Use these links to rapidly review the documentPLANETCAD INC. INDEX

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-QSB

(Mark One)

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

For the quarterly period ended September, 30, 2001

or

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|--- | ---------------------------------------------------------------

For the transition period from  to

Commission file number 0-288-42

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PLANETCAD INC.(Exact Name of Small Business Issuer as Specified in Its Charter)

DELAWARE

84-1035353(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)2520 55TH STREET, SUITE 200,
BOULDER, COLORADO

80301(Address of Principal Executive Offices)

(Zip Code)


(303) 209-9100(Issuer's telephone number, including area code)

Not Applicable(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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Check
whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the prior 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

As
of November 12, 2001, there were outstanding 12,427,696 shares of the registrant's Common Stock (par value $0.01 per share).

Transitional
Small Business Disclosure Format (Check one): Yes / /  No /x/

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PLANETCAD INC.    INDEX



|         |  |                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------
|PART I.  |  | FINANCIAL INFORMATION                                                                                             
|Item 1.  |  | Financial Statements                                                                                              
|         |  | Condensed Consolidated Balance Sheets, September 30, 2001 (Unaudited) and December 31, 2000                       
|         |  | Unaudited Condensed Consolidated Statements of Operations, three and nine months ended September 30, 2001 and 2000
|         |  | Unaudited Condensed Consolidated Statements of Cash Flows, nine months ended September 30, 2001 and 2000          
|         |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                    
|Item 2.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                             
|PART II. |  | OTHER INFORMATION                                                                                                 
|Item 1.  |  | Legal Proceedings                                                                                                 
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                                  
|         |  | Signatures                                                                                                        





PART IFINANCIAL INFORMATION

Item 1. Financial Statements.

PLANETCAD INC.        CONDENSED CONSOLIDATED BALANCE SHEETS        (In thousands, except share and per share amounts)

|                                                       |                                                                                                                                                    | September 30,
2001         |     | December 31,
2000 |       
|------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | --- | ----------------- | ------
|
|ASSETS                                                 |                                                                                                                                                    |                            |     |                   |       
|Current assets:                                        |                                                                                                                                                    |                            |     |                   |       
|                                                       | Cash and cash equivalents                                                                                                                          |                            | $   | 7,570             |       
|                                                       | Accounts receivable, net of allowance of $393 and $400 in 2001 and 2000, respectively                                                              |                            |     | 603               |       
|                                                       | Prepaid expenses and other                                                                                                                         |                            |     | 177               |       
|                                                       |                                                                                                                                                    |                            |     |                   |       
|                                                       |                                                                                                                                                    | Total current assets       |     |                   | 8,350 
|Equipment, net                                         |                                                                                                                                                    |                            | 999 |                   |       
|Purchased computer software and other intangibles, net |                                                                                                                                                    |                            | 787 |                   |       
|Other assets                                           |                                                                                                                                                    |                            | 165 |                   |       
|                                                       |                                                                                                                                                    |                            |     |                   |       
|                                                       |                                                                                                                                                    | Total assets               |     | $                 | 10,301
|                                                       |                                                                                                                                                    |                            |     |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY                   |                                                                                                                                                    |                            |     |                   |       
|Current liabilities:                                   |                                                                                                                                                    |                            |     |                   |       
|                                                       | Accounts payable                                                                                                                                   |                            | $   | 318               |       
|                                                       | Accrued expenses                                                                                                                                   |                            |     | 2,086             |       
|                                                       | Deferred revenue                                                                                                                                   |                            |     | 598               |       
|                                                       |                                                                                                                                                    |                            |     |                   |       
|                                                       |                                                                                                                                                    | Total current liabilities  |     |                   | 3,002 
|                                                       |                                                                                                                                                    |                            |     |                   |       
|Stockholders' equity:                                  |                                                                                                                                                    |                            |     |                   |       
|                                                       | Common stock, $.01 par value; 22,500,000 shares authorized; 12,427,696 and 12,402,238 shares issued and outstanding in 2001 and 2000, respectively |                            |     | 124               |       
|                                                       | Additional paid-in capital                                                                                                                         |                            |     | 36,064            |       
|                                                       | Accumulated deficit                                                                                                                                |                            |     | (28,889           | )     
|                                                       |                                                                                                                                                    |                            |     |                   |       
|                                                       |                                                                                                                                                    | Total stockholders' equity |     |                   | 7,299 
|                                                       |                                                                                                                                                    |                            |     |                   |       
|                                                       | Total liabilities and stockholders' equity                                                                                                         |                            | $   | 10,301            |       
|                                                       |                                                                                                                                                    |                            |     |                   |       

See
accompanying notes to unaudited condensed consolidated financial statements.



