for its stock-based compensation plan in
accordance with the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25), and
related interpretations. As such, compensation expense is recorded on
the date of grant only if the current fair value of the underlying
stock exceeds the exercise price. Under SFAS 123, "Accounting for
Stock-Based Compensation," entities are permitted to recognize as
expense the fair value of all stock-based awards on the date of grant
over the vesting period. Alternatively, SFAS 123 also allows entities
to continue to apply the provisions of APB 25 and provide pro forma
net earnings disclosures as if the fair-value-based
F-31
<PAGE> 74
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
method defined in SFAS 123 had been applied. The Company has elected
to continue to apply the provisions of APB 25 and provide the pro
forma disclosures required by SFAS 123.
(h) Liquidity
The Company incurred net losses in 1998, 1999 and 2000 and has a
deficit in stockholder's equity as of June 30, 2000. The net losses
have primarily been funded by advances from Stone & Webster,
Incorporated. These advances are reflected in the accompanying balance
sheet as due to affiliate. Without advances from Stone & Webster,
Incorporated, the Company would be required to obtain additional
sources of financing. It is uncertain such additional sources of
financing would be available to the Company.
(i) Income Taxes
The Company accounts for income taxes under the provisions of SFAS
109, "Accounting for Income Taxes." SFAS 109 requires the use of the
asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted
statutory rates applicable to differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities.
(2) Property And Equipment
Property and equipment consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1998 1999 2000
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and office equipment .................... $ 1,719 1,811 1,811
Purchased computer software ...................... 183 253 285
---------- ---------- ----------
1,902 2,064 2,096
Less accumulated depreciation and amortization ... (1,303) (1,694) (1,887)
---------- ---------- ----------
$ 599 370 209
========== ========== ==========
</TABLE>
(3) Stockholder's Equity
Stock Options
In July 1998, the Company adopted an equity incentive plan (the Plan)
pursuant to which the Company's Board of Directors may issue
restricted common stock and grant incentive stock options and
non-statutory stock options to employees, directors and consultants.
The Plan authorizes issuances and grants of options to purchase up to
1,900,000 shares of authorized but unissued common stock. Incentive
and non-statutory stock options generally vest over four years and
expire upon the earlier of 30 days after termination of employment or
ten years from the date of grant.
F-32
<PAGE> 75
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
Option activity during the years ended December 31, 1998 and 1999 and
the six months ended June 30, 2000 consisted of the following:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF OPTIONS AVERAGE OPTIONS
OUTSTANDING EXERCISE PRICE EXERCISABLE
----------- -------------- -----------
<S> <C> <C> <C>
Balance at January 1, 1998 ............. -- --
Granted ................................ 388,300 $ 1.50
Forfeited .............................. (35,200) 1.50
----------
Balance at December 31, 1998 ........... 353,100 1.50 --
Granted ................................ 456,000 1.50
Forfeited .............................. (160,700) 1.50
----------
Balance at December 31, 1999 ........... 648,400 1.50 52,600
Granted (unaudited) .................... -- 1.50
Forfeited (unaudited) .................. (34,500)
----------
Balance at June 30, 2000 (unaudited) ... 613,900 1.50 80,975
==========
</TABLE>
The weighted average fair value of all options granted during 1998,
1999 and 2000 was $.81 per share on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: no
expected dividends, volatility of 25%, risk-free interest rate of
approximately 6.4% and an expected life of 10 years. The remaining
weighted average contractual life of options outstanding at December
31, 1999 was approximately 3 years.
If the Company determined compensation expense based on the fair value
of the options at the grant date under SFAS 123, the Company's net
loss would have been approximately $4,142,000 and $5,165,000, for the
years ended December 31, 1998 and 1999, respectively.
Subscription Receivable
In July 1998, Stone & Webster, Incorporated increased its investment
by subscribing to 9,990,000 shares at $.01 per share. The subscription
receivable is reflected as a reduction of equity.
F-33
<PAGE> 76
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(4) Income Taxes
Income tax benefit relating to losses incurred differs from the
amounts that would result from applying the federal statutory rate as
follows (amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Expected tax benefit ................... $ (1,500) (1,814)
Change in valuation allowance for
deferred tax assets .................. 1,424 1,779
Other, net ............................. 76 35
---------- ----------
Income tax benefit ................... $ -- --
========== ==========
</TABLE>
Temporary differences that give rise to significant components of
deferred tax assets and liabilities are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards ....... $ 4,629 6,457
Other, net ............................. 83 201
------------ ------------
Gross deferred tax assets .............. 4,712 6,658
Valuation allowance .................... (4,476) (6,255)
------------ ------------
Net deferred tax assets ................ $ 236 403
============ ============
Deferred tax liabilities -
research and development costs ......... $ (236) (403)
------------ ------------
Total deferred tax liabilities ......... $ (236) (403)
============ ============
</TABLE>
At December 31, 1999 and June 30, 2000, the Company had cumulative net
operating loss carryforward for income tax purposes of approximately
$14,800,000 and $17,000,000, respectively, which will expire in
various amounts through the year 2020, if not utilized.
Due to the uncertainty regarding the utilization of net operating loss
carryforwards, no tax benefits for losses have been recorded by the
Company in any periods, and a valuation allowance has been recorded
for the entire amount of the deferred tax asset.
(5) Leases
The Company is obligated for payments of approximately $90,000 through
December 31, 2000 for leases related to office space and equipment.
