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PCD Investments
Follow up: 14 May 2002
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PlanetCAD is a company with a bright beginning, followed by an unhappy history. It got wacked by: (1) the sudden unpopularity of ASPs, Web-based services; (2) a too-high burn rate of over a million dollars a month; (3) marketing niche software products that were difficult to understand and more difficult to sell; and (4) the slowdown in the economy that put big purchases on hold. The company started strong with the US$25 million it made selling Spatial to Dassault Systemes, but rapidly spent the cash without making much in sales. In its 3Q, PlanetCAD had a US$3.9 million-loss on US$557,000 revenue; 4Q results have not yet been announced. Last year, it cut its staff from 60 to 29. PlanetCAD shares, which had been as low as 10 cents, jumped to 22 cents on the latest takeover news. Eric Weissman is the president of PCD Investments, a company looking to take over PlanetCAD for US$3.7 million. This may be the first hostile takeover in the CAD world. I interviewed him last Friday: - - - upFront.eZine: What background do you have in CAD? Mr Weissman: My partner and I have substantial ownership in a software company that sells supply-chain software. That's relevant because with both SCS/Envoy and the Castalink acquisition, PlanetCAD is moving toward the supply chain space.
upFront.eZine: What got you interested in PlanetCAD, then? Mr Weissman: I look for companies that are undervalued and have a lot of potential value. If PlanetCAD continues on its current path, it will run out of cash. I and my partner, Gary Jacobs, looked at over 100 small companies before picking PlanetCAD last October. We have long experience in working with management teams with more specific knowledge; that's how investors can focus on a broader area (we focus on IT with an emphasis on software) and not be limited to a more narrow area.
upFront.eZine: And you have a spare US$3.7 million laying around to make this purchase? Mr. Weissman: Oh, yes. That's not a problem. We are making three offers for shares:
upFront.eZine: Your press release makes mention of SCS|Envoy but not PrescientQA. Do you plan to drop the second product? Mr. Weissman: No, we plan to sell both products. SCS]Envoy was mentioned only because it was not yet launched. We intend to continue its launch.
upFront.eZine: The press release also metnions 'overcoming the distribution obstacles.' What does that mean? Mr. Weissman: PlanetCAD is a small company that isn't able to sell its products very well. I intend to make distribution agreements to give their products a better chance. Part of my tactic is to take PlanetCAD private. The problem is that its competitors are private, so they don't need to reveal their sales. PlanetCAD is public, so their sales are public knowledge. Their competitors are able to use that information to PlanetCAD's disadvantage. - - - I was puzzled by the press release that made is sound as if PlanetCAD is buying Avatech, when clearly (to me, anyhow) it is white knight Avatech buying PlanetCAD. PlanetCAD had been the subject of another, perhaps hostile takeover by PCD Investments. I asked Eric Weissmann for his comment on the situation. We've been pushing PlanetCAD to take decisive action to get the enterprise value up for many months now. I'm pleased to see the PlanetCAD board do something that the market has rewarded with an improved stock price. That being said, we don't have enough information yet to evaluate the transaction. The company will soon have to file detailed information with the SEC concerning Avatech, such as financial statements. At that time, we'll be able to evaluate the terms of the proposed merger (which is subject to shareholder approval) and determine whether we'll support it [PCD Investments owns 15% of PlanetCAD]. We've been in contact with the leadership of Avatech, and hope to meet with them in the next few weeks. By way of explanation of the transaction, this is what's known as a 'reverse merger.' The larger, private company (Avatech) is technically acquired by the smaller, public company (PlanetCAD). The consideration for Avatech is such a large percentage of PlanetCAD (75%) that after the merger (if it is completed), the company will be called Avatech and be run by current Avatech executives. In a reverse merger, the private company gets to be publicly traded without the expense of an IPO [initial public offering], and they also get the assets, liabilities, and operations of PlanetCAD.
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