PLANETCAD INC.        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)

|                                                       |                                                        | Three months ended
September 30, |     | Nine months ended
September 30, |       
|------------------------------------------------------ | ------------------------------------------------------ | -------------------------------- | --- | ------------------------------- | ------
|
|Revenue:                                               |                                                        |                                  |     |                                 |       
|                                                       | License fees                                           |                                  | $   | 163                             |       
|                                                       | Services                                               |                                  |     | 394                             |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Total revenue                    |     |                                 | 557   
|                                                       |                                                        |                                  |     |                                 |       
|Cost of revenue:                                       |                                                        |                                  |     |                                 |       
|                                                       | License fees                                           |                                  |     | 85                              |       
|                                                       | Services                                               |                                  |     | 250                             |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Total cost of revenue            |     |                                 | 335   
|                                                       |                                                        |                                  |     |                                 |       
|Gross profit                                           |                                                        |                                  | 222 |                                 |       
|                                                       |                                                        |                                  |     |                                 |       
|Operating expenses:                                    |                                                        |                                  |     |                                 |       
|                                                       | Sales and marketing                                    |                                  |     | 953                             |       
|                                                       | Research and development                               |                                  |     | 963                             |       
|                                                       | General and administrative                             |                                  |     | 990                             |       
|                                                       | Restructuring costs                                    |                                  |     | 1,023                           |       
|                                                       | In process research and development                    |                                  |     |                                |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Total operating expenses         |     |                                 | 3,929 
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Loss from operations             |     |                                 | (3,707
|                                                       |                                                        |                                  |     |                                 |       
|Other income and (expense):                            |                                                        |                                  |     |                                 |       
|                                                       | Other expense                                          |                                  |     | (308                            | )     
|                                                       | Interest income                                        |                                  |     | 88                              |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Total other income (expense)     |     |                                 | (220  
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Loss from continuing operations  |     |                                 | (3,927
|Income (loss) from discontinued operations, net of tax |                                                        |                                  |    |                                 |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Net loss                         |     | $                               | (3,927
|                                                       |                                                        |                                  |     |                                 |       
|Earnings (loss) per common share, basic and diluted:   |                                                        |                                  |     |                                 |       
|                                                       | Continuing operations                                  |                                  | $   | (0.32                           | )     
|                                                       | Discontinued operations                                |                                  | $   |                                |       
|                                                       |                                                        |                                  |     |                                 |       
|                                                       |                                                        | Net loss per share               |     | $                               | (0.32 
|                                                       |                                                        |                                  |     |                                 |       
|                                                       | Weighted average shares outstanding, basic and diluted |                                  |     | 12,419                          |       

See
accompanying notes to unaudited condensed consolidated financial statements.



