Mod Viz Es Q2 2003


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Mod Viz Es Q2 2003

  1. 1. ______________________________________ Executive Summary Q2 2003 Prepared by Robert Jacobson Chief Executive Officer Thomas Ruge Chief Technology Officer Yixin (Shing) Pan Vice President, Marketing and Business Development ModViz, Inc. 60 E. Third Avenue, Suite 210 San Mateo, CA 94401 USA +1-650-558-3880 voice +1-650-558-8447 fax Email: © 2003 ModViz, Inc.
  2. 2. CONFIDENTIAL. This document contains information that is confidential and proprietary to ModViz, Inc. It may not be disclosed to others who are not directly concerned with an investor’s decision. No part of it may be used, circulated, quoted, or reproduced for distribution without the prior written permission of the Company. If you are not the intended recipient of this document, you are hereby notified that the use, circulation, quoting, or reproducing of this document is strictly prohibited and may be unlawful. TABLE OF CONTENTS* EXECUTIVE SUMMARY 3 1. OUR BUSINESS PROPOSITION 6 2. MARKET OPPORTUNITY 6 3. FIVE-YEAR TECHNOLOGY DEVELOPMENT PLAN 10 4. MARKETING AND SALES STRATEGIES 12 5. COMPETITIVE ANALYSIS 24 6. MANAGEMENT 25 7. FINANCIAL AND OPERATIONAL PLANS 27 7. APPENDICES A & B: PATENT APPLICATION 30+ AND FINANCIALS * Full document DISCLAIMER. THIS IS STRICTLY AND ONLY AN INFORMATIONAL DOCUMENT. THIS DOCUMENT DOES NOT CONSTITUTE A SOLICITATION FOR INVESTMENT OR A FORMAL INVESTMENT OFFER. THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE TO THE CURRENT BEST KNOWLEDGE OF MODVIZ, INC., BUT NO WARRANTIES ARE MADE AS TO THE ACTUAL ACCURACY OF THE INFORMATION CONTAINED WITHIN. READERS ARE ENCOURAGED TO CONTACT MODVIZ, INC.’S OFFICERS OR OTHER AUTHORITATIVE PARTIES TO CONFIRM THE INFORMATION CONTAINED HEREIN. © 2003 ModViz, Inc. – Page 3
  3. 3. EXECUTIVE SUMMARY The future of computing is visual. ModViz, Inc., is the leader in distributed visualization. Our software products make high-performance, real- time visualization affordable and accessible. Our goal is for our software to become the standard Graphics OS for next-generation computing. Our products enable off-the-shelf PCs arrayed in clusters to produce high-resolution, interactive 2D and 3D graphics in real-time. These “viz clusters” outperform high-powered graphics supercomputers at a fraction of the cost. Collaboration, on site and remotely, is driving the adoption of visualization throughout industry. Our immediate focus is on serving the oil and gas industry and manufacturing, where visualization is an accepted and critical business process – and where existing solutions simply do not work. Utility computing and grid computing have the potential to make visualization ubiquitous. We intend to be there when they do. ModViz, Inc., is an early stage company incorporated in Delaware and headquartered in San Mateo, CA, Organized in October 2002, we are a spinout from Siemens AG, the German multinational. ModViz, Inc., in a Nutshell • ModViz incorporated in October 2002, located in San Mateo, CA • Spinout from Siemens AG, where technology was developed • Makes software that enables high-performance, real-time computer visualization using common PC-based technology • Focused on serving oil and gas, and manufacturing industries • Existing customers, with several others pending • Partnerships with IT industry leaders • Forecast revenues may exceed $100M in 2007 • Seasoned, unusually competent management team with decades of experience in the visual computing business • Currently, a team of nine MARKET OPPORTUNITIES The cumulative unserved market for high-performance, low-cost visualization is estimated by leading market research firms to be over $20 billion, half for hardware and the other half for software. Based on our partners’ and our own research, the addressable market for PC-based distributed visualization is approximately $6 billion. © 2003 ModViz, Inc. – Page 4