Rent expense for operating leases, which is recognized using the
straight-line method over the lease term, for the years ended December
31, 1998 and 1999 and the six months ended June 30, 1999 and 2000 was
approximately $437,000, $441,000, $215,000 and $304,000, respectively.
F-34
<PAGE> 77
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(6) Employee Benefit Plans
The Company has a defined contribution 401(k) plan which covers
substantially all employees and allows employee contributions of up to
15% of their compensation, subject to the maximum amount allowed under
the Internal Revenue Code. The Company matches 25% of the first 1% of
an employee's contribution, and may also provide a discretionary
contribution each year. The Company's contributions to the Plan
totaled $27,000 in 1998 and $20,000 in 1999. In addition, the
Company's employees are eligible to participate in a pension plan
sponsored by Stone & Webster Incorporated. Costs of the plan charged
to the Company were $8,000 and $39,000 in 1998 and 1999, respectively.
(7) Revenue and Significant Customers
Revenue by geographic area is summarized as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- -----------------------
1998 1999 1999 2000
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
United States ..................... $ 2,945 2,385 1,220 940
Europe ............................ 615 725 312 66
Asia .............................. 205 3 2 18
---------- ---------- ---------- ----------
Total ........................... $ 3,765 3,113 1,534 1,024
========== ========== ========== ==========
</TABLE>
No individual customers accounted for greater than 10% of total
revenue during 1998 or 1999.
(8) Sale of the Company
On July 12, 2000, substantially all of the net assets of the Company
were acquired by PlanetCAD Inc., formerly known as Spatial Technology
Inc. (PlanetCAD), for $100,000 cash and 300,000 shares of the common
stock of PlanetCAD. An additional 50,000 shares of Spatial common
stock are required to be issued if certain performance objectives are
attained.
F-35
<PAGE> 78
INDEPENDENT AUDITORS' REPORT
MR. ISAAC K. KATO
SVEN TECHNOLOGIES, INC.
Palo Alto, California
We have audited the accompanying balance sheet of SVEN TECHNOLOGIES, INC. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sven Technologies, Inc. as of
December 31, 1997 and 1998 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
HOOD & STRONG LLP
Menlo Park, California
August 20, 1999
F-36
<PAGE> 79
SVEN TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1997 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ -- $ 18,526
Accounts receivable 4,408 10,878
Prepaid expenses 2,280 3,640
Inventory 1,500 2,915
----------- -----------
Total current assets 8,188 35,959
----------- -----------
FIXED ASSETS, net of accumulated depreciation 56,579 24,728
DEPOSIT 4,790 4,790
OTHER ASSETS, net of accumulated amortization 16,481 15,131
----------- -----------
$ 86,038 $ 80,608
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Cash overdraft $ 1,349 $ --
Accounts payable 34,833 43,587
Accrued wages 54,618 56,992
Accrued interest 8,459 29,228
----------- -----------
Total current liabilities 99,259 129,807
----------- -----------
LONG-TERM LIABILITIES
Notes payable to stockholders 300,482 409,990
----------- -----------
Total liabilities 399,741 539,797
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 10,000,000 shares authorized ;
2,222,222 shares issued and outstanding 22,222 22,222
Preferred stock, 5,000,000 shares authorized; 166,890 and 501,102
shares issued and outstanding in 1997 and 1998, respectively 300,400 617,900
Retained earnings (deficit) (636,325) (1,099,311)
----------- -----------
Total stockholders' equity (deficit) (313,703) (459,189)
----------- -----------
$ 86,038 $ 80,608
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-37
<PAGE> 80
SVEN TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1998
--------- ---------
<S> <C> <C>
REVENUE $ 28,623 $ 147,009
--------- ---------
COST OF GOODS SOLD
Manuals and packaging 15,246 24,235
Other costs 1,192 2,019
--------- ---------
16,438 26,254
--------- ---------
Gross profit 12,185 120,755
--------- ---------
OPERATING EXPENSES:
Office salary 145,395 135,524
Marketing and promotion 37,316 71,523
Officers' salary 83,764 68,050
Rent 37,772 62,940
Advertising 23,234 56,372
Depreciation expenses 27,822 31,851
Printing and reproduction 4,899 25,202
Legal and professional fees 51,445 24,126
Payroll taxes 20,457 16,114
Postage and delivery 2,097 12,600
Travel 10,482 10,608
Telephone 14,022 8,879
Outside service 1,534 8,660
Supplies 3,007 6,368
Equipment rental 678 3,744
Dues and subscriptions 2,912 3,113
Employee benefits 56 2,770
Meals 614 2,536
Educational seminar 861 2,500
Computer supplies 2,601 2,264
Bad debt -- 1,464
Amortization 1,350 1,350
Office expenses 587 1,218
Insurance 562 905
Bank charges 1,009 670
Workers compensation insurance 1,119 515
--------- ---------
475,595 561,866
--------- ---------
Loss from operations (463,410) (441,111)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 969 --
Interest expense (8,459) (20,769)
Other, net 1,494 (306)
--------- ---------
(5,996) (21,075)
--------- ---------
Loss from operations before provision for income taxes (469,406) (462,186)
PROVISION FOR INCOME TAXES 800 800
--------- ---------
NET LOSS $(470,206) $(462,986)
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-38
<PAGE> 81
SVEN TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Retained
Common Stock Preferred Stock Earnings (Deficit) Total