PLANETCAD INC.        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

|                                                                        |                                                                             | Nine Months Ended
September, 30              |                           
|----------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------- | --------------------------
|
|Cash flows from operating activities:                                   |                                                                             |                                              |                           
|                                                                        | Net loss                                                                    |                                              | $                         
|                                                                        | Adjustments to reconcile net loss to net cash used by operating activities: |                                              |                           
|                                                                        |                                                                             | Depreciation and amortization                |                           
|                                                                        |                                                                             | In-process research and development          |                           
|                                                                        |                                                                             | Fixed asset impairment, net                  |                           
|                                                                        |                                                                             | Stock options issued for services            |                           
|                                                                        |                                                                             | Bad debt reserve                             |                           
|                                                                        |                                                                             | Changes in operating assets and liabilities: |                           
|                                                                        |                                                                             |                                              | Accounts receivable       
|                                                                        |                                                                             |                                              | Prepaid expenses and other
|                                                                        |                                                                             |                                              | Accounts payable          
|                                                                        |                                                                             |                                              | Accrued expenses          
|                                                                        |                                                                             |                                              | Deferred revenue          
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|Cash flows from investing activities:                                   |                                                                             |                                              |                           
|                                                                        | Additions to equipment                                                      |                                              |                           
|                                                                        | Additions to purchased computer software                                    |                                              |                           
|                                                                        | Cash paid for business combination                                          |                                              |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|Cash flows from financing activities:                                   |                                                                             |                                              |                           
|                                                                        | Notes payable and credit line                                               |                                              |                           
|                                                                        | Proceeds from issuance of common stock, net                                 |                                              |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|Foreign currency translation adjustment affecting cash                  |                                                                             |                                              |                          
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             |                                              |                           
|Cash and cash equivalents at beginning of period                        |                                                                             |                                              | 18,310                    
|                                                                        |                                                                             |                                              |                           
|Cash and cash equivalents at end of period                              |                                                                             | $                                            | 7,570                     
|                                                                        |                                                                             |                                              |                           
|Supplemental disclosures:                                               |                                                                             |                                              |                           
|                                                                        | Cash paid for income taxes                                                  |                                              | $                         
|                                                                        |                                                                             |                                              |                           
|Supplemental disclosure of non-cash investing and financing activities: |                                                                             |                                              |                           
|                                                                        |                                                                             | Common stock warrants issued for assets      |                           
|                                                                        |                                                                             |                                              |                           
|                                                                        |                                                                             | Common stock issued for acquisitions         |                           
|                                                                        |                                                                             |                                              |                           

See
accompanying notes to unaudited condensed consolidated financial statements.





PLANETCAD INC.        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        SEPTEMBER 30, 2001

A. Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the instructions to Form 10-QSB and Regulation S-B, Item 310. Accordingly, they do not include
all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary to make the financial statements not misleading and for a fair presentation have been included. Operating results for the three- and nine-month
periods ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001 or any subsequent period. The unaudited
condensed consolidated financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2000.

In
November 2000, the Company's stockholders approved plans to sell the assets of its component software division to Dassault Systemes Corp. ("Dassault") or its assignee in a
cash transaction for $25.0 million, subject to certain price adjustments. The Company completed the sale to Dassault on November 14, 2000. The results of operations of the component
software division have been reclassified as discontinued operations and, accordingly, prior periods have been restated.

In
February 2000, the Company sold 1.9 million shares of its common stock to certain investors in a private equity transaction at a price of $3.60 per share for a total
of $6.8 million. In connection with that transaction, the Company entered into a registration rights agreement with the investors obligating the Company to file a registration statement
with the Securities and Exchange Commission registering for resale the shares acquired by those investors. Under the registration rights agreement, the initial registration statement was required to
be filed by the Company in November 2000, and the Company was required to use its best efforts to cause that registration statement to be declared effective by the Securities and Exchange
Commission within 90 days after the initial filing. Although the Company filed the initial registration statement in November 2000, the registration statement has not yet been declared
effective by the Securities and Exchange Commission. As a result, pursuant to the registration rights agreement, the Company is required to pay to the investors, as a penalty, an amount equal to 10%
per annum (compounded semi-annually) of the original investment amount for each month, or portion of a month, after February 2001 that the Company fails to cause the registration
statement to be declared effective. The Company obtained a waiver of the penalty provisions from the investors through April 20, 2001, but the waiver has since expired and the penalty payments
have been accruing since that date. Accordingly, the Company recorded a penalty of $308,000 in the third quarter respecting its obligation to those investors, which amount is included in other
expense. While the Company continues to work with the Securities and Exchange Commission to cause the registration statement to be declared effective, the penalty amounts will continue to accrue until
the registration statement is declared effective by the Securities and Exchange Commission.

During
the third quarter of 2001, the Company implemented a restructuring plan to reduce operating expenses and strengthen its competitive and financial position by eliminating
certain employee positions and reducing office space and related overhead expenses. Overall expense reductions were necessary to lower the Company's existing cost structure and to reallocate resources
to pursue future operating strategies in response to declining revenue and other performance measures

during 2001. Restructuring charges primarily consisted of $623,000 for severance payments and termination costs associated with the reduction in force of 21 employees and $400,000 for office closure
costs. During the third quarter, $117,025 of restructuring costs were paid. The Company expects to pay additional restructuring costs of $905,975 during the fourth quarter of 2001.