  4. 4. Our products address the accelerating need of companies to provide visualization capabilities throughout their organizations and supply chains. Our vertical market segments include, in order of priority:, Oil and Gas (exploration and development), Manufacturing, Medical and Life Sciences, AEC (Architecture/Engineering/ Construction), and Entertainment. Each of these markets is large – $1 billion-plus – traditionally with double-digit growth rates. Our products are catalytic. New users of visualization, finding new uses and developing new applications, will contribute to the growth of a large, latent horizontal market. This will especially be the case if we can set the standards for visualization in emerging utility-computing and grid- computing environments. PRODUCTS AND INTELLECTUAL PROPERTY Our current product line includes the Renderizer software suite for managing visualization clusters. Clusters are scalable and can be heterogeneous and distributed. The Renderizer SDK enables customers to develop Renderizer-compatible applications that run on viz clusters. We are in the process of integrating our products with popular applications in the oil and gas industry, and in manufacturing. In the future, we will adapt our products to the grid and utility computing environments. We are also partnering with a stealth producer of ultra- high-resolution, interactive holography to create next-generation information environments. ModViz owns the IP for distributed visualization software (including patents, software, and trade secrets). We are in the process of filing provisional patents for new IP that will extend Renderizer’s capability, our product line, and our market leadership. COMPETITIVE ADVANTAGES Experts acknowledge Renderizer software as the "best of breed" among high-performance, software-based, PC-platform visualization solutions. Its unique qualities provide performance efficiency and adaptability to the needs of customers across the board, in every market segment. While other visualization solutions exist, they require specialized hardware that raises their prices well above what ModViz is charging. By enabling viz clusters that enhance visualization and lower prices, we open a vast new market. Mid-range companies and agencies now have access to the same visualization technologies and methods restricted for two decades to Fortune 500 corporations and militaries. CUSTOMERS AND PARTNERS We currently serve training simulation and manufacturing customers in North America and Europe. Our field of focus, however, has turned to the oil and gas industry, where the industry is still vibrant, the economic slowdown affecting manufacturing is not evident, and visualization is absolutely essential to oil exploration and development (E&P). We still intend to serve the manufacturing industry when it returns to good health. While many buyers in both O&G and manufacturing intend to use our products to replace large, centralized graphics supercomputers, most of our © 2003 ModViz, Inc. – Page 5
  5. 5. buyers will use our products to extend visualization throughout the enterprise and supply chain. Our current technology and channel partners include leading computer hardware and software manufacturers; makers of display technology; and integrators, resellers, and distributors in North America, Japan, Southeast Asia, and Europe. MOUs are in place with key partners including Hewlett Packard and Fakespace/Mechdyne; others are in the final review process. Current buyers include oil-industry “interpreters” and petroleum engineers; designers and product managers in manufacturing; and in both industries, the IT managers who support these professionals, often with the imprimatur of CTOs and CIOs. SALES AND LICENSING Our marketing strategy builds on strong channel relationships. Our channel partners, dominant players in their industries, promote and sell our products in the vertical markets they serve. ModViz’s role is to continuously improve our products to support our channel partners and serve their customers’ needs. Our sales strategy emphasizes on OEM sales and value pricing in our initial, vertical markets – oil and gas, and manufacturing – and volume pricing in the horizontal market once it is established. Our products are licensed on a run-time basis to hardware manufacturers and on a royalty basis to ISVs (software vendors). A typical viz cluster comprises four to sixteen PCs, or "nodes" (and a master PC). Each new viz cluster sold generates multiple revenue events for ModViz, since each node requires a Renderizer software license. The application that runs on the viz cluster requires a license of a different type. As viz clusters proliferate and scale in size, our revenue streams will grow rapidly. This cascade effect will accelerate further as grid and utility computing become pervasive. MANAGEMENT TEAM Our core management team, comprising the Company’s