------------ --------------- ------------------ -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 22,222 $ 175,200 $ (166,119) $ 31,303
Issuance of stock 125,200 125,200
Net (loss) (470,206) (470,206)
----------- ----------- ----------- -----------
Balance, December 31, 1997 $ 22,222 $ 300,400 $ (636,325) $ (313,703)
Issuance of stock 317,500 317,500
Net (loss) (462,986) (462,986)
----------- ----------- ----------- -----------
Balance, December 31, 1998 $ 22,222 $ 617,900 $(1,099,311) $ (459,189)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-39
<PAGE> 82
SVEN TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from customers $ 24,215 $ 140,539
Cash paid to suppliers (17,938) (27,669)
Cash paid for operating expenses (412,034) (519,203)
Income taxes paid -- (800)
Interest income received 969 --
--------- ---------
Net cash used for operating activities (404,788) (407,133)
--------- ---------
INVESTING ACTIVITIES:
Purchase of fixed assets (24,851) --
--------- ---------
Net cash used for investing activities (24,851) --
--------- ---------
FINANCING ACTIVITIES:
Loans from stockholders 219,562 109,508
Issuance of preferred stock 125,200 317,500
Cash overdraft 1,349 (1,349)
--------- ---------
Net cash provided from financing activities 346,111 425,659
--------- ---------
NET INCREASE (DECREASE) IN CASH (83,528) 18,526
CASH - Beginning of year 83,528 0
--------- ---------
CASH - End of year $ -- $ 18,526
--------- ---------
RECONCILIATION OF NET LOSS TO NET CASH
USED FOR OPERATING ACTIVITIES:
NET LOSS $(470,206) $(462,986)
--------- ---------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED
FOR OPERATING ACTIVITIES:
Depreciation and amortization 29,172 33,201
Increase in accounts receivable (4,408) (6,470)
Increase in prepaid expenses (2,280) (1,360)
Increase in inventory (1,500) (1,415)
Decrease in deposits 723 --
Increase in other assets (5,948) --
Increase in accounts payable 18,963 8,754
Increase in accrued wages 22,237 2,374
Increase in accrued interest 8,459 20,769
--------- ---------
Total adjustments 65,418 55,853
--------- ---------
Net cash used for operating activities $(404,788) $(407,133)
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-40
<PAGE> 83
SVEN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C> <C>
NOTE 1 - NATURE OF BUSINESS Sven Technologies, Inc. (the
Company) develops and markets 3D
computer graphics software
applications, SurfaceSuite Pro, an
application that enables mapping
and warping of multiple
photorealistic textures onto
complex 3D objects, and
AvatarMaker 3D, a 3D avatar
creation application. The Company
is specifically targeting the high
end of the market, licensing to
the large game companies and the
3D chip manufacturers.
NOTE 2 - Summary of Significant a. Estimates
Accounting Policies
The preparation of financial
statements in accordance with
generally accepted accounting
principals requires management to
make estimates and assumptions
that affect the reported amounts
of assets and liabilities, and
revenues and expenses, as well as,
contingent assets and liabilities
during the reporting period.
Actual results could differ from
those estimates.
b. Revenue Recognition
The Company recognizes revenue
from software sales upon shipment.
c. Inventory
Inventory is stated at the lower
of cost or market, with cost being
determined on the first-in,
first-out method.
d. Fixed Assets
Fixed assets are stated at cost,
net of accumulated depreciation.
Depreciation is calculated using
the straight-line method over the
estimated useful lives ranging
from five to seven years.
e. Other Assets
Patents are amortized on the
straight-line method over 15
years. Organization costs are
amortized on the straight-line
method over 5 years.
</TABLE>
F-41
<PAGE> 84
SVEN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
<TABLE>
<S> <C> <C>
NOTE 2 - Summary of Significant f. Bad Debts
Accounting Policies
(Continued) Receivables are written-off using
the direct write-off method.
g. Income Taxes
The Company has loss carryforwards
of approximately $870,000 through
December 31, 1998 that may be
offset against future taxable
income.
h. Advertising
The Company expenses
advertising costs as they are
incurred.
</TABLE>
<TABLE>
<CAPTION>
NOTE 3 - FIXED ASSETS Fixed assets consisted of the following at December 31:
1998 1997
--------- ---------
<S> <C> <C>
Computer equipment
and software $ 89,502 $ 89,502
Furniture and equipment 6,050 6,050
--------- ---------
95,552 95,552
Less accumulated depreciation 70,824 38,973
--------- ---------
$ 24,728 $ 56,579
========= =========
</TABLE>
<TABLE>
<CAPTION>
NOTE 4 - OTHER ASSETS Other assets consisted of the following at December 31:
1998 1997
--------- ---------
<S> <C> <C>
Patents, net of accumulated
amortization of $2,246 for
1998 and $1,123 for 1997 $ 14,600 $ 15,723
Organization costs, net of
accumulated amortization
of $605 for 1998 and $378
for 1997 531 758
--------- ---------
$ 15,131 $ 16,481
========= =========
</TABLE>
F-42
<PAGE> 85
SVEN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
<TABLE>
<S> <C> <C>
NOTE 5 - RELATED PARTY The Company has notes payable to
TRANSACTIONS stockholders for money borrowed at
various dates throughout 1997 and
1998. Principal and interest at
10% per annum are payable on or
before various dates in 2000 and
2001. The aggregate principal
balance of the notes as of
December 31, 1998 was $409,990, of
which $269,558 is payable in 2000
and $140,432 is payable in 2001.
The aggregate principal balance of
the notes of December 31, 1997 was
$300,482. Accrued interest payable
on the notes as of December 31,
1998 and 1997, respectively was
$29,228 and $8,459.