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 securities. For the three- and nine-month periods ended
September 30, 2001 and 2000, diluted loss per share is the same as basic loss per share, as the effect of potential dilutive securities, consisting of common stock options, is antidilutive. For
the nine-month periods ended September 30, 2001 and 2000, potential dilutive securities excluded from the computation of diluted earnings per share was 51,306 and 230,239,
respectively. For the three-month periods ended September 30, 2001 and 2000, potential dilutive securities excluded from the computation of diluted earnings per share was 0 and 576,835,
respectively.

C. New Accounting Pronouncements

In June 2001 the Financial Accounting Standards Board (FASB) issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS No. 141 requires business combinations initiated after September 30, 2001 to be accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets separate from goodwill. Recorded goodwill and intangibles will be evaluated against this new criteria and may result in certain intangibles being subsumed into
goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified and recognized apart from goodwill. SFAS No. 142 requires the use of a nonamortization approach
to account for purchased goodwill and certain intangibles. Under a nonamortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead would be
reviewed for impairment and written down and charged to results of
operations only in the periods in which the recorded value of goodwill and certain intangibles exceeds its fair value. Management does not believe these new pronouncements will have a material impact
on the Company's financial statements.

In
June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS
No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The
adoption of this standard will not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning
after December 15, 2001. SFAS No. 144 establishes one accounting model to be used for long-lived assets to be disposed of by sale and broadens the presentation of
discontinued operations to include more disposal transactions. We are currently evaluating the requirements and impact of this statement on the Company's consolidated financial position and results of
operations.

D. Acquisition

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 300,000 shares of the Company's common stock. 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 are being 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.

E. 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 the three and nine months ended September 30, 2001 and 2000 have been
presented as discontinued operations in the Company's financial statements. The Company recorded a gain of approximately $17.4 million, net of tax, in the fourth quarter 2000. Included in this
amount is management's estimate of the amount of expected future losses during the phase-out period. An additional $1.0 million has been placed in escrow by Dassault and will be
paid to the Company on the first anniversary of the sale provided certain deliverables and general representations and warranties are satisfied.

On
June 19, 2001, Dassault notified the Company of certain claims for indemnification related to alleged breaches of the terms of the purchase agreement used in connection with
the sale of the component software division. Any amounts to be paid to Dassault related to these claims would first reduce the $1.0 million of purchase price for the sale of the component
software division held in escrow. The Company has engaged in discussions with Dassault regarding the allegations and, based upon the status of the negotiations and the tentative settlement arrangement
reached with Dassault, believes any amount to be paid in respect of the allegations will not exceed the $1.0 million held in escrow.

During
the nine-month period ended September 30, 2001, legal fees and personnel-related expenses that had been previously accrued as part of the
phase-out period were adjusted to actual

amounts paid, resulting in income from discontinued operations during the period. Summary unaudited operating results of the discontinued operations were as follows:

Nine Months Ended
September 30,(In thousands)2001

2000Revenue

$


$
8,808Cost of revenue





1,494Gross profit





7,314Operating expenses





10,629Operating (loss) from discontinued operations





(3,315
)Other income


456


124Income (loss) from discontinued operations before income taxes


456


(3,191
)Income tax expense


(9
)

(161
)Income (loss) from discontinued operations

$
447

$
(3,352
)


F. Related Party Transaction

In June 2001, the Company acquired software and related equipment from an entity, which had a significant investor affiliated with a member of the
Company's Board of Directors, for total consideration of approximately $265,000, including $200,000 cash and 125,000 warrants to purchase the Company's common stock. The warrants, which have an
exercise price of $1.00 and expire on June 1, 2004, were valued using the Black-Scholes option pricing model assuming no dividends, risk free interest rate of 4.55%, volatility of 180% and a
term of 3 years.





Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

Three and nine months ended September 30, 2001 compared to three and nine months ended September 30, 2000

In November 2000, the Company's stockholders approved plans to sell the assets of its component software division to Dassault Systemes Corp. or its
assignee in a cash transaction for $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. The results of operations of the Company's component software division have been reclassified as discontinued operations.