co-founders, is unusually competent in the visual computing business, with collective decades of experience. Dr. Robert Jacobson, CEO – A pioneer in applications of advanced graphical applications and virtual worlds, Dr. Jacobson was the founder and CEO of Worldesign Inc., in Seattle; co-founder and Associate Director of the Human Interface Technology Lab (HIT Lab) at the University of Washington, also in Seattle; and a Senior Consultant with SRI in Menlo Park, CA. He holds a Ph.D. in Planning from UCLA, a Masters in Communication Management from the Annenberg School of Communications at USC, and a Masters in Television Studies from UCLA. Mr. Thomas Ruge, CTO – Well known in the visualization community and a frequent participant in computing standards bodies and initiatives, Mr. Ruge founded and was the Renderizer Development Team Leader within Siemens Corporate Technology, in Munich. An inventor and patent holder, Mr. Ruge as a teenager was one of Germany’s first successful software entrepreneurs. Now a quantum physicist, he holds a Diploma (M.S. equivalent) from the Technical University of Munich and an Abitur (Bachelor’s equivalent) from Willi-Graf-Gymnasium, Munich. Mr. Ruge is fluent in German, French, English, and Italian. © 2003 ModViz, Inc. – Page 6
  6. 6. Ms. Yixin (Shing) Pan, VP Marketing – Thoroughly versed in the use of visual design tools as well as in their development and marketing, Ms. Pan, formerly an experienced automotive design engineer with Borg-Warner, most recently served SGI as a Strategist and Industry Marketing Manager. She established her entrepreneurial credentials by building a new clustering business within SGI. She holds an MBA from Cornell University and an MS in Mechanical Engineering from Northern Illinois University. Ms. Pan is fluent in Chinese (Mandarin) and English. Mr. Brian Blau, VP Engineering – Formerly Senior Project Director with Discreet, the 3D division of Autodesk. Inc. Before that, he co-founded and served as VP Engineering with Intervista Software, eventually acquired by Platinum Software. Brian has a long history of working as a SIGGRAPH organizer and was responsible for the VRML Working Group that evolved into the Web3D Working Group. He holds a BS and MS in Computer Science from the University of Central Florida, one of the nation’s leading academic centers for visualization technology. (UCF is proximate to the U.S. military’s central visualization commands in Orlando.) Our Board of Directors currently has three members, with a fourth’s nomination in process: Mr. Joe Becker, Chairman. Principal, Dolphin Ventures (Fremont, CA); founder and former CEO, The Enterprise Networks; former CEO and President, ICOT Corp.; Chairman, Zynx, Inc.; Chairman, Silicon Valley Association of Startup Entrepreneurs (SVASE) Mr. Silvano Dall’Asta, Chief Financial Officer, Siemens Corporate Research, Inc. (Princeton, NJ) Dr. Robert Jacobson, CEO, ModViz, Inc. Mr. John Kohler, Co-CEO and General Partner, The Redleaf Group, has been nominated for board membership. ORGANIZATION AND FINANCES Siemens provided initial funding for ModViz and transferred ownership of the IP to ModViz. Management owns 51 percent of ModViz and Siemens holds the remaining 49 percent. We are seeking $5.5 million in first-round institutional funding, in two tranches (represented as a single investment in our balance sheet.) As channels become fully activated and our sales become widespread in 2004 and 2005, ModViz will experience substantial revenue growth and profitability. That is when we will need our second investment. ModViz will break even in Q1 2005. Sales will jump once again with the migration of our products from stand-alone viz clusters to computer utilities and grid environments. Fifth year revenues are forecast to approach $65M as the horizontal market blooms. They could easily exceed that figure with a bounce from holography and grid applications. ModViz is seeking a first round of institutional investment to accelerate its product development and marketing efforts, especially building and reinforcing channels and business relationships. These funds are expected to fund ModViz for approximately two years as revenues grow and additionally to enable acquisition of small firms and desirable technologies. Currently, an M&A strategy – a sale to one of our channel partners – provides the surest path to liquidity, although changing market conditions could restore the attractiveness of an IPO strategy, © 2003 ModViz, Inc. – Page 7