The Company also accrued wages of
$54,618 in 1997 for officers who
are also stockholders of the
Company. These wages are still
outstanding and included in
accrued wages at December 31,
1998.
NOTE 6 - STOCKHOLDERS' Sven Technologies, Inc. has
EQUITY authorized the issuance of 5
million shares of preferred stock.
At December 31, 1998 and 1997, the
Company had 166,890 outstanding
shares of Series A Convertible
Preferred Stock ("Series A"). At
December 31, 1998, the Company
also has 334,212 outstanding
shares of Series B Convertible
Preferred Stock ("Series B"). The
stocks have stated at liquidation
preference values of $300,400 and
$317,500, respectively. Each share
of Preferred Stock will be
convertible into one share of
Common Stock. Holders of the
Preferred Stocks have the same
voting rights as Common Stock
holders on an as-converted basis.
Dividends on the Series A are
payable in cash at the rate of
$0.108 per share and holders of
Series B are entitled to
noncumulative dividends equal of
6% of the purchase price if
declared by the Company's Board of
Directors.
NOTE 7 - LEASE COMMITMENT The Company has a lease for office
space expiring in October 1999.
Future minimum lease payments are
approximately $45,000 for 1999.
</TABLE>
F-43
<PAGE> 86
<TABLE>
<S> <C> <C>
NOTE 8 - SUBSEQUENT EVENTS The Company borrowed $200,000 from
a stockholder in January 1999. The
note payable to the stockholder
calls for principal and interest
at 10% per annum to be paid on or
before January 20, 2002.
On June 29, 1999, certain assets
and liabilities of the Company
were purchased in exchange for
cash and stock of the purchasing
corporation. The Company's intent
is to eventually liquidate its
remaining assets and liabilities
and cease operations.
</TABLE>
F-44
<PAGE> 87
SVEN TECHNOLOGIES, INC.
CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PAGE
----
Financial Statements:
<S> <C>
Balance Sheet, as of June 29, 1999................................... F-46
Statements of Operations, six months ended June 30, 1998 and
June 29, 1999........................................................ F-47
Statements of Cash Flows, six months ended June 30, 1998 and
June 29, 1999........................................................ F-48
Notes to Financial Statements........................................ F-49
</TABLE>
F-45
<PAGE> 88
SVEN TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
June 29,
1999
-----------
Current Assets:
<S> <C>
Cash and cash equivalents .............................................. $ 36,093
Accounts receivable, net ............................................... 14,359
Prepaid expenses and other ............................................. 10,230
-----------
Total current assets ............................................... 60,682
Equipment, net .............................................................. 21,569
Other assets ................................................................ 20,643
-----------
$ 102,894
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable ....................................................... $ 13,703
Accrued expenses ....................................................... 81,863
-----------
Total current liabilities .......................................... 95,566
-----------
Notes payable to stockholders ............................................... 627,759
-----------
Stockholders' Deficit:
Common stock, 10,000,000 shares authorized; 2,222,222 shares issued
and outstanding .................................................... 22,222
Preferred stock, 5,000,000 shares authorized; 501,102 shares issued
and outstanding .................................................... 617,900
Accumulated deficit .................................................... (1,260,553)
-----------
Total stockholders' deficit ........................................ (620,431)
-----------
$ 102,894
===========
</TABLE>
See accompanying notes to condensed financial statements.
F-46
<PAGE> 89
SVEN TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, 1998 June 29, 1999
------------- -------------
<S> <C> <C>
Revenue ................................... $ 41,275 $ 113,923
Cost of goods sold ........................ 12,449 7,798
----------- -----------
Gross profit .............................. 28,826 106,125
----------- -----------
Operating expenses:
Sales and marketing .................. 42,561 53,136
Research and development ............. 120,759 158,341
General and administrative ........... 24,482 55,070
----------- -----------
Total operating expenses ......... 187,802 266,547
----------- -----------
Loss from operations ............. (158,976) (160,422)
Other income .............................. 1,669 --
----------- -----------
Loss before income taxes ......... (157,307) (160,422)
----------- -----------
Income tax expense ........................ -- 820
----------- -----------
Net Loss ......................... $ (157,307) $ (161,242)
Accumulated deficit:
Beginning of period .............. (616,935) (1,099,311)
----------- -----------
End of period .................... $ (774,242) $(1,260,553)
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
F-47
<PAGE> 90
SVEN TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, 1998 June 29, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $(157,307) $(161,242)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization ......................... 13,926 13,077
Changes in operating assets and liabilities:
Accounts receivable ................................. (6,530) (3,481)
Prepaid expenses and other .......................... (15,319) (4,397)
Accounts payable .................................... (16,791) (29,884)
Accrued expenses .................................... 9,751 (4,357)
--------- ---------
Net cash used by operating activities ............. (172,270) (190,284)
--------- ---------
Cash flows from investing activities:
Additions to equipment .................................. (3.486) (9,918)
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable to stockholders ............. 99,502 217,769
Proceeds from issuance of preferred stock ............... 280,000 --
--------- ---------
Net cash provided by financing activities ......... 379,502 217,769
--------- ---------
Net increase in cash and cash equivalents ......... 203,746 17,567
Cash and cash equivalents at beginning of period ........... -- 18,526
--------- ---------
Cash and cash equivalents at end of period ................. $ 203,746 $ 36,093
========= =========
Supplemental disclosures:
Cash paid for income taxes .............................. $ -- $ 820
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
F-48
<PAGE> 91
SVEN TECHNOLOGIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements of Sven
Technologies, Inc ("Sven") have been prepared by Sven pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. Sven believes the disclosures included in the
condensed financial statements, when read in conjunction with Sven's
financial statements as of December 31, 1997 and 1998 and for the years
then ended and notes thereto included elsewhere in the Current Report
on Form 8-K of Spatial Technology Inc. dated September 13, 1999 are
adequate to make the information presented not misleading.