Revenue

Our revenue consists of software license revenue and service revenue. Software license revenue consists of sales of software licenses, which are recognized in
accordance with the American Institute of Certified Public Accountants' Statement of Position SOP 97-2 ("SOP 97-2"), Software Revenue Recognition," as modified by SOP
98-9. Under SOP 97-2, software license revenue is recognized upon execution of a contract and delivery of software, provided that the license fee is fixed and determinable, no
significant production, modification or customization of the software is required and collection is considered probable by management. In addition, SOP 97-2 requires that revenue
recognized from software arrangements be allocated to each element of a multiple element arrangement based on the vendor specific objective evidence of fair value for each element. Service revenue is
primarily derived from customer maintenance agreements generally entered into in connection with the initial license sale and subsequent renewals and fees for implementation, consulting and training
services. Maintenance revenue is recognized ratably over the term of the maintenance period and service revenue is recognized as the services are performed. Payments for maintenance fees are generally
collected in advance of performance.

Total
revenue decreased 59% to $557,000 for the three-month period ended September 30, 2001, as compared to $1,343,000 for the same three-month period in 2000. In the first
nine months of 2001, total revenue decreased 22% to $1,271,000 from $1,632,000 in the first nine months of 2000. License revenue decreased 84% to $163,000 in the three-month period ended
September 30, 2001, as compared to $1,036,000 reported for the comparable prior year period. In the first nine months of 2001, license revenue decreased 70% to $362,000 from $1,204,000 in the
first nine months of 2000. Service revenue increased 28% to $394,000 for the three-month period ended September 30, 2001, as compared to $307,000 reported for the comparable period in 2000. In
the first nine months of 2001, service revenue increased 112% to $909,000 from $428,000 in the first nine months of 2000. The decrease in license fees is due to decreased sales of the Prescient
software products resulting from the late release of software upgrades and the slowing of capital purchases by corporations in the US. The increase in service revenues is primarily attributable to
sales of products acquired in the July 2000 Prescient acquisition.

Cost of Revenue

Cost of license fees consists primarily of royalty fees associated with third-party software included with our software and the cost of reproduction and
delivery of the software. Cost of license fees was $85,000 and $3,000 for the three-month periods ended September 30, 2001 and 2000, respectively, representing 52% and 0.3% of license revenue,
respectively. Cost of license fees was $363,000 and $13,000 for the nine-month periods ended September 30, 2001 and 2000, respectively, representing 100% and 1% of license revenue,
respectively. The increases in cost of license revenue were primarily

attributable to an increase in royalty fees associated with third party software. Certain agreements have minimum royalty fees, which can exceed the revenues related to product sales.

Cost
of services consists primarily of costs associated with providing software maintenance to customers such as telephone support and packaging and shipping costs related to new
releases, as well as costs associated with the implementation, consulting and training services. Cost of services was $250,000 and $494,000 for the three months ended September 30, 2001 and
2000, respectively, representing 63% and 161% of services revenue, respectively. Cost of services was $824,000 and $686,000 for the nine months ended September 30, 2001 and 2000, respectively,
representing 91% and 160% of services revenue, respectively. The decrease in cost of services as a percentage of services revenue is attributable to increased services revenue for products acquired in
the July 2000 Prescient acquisition. The decrease in the dollar amount of cost of services for the three-month period is attributable to cost reductions implemented during the third quarter,
including decreased headcount and travel expenditures. The increase in the dollar amount of cost of services for the nine-month period is attributable to the hiring and training of
additional consultants, and increased product support.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel costs, commissions, travel, office facilities, promotional events such as trade shows, seminars and
technical conferences, advertising and public relations programs. Sales and marketing expenses were $953,000 and $1,053,000 for the three months ended September 30, 2001 and 2000, respectively,
representing 171% and 78% of total revenue, respectively. Sales and marketing expenses were $2,695,000 and $2,216,000 for the nine months ended September 30, 2001 and 2000, respectively,
representing 212% and 136% of total revenue, respectively. The increase in sales and marketing expenses as a percentage of total revenue is attributable to decreased revenues and increased spending.
The decrease in the dollar amount of sales and marketing expenses for the three month period is attributable to cost reductions implemented during the third quarter, including decreased headcount and
travel expenditures. The increase in the dollar amount of sales and marketing expenses for the nine month period is attributable to expansion of our direct sales force, increased sales commissions as
a result of higher revenues, and increased marketing and promotional activities for products acquired in the July 2000 Prescient acquisition.