  7. 7. Testimonials ! Leading ISV Serving the Oil & Gas Industry: “With Renderizer software, ModViz offers a lower cost solution for intensive graphics applications. This technology is extremely important to our clients. It maximizes our applications’ potential in an industry where ROI is crucial to a successful development program.” ! Chief Engineer, Major Automotive Manufacturer: “We are encouraged with the potential of Renderizer to eliminate several steps in our current process that require multiple iteration of fiberglass and clay models. We expect to develop a request for a supplemental funding for multiple licenses.” ! Emerging Technology Director, Top PC Manufacturer: “I intend to drag ModViz into our program, on my back if necessary. Renderizer is going to be a cornerstone of our cluster management products from the standpoint of application management.” ! Oak Ridge Centers for Manufacturing Technology: “No other technology offers more than a fraction of the potential that modeling and simulation do for improving products, perfecting processes, reducing design-to- manufacturing cycle time, and reducing product realization costs” © 2003 ModViz, Inc. – Page 8
  8. 8. 1. ModViz, Inc. Annual Balance Sheet 2003 - 2007 2003E 2004E 2005E 2006E 2007E Assets Cash 2,940,023 125,278 5,495,368 25,163,008 61,683,684 Acounts Receivable 67,493 279,097 1,102,789 2,092,627 3,258,449 Inventory 761 3,105 12,177 22,960 36,191 Total Current Assets 3,008,277 407,480 6,610,335 27,278,595 64,978,324 Property, Plant & Equipment, net - - - - - Total Assets 3,008,277 407,480 6,610,335 27,278,595 64,978,324 Liabilities and Stockholders' Equity Short-term debt - - - - - Accounts payable 7,608 31,049 121,774 229,601 361,910 Other accrued liabilities - - - - - Total current liabilities 7,608 31,049 121,774 229,601 361,910 Long-term debt - - - - - Total liabilities 7,608 31,049 121,774 229,601 361,910 Stockholders' equity Common stock 3,122 3,122 3,122 3,122 3,122 Preferred stock 5,500,000 5,500,000 5,500,000 5,500,000 5,500,000 Retained earnings (2,502,453) (5,126,691) 985,438 21,545,872 59,113,292 Total stockholders' equity 3,000,669 376,431 6,488,561 27,048,995 64,616,415 Total Liabilities + Shareholders' Equity 3,008,277 407,480 6,610,335 27,278,595 64,978,324 © 2003 ModViz, Inc. – Page 9
  9. 9. ModViz, Inc. Annual Income Statement 2003 - 2007 2003E 2004E 2005E 2006E Revenues Hardware Partners 440,000 3,575,000 18,150,000 42,900,000 Software Partners 407,438 3,007,214 10,539,048 21,421,682 Total Revenue 847,438 6,582,214 28,689,048 64,321,682 Cost of Revs 92,469 733,393 3,208,143 7,159,138 Gross Margin 754,969 5,848,821 25,480,905 57,162,543 % of revenue 89% 89% 89% 89% Operating Expenses G&A 569,666 945,403 1,823,782 2,512,154 % of revenue 67% 14% 6% 4% S&M 1,331,155 4,478,973 7,841,780 12,808,451 % of revenue 157% 68% 27% 20% R&D 1,356,601 3,002,369 5,628,461 7,574,548 % of revenue 160% 46% 20% 12% Total Op Exp 3,257,422 8,426,745 15,294,023 22,895,153 Operating Income (2,502,453) (2,577,924) 10,186,882 34,267,390 Interest - - - - Net income before taxes (2,502,453) (2,577,924) 10,186,882 34,267,390 Taxes 40% - - (4,074,753) (13,706,956) Net income (2,502,453) (2,577,924) 6,112,129 20,560,434 % of revenue -295% -39% 21% 32% © 2003 ModViz, Inc. – Page 10
  10. 10. ModViz, Inc. Annual Statement of Cash Flows 2003 - 2007 2003E 2004E 2005E 2006E 2007E Operating activities: Net income (loss) (2,502,453) (2,624,238) 6,112,129 20,560,434 37,567,420 Added depreciation/amortization - - - - - Increases in liabilities - - - - - Accounts payable 7,608 23,441 90,726 107,826 132,309 Decreases (increases) in assets - - - - - Net accounts receivable (67,493) (211,604) (823,692) (989,838) (1,165,822) Inventory (761) (2,344) (9,073) (10,783) (13,231) Cash flows from operating activities (2,563,099) (2,814,745) 5,370,090 19,667,640 36,520,676 Investing activities: Purchase of property and equipment - - - - - Cash flows from investing activities - - - - - Financing activities: Proceeds from loans - - - - - Proceeds from sale of stock 5,500,000 - - - - Cash flows from financing activities 5,500,000 - - - - - - - - - NET CHANGES IN CASH 2,936,901 (2,814,745) 5,370,090 19,667,640 36,520,676 Beginning CASH 3,122 2,940,023 125,278 5,495,368 25,163,008 Ending CASH 2,940,023 125,278 5,495,368 25,163,008 61,683,684 © 2003 ModViz, Inc. – Page 11