The accompanying unaudited financial information as of June 29, 1999
and for the six month periods ended June 30, 1998 and June 29, 1999 has
been prepared in accordance with generally accepted accounting
principles for interim financial information. All significant
adjustments, consisting of only normal and recurring adjustments, which
in the opinion of management, are necessary for a fair presentation of
the results for the six months ended June 30, 1998 and June 29, 1999
have been included. Operating results for the six month period ended
June 29, 1999 are not necessarily indicative of the results that may be
expected for the full year.
B. NOTES PAYABLE TO STOCKHOLDERS
During 1998 and 1999 Sven issued notes payable to certain stockholders
which bear interest at 10% per annum and are due on various dates
through 2001.
F-49
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, we have
broad powers to indemnify our directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act of
1933, as amended ("Securities Act").
Our Bylaws also provide that we will indemnify our directors and
executive officers and may indemnify our other officers, employees and other
agents to the fullest extent permitted by Delaware law.
In addition, our Restated Certificate of Incorporation ("Restated
Certificate") provides that the liability of its directors for monetary damages
will 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 PlanetCAD and our
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 directors' duty of loyalty to PlanetCAD, for acts 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.
We have entered into indemnification agreements with each of our
directors and executive officers that require us to indemnify each such person
to the fullest extent authorized or permitted by the provisions of the Restated
Certificate and Delaware law against expenses, judgments, 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 they may be made a party by reason of the fact that they
are or were a director, officer, employee or other agent of PlanetCAD or any of
its affiliated enterprises. Delaware law permits this indemnification, provided
the person acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interest of PlanetCAD 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,
we maintain 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 officers of PlanetCAD.
At present, there is no pending litigation or proceeding involving a
director or officer of PlanetCAD as to which indemnification is being sought,
nor is PlanetCAD aware of any threatened litigation that may result in claims
for indemnification by any officer or director.
II-1
<PAGE> 93
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by PlanetCAD in
connection with the sale of the common stock being registered herein. All of the
amounts shown are estimates except for the registration fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ---------
<S> <C>
Registration fee $2,050.77
Federal taxes *
State taxes and fees *
Trustees' and transfer agents' fees *
Printing and engraving expenses *
Legal fees and expenses *
Listing fees *
Accounting fees and expenses *
Miscellaneous *
Total *
</TABLE>
---------
* To be filed by amendment.
Pursuant to the terms of the registration rights agreement, we are
obligated to pay the expenses described above, and the fees and disbursements of
one counsel for the selling stockholders up to a maximum of $15,000. The selling
stockholders will not be responsible for any of these expenses except to the
extent that fees and disbursements for selling stockholders' counsel exceed
$15,000.
RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of sales of our securities that were not
registered under the Securities Act during the last three years:
On November 14, 2000, we issued 555,556 shares of common stock to
Dassault Systemes for $2,000,000 pursuant to a purchase agreement, dated as of
November 14, 2000, by and between PlanetCAD and Dassault. The sale and issuance
of such shares was deemed to be exempt from registration under the Securities
Act pursuant to Section 4(2) thereof. Dassault represented its intention to
acquire the securities for investment only. Appropriate legends are affixed to
the stock certificates issued in the transaction. The transaction did not
involve general solicitation or general advertising. There was no underwriter
involved in the issuance of the shares and no commissions were paid to any
person.
On July 12, 2000, we issued 300,000 shares of common stock to Prescient
in partial consideration for certain assets of Prescient pursuant to an asset
purchase agreement, dated June 28, 2000, by and among PlanetCAD, Prescient and
Stone & Webster Incorporated. Additionally, 50,000 shares of common stock were
placed into escrow, pursuant to the terms of the asset purchase agreement, to be
released to Prescient upon the attainment of certain performance objectives
relating to the execution of certain customer contracts. The sale and issuance
of such shares was deemed to be exempt from registration under the Securities
Act pursuant to Section 4(2) thereof. The recipients represented their intention
to acquire the securities for investment only. Appropriate legends are affixed
to the stock certificates issued in such transaction. All recipients either
received adequate information about PlanetCAD or had access to such information.
The transaction did not involve general solicitation or general advertising.
There was no underwriter involved in the issuance of the shares and no
commissions were paid to any person.
On February 22, 2000, we issued to certain private investors an
aggregate of 1,900,000 shares of common stock and warrants to purchase up to
1,200,000 shares of common stock, pursuant to a stock purchase agreement by and
among PlanetCAD and the investors named therein. In consideration of the
issuance of such shares and warrants, we received $6,900,000. The sale and
issuance of such shares and warrants was deemed to be exempt from registration
under the Securities Act pursuant to Rule 506 of Regulation D promulgated
thereunder. The recipients were all accredited investors and represented their
intention to acquire the securities for investment purposes only. Appropriate
legends are affixed to the stock certificates issued in such transaction. All
recipients either received adequate information about PlanetCAD or had access to
such information. The transaction did not involve general solicitation or
II-2
<PAGE> 94
general advertising. There was no underwriter involved in the issuance of the
shares and no commissions were paid to any person.
On June 29, 1999, we issued 193,861 shares of common stock and warrants
to purchase up to 250,000 shares of Common Stock to one private investor in
partial consideration for our acquisition of certain of assets of Sven
Technologies, Inc. The issuance of the shares and warrants to purchase shares
was deemed to be exempt from registration pursuant to Rule 506 under the
Securities Act of 1933. The recipient was accredited and represented its
intention to acquire the securities for investment only. Appropriate legends are
affixed to the stock certificates issued in such transaction. The transaction
did not involve general solicitation or general advertising. There was no
underwriter involved in the issuance of the shares and no commissions were paid
to any person.
On December 23, 1998, we issued an aggregate of 1,400,000 shares of
common stock in connection with the acquisition of all the outstanding capital
stock of InterData Access, Inc. ("IDA"). The shares were issued to the
stockholders of IDA pursuant to a stock purchase agreement by and among
PlanetCAD, IDA and IDA stockholders. The sale and issuance of such shares was
deemed to be exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. The recipients represented their intention to acquire the
securities for investment purposes only. Appropriate legends are affixed to the
stock certificates issued in such transaction. All recipients either received
adequate information about PlanetCAD or had access to such information. The
transaction did not involve general solicitation or general advertising. There
was no underwriter involved in the issuance of the shares and no commissions
were paid to any person.
On December 31, 1997, we issued an aggregate of 250,000 shares of
common stock to persons affiliated with Three-Space Limited, a limited company
organized under the laws of England ("TSL"). The shares were issued as partial
consideration for the acquisition from TSL of all right, title and interest to
all technology developed, or being developed, by TSL as of December 31, 1997
pursuant to a development agreement by and between PlanetCAD and TSL dated June
26, 1987, as amended. The sale and issuance of such shares was deemed to be
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. The recipients represented their intention to acquire the securities
for investment purposes only and not with a view to distribute such securities.
Appropriate legends are affixed to the stock certificates issued in such
transaction. All recipients either received adequate information about PlanetCAD
or had access to such information. The transaction did not involve general
solicitation or general advertising. There was no underwriter involved in the
issuance of the shares and no commissions were paid to any person.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
3(i).1 -- Restated Certificate of Incorporation
3(i).2 -- Certificate of Amendment to Restated Certificate of Incorporation
3(ii).1 -- Bylaws of the Registrant, as amended
4.1 -- Reference is made to Exhibits 3(i).1, 3(i).2 and 3(ii).1
5.1+ -- Opinion of Hogan & Hartson L.L.P.
10.1* -- Form of Indemnification Agreement entered into between the Registrant and its
directors and officers, with related schedule
10.2* -- Investment Agreement, dated as of August 12, 1986
10.3* -- Investors' Rights Agreement, dated as of February 4, 1993
10.4* -- 1996 Amended and Restated 1987 Stock Option Plan of the Registrant (the "Restated
Plan"), including form of Incentive Stock Option and Nonstatutory Stock Option
under the Restated Plan
</TABLE>
II-3
<PAGE> 95
<TABLE>
<S> <C>
10.5* -- 1996 Equity Incentive Plan of the Registrant (the "Incentive Plan"), including form
of Incentive Stock Option and Nonstatutory Stock Option under the Incentive Plan
10.6* -- 1996 Non-Employee Directors' Stock Option Plan of the Registrant (the "Directors'
Plan"), including form of Nonstatutory Stock Option under the Directors' Plan
10.7* -- Employee Stock Purchase Plan of the Registrant and related offering document
10.8* -- Employment Agreement between the Registrant and Karlheinz Peters, dated as of May
5, 1993
10.9* -- Lease Agreement between the Registrant and Cottonwood Development Partners, dated
June 29, 1990, as amended
10.10* -- Warrant to Purchase 100,000 shares of Next Preferred Stock issued by the
Registrant to New York Life Insurance Company
10.11* -- Warrant to Purchase 200,000 shares of Next Preferred Stock issued by the
Registrant to Nazem & Company II, L.P.
10.12* -- Warrant to Purchase 200,000 shares of Next Preferred Stock issued by the
Registrant to Benefit Capital Management Corporation
10.13* -- Warrant to Purchase 37,500 shares of Next Preferred Stock issued by the Registrant
to Benefit Capital Management Corporation
10.14* -- Warrant to Purchase 30,000 shares of Next Preferred Stock issued by the Registrant
to New York Life Insurance Company
10.15* -- Consultancy Agreement between the Registrant and D-Cube Ltd., dated June 19, 1991,
as amended
10.16* -- Technology Development and Royalty Agreement between the Registrant and Autodesk,
Inc., dated June 27, 1991, as amended
10.17* -- Amended and Restated Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of August 15, 1995, as amended
10.18** -- Amended and Restated Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of August 15, 1995, as amended
10.19** -- Separation and Release Agreement between the Registrant and Jerry T. Sisson, dated
as of June 23, 1997
10.20** -- Employment Agreement between the Registrant and R. Bruce Morgan, dated as of July
1, 1997
10.21*** -- Technology Purchase Agreement by and between the Registrant and TSL, dated as of
December 31, 1997
10.22**** -- Amendment to Loan and Security Agreement between the Registrant and Silicon Valley
Bank, dated as of August 15, 1995, as amended
10.23*** -- Registration Rights Agreement by and between the Registrant and TSL, dated as of
December 31, 1997
10.24*** -- Software Consulting Agreement, by and between the Registrant and TSL, dated
December 31, 1997
</TABLE>
II-4
<PAGE> 96
<TABLE>
<S> <C>
10.25***** -- Stock Purchase Agreement by and among the Registrant, InterData Access, Inc., and
Shareholders of InterData Access, Inc., dated December 23, 1998
10.26***** -- Escrow Agreement by and among the Registrant, InterData Access, Inc., and
Shareholders of InterData Access, Inc., dated December 23, 1998
10.27****** -- Asset purchase agreement by and between the Registrant and Sven Technologies, Inc.,
dated as of June 29, 1999
10.28******* -- Securities Purchase Agreement, by and between the Registrant and Purchasers, dated as
of February 22, 2000
10.29******** -- Asset Purchase Agreement by and between the Registrant, Prescient and Stone and
Webster, dated as of June 28, 2000
10.30++ -- 2000 Stock Incentive Plan of the Registrant
10.31+++ -- Share Purchase Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes Corp.
10.32+++ -- Cross License Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.33+++ -- Co-Branding Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.34+++ -- Server Software License Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.35+++ -- Web Services Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.36+++ -- Joint Software License Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.37+++ -- Master Software Reseller Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.38+++ -- IntraVISION License Agreement, dated as of November 14, 2000, between the Registrant and
Spatial Components, LLC
10.39+++ -- Catia V5 Galaxy Program Solution Provider Agreement, dated as of November 14, 2000,
between the Registrant and Dassault Systemes S.A.
10.40++ -- Purchase Agreement by and among the Registrant, Dassault Systemes Corp. and Spatial Components,
LLC, dated July 4, 2000 ("Dassault Purchase Agreement")
10.41++ -- Amendment No. 1 to Dassault Purchase Agreement
21.1+ -- List of Subsidiaries of the Registrant
23.1 -- Consent of KPMG LLP for the Registrant and Prescient Technologies, Inc.
23.2 -- Consent of Hood & Strong LLP for Sven Technologies, Inc.
24 -- Power of Attorney for Directors and Officers (included on signature page)
27 -- Financial Data Schedule
</TABLE>
-------------------------------------------------------------------------------
* Incorporated by reference to the Issuer's Registration
Statement on Form SB-2, File No. 333-5416-D, as amended.
** Incorporated by reference to the Issuer's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997.
*** Incorporated by reference to the Issuer's Report on Form 8-K
dated December 31, 1997.
**** Incorporated by reference to the Issuer's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1998.
***** Incorporated by reference to the Issuer's Report on Form 8-K
dated December 23, 1998.
****** Incorporated by reference to the Issuer's Report on Form 8-K
dated July 14, 1999, as amended.
******* Incorporated by reference to the Issuer's Annual Report on Form
10-KSB for the year ended December 31, 1999.
******** Incorporated by reference to the Issuer's Report on Form 8-K
dated October 18, 2000.
+ To be filed by amendment.
++ Incorporated by reference to the Issuer's Definitive Proxy
Statement on Schedule 13D dated October 17, 2000.
+++ Incorporated by reference to the Issuer's Report on Form
8-K dated November 21, 2000.
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 to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) 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; and
II-5
<PAGE> 97
(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 PlanetCAD 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will 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) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
II-6
<PAGE> 98
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this registration
statement to be signed on behalf of the undersigned, in the City of Boulder,
State of Colorado on November 21, 2000.
PLANETCAD INC.
By: /s/ R. Bruce Morgan
----------------------------------
R. Bruce Morgan
President, Chief Executive Officer,
Principal Executive, Financial
and Accounting Officer and
Director
November 21, 2000
Each person whose signature appears below constitutes and appoints R. Bruce
Morgan, with full power of substitution and resubstitution, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission or any state, 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 might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, 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 below by the following persons on behalf
of the Issuer and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard M. Sowar
----------------------------------- Chairman, Director and Chief November 21, 2000
Richard M. Sowar Technology Officer
/s/ R. Bruce Morgan
------------------------------------ President, Chief Executive Officer and November 21, 2000
R. Bruce Morgan Director (Principal Executive and
Financial Officer)
/s/ Philip E. Barak Director November 21, 2000
------------------------------------
Philip E. Barak
/s/ Eugene J. Fischer Director November 21, 2000
------------------------------------
Eugene J. Fischer
/s/ H. Robert Gill Director November 21, 2000
------------------------------------
H. Robert Gill
/s/ M. Thomas Hull Director November 21, 2000
------------------------------------
M. Thomas Hull
/s/ Chuck Bay Director November 21, 2000
------------------------------------
Chuck Bay
</TABLE>
II-7
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
3(i).1 -- Restated Certificate of Incorporation
3(i).2 -- Certificate of Amendment to Restated Certificate of Incorporation
3(ii).1 -- Bylaws of the Registrant, as amended
4.1 -- Reference is made to Exhibits 3(i).1, 3(i).2 and 3(ii).1
5.1+ -- Opinion of Hogan & Hartson L.L.P.
10.1* -- Form of Indemnification Agreement entered into between the Registrant and its
directors and officers, with related schedule
10.2* -- Investment Agreement, dated as of August 12, 1986
10.3* -- Investors' Rights Agreement, dated as of February 4, 1993
10.4* -- 1996 Amended and Restated 1987 Stock Option Plan of the Registrant (the "Restated
Plan"), including form of Incentive Stock Option and Nonstatutory Stock Option
under the Restated Plan
10.5* -- 1996 Equity Incentive Plan of the Registrant (the "Incentive Plan"), including form
of Incentive Stock Option and Nonstatutory Stock Option under the Incentive Plan
10.6* -- 1996 Non-Employee Directors' Stock Option Plan of the Registrant (the "Directors'
Plan"), including form of Nonstatutory Stock Option under the Directors' Plan
10.7* -- Employee Stock Purchase Plan of the Registrant and related offering document
10.8* -- Employment Agreement between the Registrant and Karlheinz Peters, dated as of May
5, 1993
10.9* -- Lease Agreement between the Registrant and Cottonwood Development Partners, dated
June 29, 1990, as amended
10.10* -- Warrant to Purchase 100,000 shares of Next Preferred Stock issued by the
Registrant to New York Life Insurance Company
10.11* -- Warrant to Purchase 200,000 shares of Next Preferred Stock issued by the
Registrant to Nazem & Company II, L.P.
10.12* -- Warrant to Purchase 200,000 shares of Next Preferred Stock issued by the
Registrant to Benefit Capital Management Corporation
10.13* -- Warrant to Purchase 37,500 shares of Next Preferred Stock issued by the Registrant
to Benefit Capital Management Corporation
10.14* -- Warrant to Purchase 30,000 shares of Next Preferred Stock issued by the Registrant
to New York Life Insurance Company
10.15* -- Consultancy Agreement between the Registrant and D-Cube Ltd., dated June 19, 1991,
as amended
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
10.16* -- Technology Development and Royalty Agreement between the Registrant and Autodesk,
Inc., dated June 27, 1991, as amended
10.17* -- Amended and Restated Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of August 15, 1995, as amended
10.18** -- Amended and Restated Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of August 15, 1995, as amended
10.19** -- Separation and Release Agreement between the Registrant and Jerry T. Sisson, dated
as of June 23, 1997
10.20** -- Employment Agreement between the Registrant and R. Bruce Morgan, dated as of July
1, 1997
10.21*** -- Technology Purchase Agreement by and between the Registrant and TSL, dated as of
December 31, 1997
10.22**** -- Amendment to Loan and Security Agreement between the Registrant and Silicon Valley
Bank, dated as of August 15, 1995, as amended
10.23*** -- Registration Rights Agreement by and between the Registrant and TSL, dated as of
December 31, 1997
10.24*** -- Software Consulting Agreement, by and between the Registrant and TSL, dated
December 31, 1997
10.25***** -- Stock Purchase Agreement by and among the Registrant, InterData Access, Inc., and
Shareholders of InterData Access, Inc., dated December 23, 1998
10.26***** -- Escrow Agreement by and among the Registrant, InterData Access, Inc., and
Shareholders of InterData Access, Inc., dated December 23, 1998
10.27****** -- Asset purchase agreement by and between the Registrant and Sven Technologies, Inc.,
dated as of June 29, 1999
10.28******* -- Securities Purchase Agreement, by and between the Registrant and Purchasers, dated as
of February 22, 2000
10.29******** -- Asset Purchase Agreement by and between the Registrant, Prescient and Stone and
Webster, dated as of June 28, 2000
10.30++ -- 2000 Stock Incentive Plan of the Registrant
10.31+++ -- Share Purchase Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes Corp.
10.32+++ -- Cross License Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.33+++ -- Co-Branding Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.34+++ -- Server Software License Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.35+++ -- Web Services Agreement, dated as of November 14, 2000, between the Registrant and
Dassault Systemes S.A.
10.36+++ -- Joint Software License Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.37+++ -- Master Software Reseller Agreement, dated as of November 14, 2000, between the Registrant
and Dassault Systemes S.A.
10.38+++ -- IntraVISION License Agreement, dated as of November 14, 2000, between the Registrant and
Spatial Components, LLC
10.39+++ -- Catia V5 Galaxy Program Solution Provider Agreement, dated as of November 14, 2000,
between the Registrant and Dassault Systemes S.A.
10.40++ -- Purchase Agreement by and among the Registrant, Dassault Systemes Corp. and Spatial Components,
LLC, dated July 4, 2000 ("Dassault Purchase Agreement")
10.41++ -- Amendment No. 1 to Dassault Purchase Agreement
21.1+ -- List of Subsidiaries of the Registrant
23.1 -- Consent of KPMG LLP for the Registrant and Prescient Technologies, Inc.
23.2 -- Consent of Hood & Strong LLP for Sven Technologies, Inc.
24 -- Power of Attorney for Directors and Officers (included on signature page)
27 -- Financial Data Schedule
</TABLE>
-------------------------------------------------------------------------------
* Incorporated by reference to the Issuer's Registration
Statement on Form SB-2, File No. 333-5416-D, as amended.
** Incorporated by reference to the Issuer's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997.
*** Incorporated by reference to the Issuer's Report on Form 8-K
dated December 31, 1997.
**** Incorporated by reference to the Issuer's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1998.
***** Incorporated by reference to the Issuer's Report on Form 8-K
dated December 23, 1998.
****** Incorporated by reference to the Issuer's Report on Form 8-K
dated July 14, 1999, as amended.
******* Incorporated by reference to the Issuer's Annual Report on Form
10-KSB for the year ended December 31, 1999.
******** Incorporated by reference to the Issuer's Report on Form 8-K
dated October 18, 2000.
+ To be filed by amendment.
++ Incorporated by reference to the Issuer's Definitive Proxy
Statement on Schedule 13D dated October 17, 2000.
+++ Incorporated by reference to the Issuer's Report on Form 8-K
dated November 21, 2000.