Research and Development Expenses

Research and development expenses consist primarily of personnel costs, third party consultant costs, and depreciation of development related assets. Research
and development expenses were $963,000 and $2,343,000 for the three months ended September 30, 2001 and 2000, respectively, representing 173% and 175% of total revenue, respectively. Research
and development expenses were $3,808,000 and $4,403,000 for the nine months ended September 30, 2001 and 2000, respectively, representing 300% and 270% of total revenue, respectively. The
decrease in research and development expenses as a percentage of total revenue and in total dollar amount is attributable to decreased headcount, travel and consulting costs.

General and Administrative Expenses

General and administrative expenses include the personnel and other costs of our finance, accounting, human resources, information systems and executive
departments, as well as corporate facilities expenses. General and administrative expenses were $990,000 and $427,000 for the three months ended September 30, 2001 and 2000, respectively,
representing 178% and 32% of total revenue, respectively. General and administrative expenses were $3,259,000 and $1,218,000 for the nine months ended September 30, 2001 and 2000, respectively,
representing 256% and 75% of total revenue, respectively. The increase in general and administrative expenses in dollar amount and as a percentage

of total revenue is primarily attributable to increased staffing, office space and other infrastructure expenses incurred in support of expanded product lines, increased marketing activities and
increased product development activities.

Discontinued Operations

During the nine-month period ended September 30, 2001, legal fees and personnel-related expenses that had been previously accrued as part of
the phase-out period were adjusted to actual amounts paid, resulting in income from discontinued operations during the period. On June 19, 2001, Dassault notified the Company of
certain claims for indemnification related to alleged breaches of the terms of the purchase agreement used in connection with the sale of the component software division. Any amounts to be paid to
Dassault related to these claims would first reduce the $1.0 million of purchase price held in escrow for indemnification claims associated with the sale of the component software division. The
Company has engaged in discussions with Dassault regarding the allegations and, based upon the status of the negotiations and the tentative settlement arrangement reached with Dassault, believes any
amount to be paid in respect of the allegations will not exceed the $1.0 million held in escrow.

FLUCTUATIONS IN QUARTERLY RESULTS

The Company has 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 the Company's products, the product mix purchased by the Company's
customers, competing capital budget considerations of the Company's customers, introduction and enhancement of products by the Company and its competitors, market acceptance of new products, reviews
in the industry press concerning the products of the Company or its competitors, changes or anticipated changes in pricing by the Company or its competitors and general economic conditions. In light
of the foregoing factors, it is possible that the Company's operating results for future quarters may fall below the expectations of securities analysts and investors.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, the Company had $7.6 million in cash and cash equivalents, as compared to $18.3 million in cash and cash
equivalents as of December 31, 2000. The decrease of $10.7 million in cash and cash equivalents during the nine months ended September 30, 2001 is primarily attributable to the
net loss of $10.1 million, payment of accounts payable and accrued expenses of $2.3 million, and purchase of $487,000 of fixed assets, including computer software. The decrease was
partially offset by cash inflows from a net decrease in accounts receivable and prepaid expenses of $1.2 million and non-cash expenses of depreciation, fixed asset impairment and
bad debt of $986,000. The slight decrease in cash and cash equivalents during the nine months ended September 30, 2000 was primarily attributable to the issuance of common stock to certain
investors in February 2000, offset by losses from operations.

Management
believes it has sufficient cash to meet the operating requirements for the foreseeable future, including at least the next 12 months.





PART IIOTHER INFORMATION

Item 1. Legal Proceedings.

Although no formal proceedings have been initiated to date, on June 19, 2001, Dassault notified the Company of certain claims for indemnification
related to alleged breaches of the terms of the purchase agreement used in connection with the sale of the component software division. Any amounts to be paid to Dassault related to these claims would
first reduce the $1.0 million of purchase price for the sale of the component software division held in escrow. The Company has engaged in discussions with Dassault regarding the allegations
and, based upon the status of the negotiations and the tentative settlement arrangement reached with Dassault, believes any amount to be paid in respect of the allegations will not exceed the
$1.0 million held in escrow.

Item 6. Exhibits and Reports on Form 8-K.







SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the issuer has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                        |  | PLANETCAD INC.
|----------------------- |  | --------------
|Date: November 14, 2001 |  | By:           
|                        |  | Name:         
|                        |  | Title:        
|Date: November 14, 2001 |  | By:           
|                        |  | Name:         
|                        |  | Title: