SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number: 0-16454
CIMETRIX INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada 87-0439107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6979 South High Tech Drive, Salt Lake City, Utah 84047-3757
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (801) 256-6500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of each of the issuer's classes of common
stock as of May 12, 2000: Common stock, par value $.0001 - 24,426,690.
CIMETRIX INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PART I Financial Information
Item 1. Financial Statements
a) Condensed Statements of Operations...............................1
b) Balance Sheets...................................................2
c) Statements of Cash Flows...................................3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................5
PART II Other Information
Item 1. Legal Proceedings...........................................10
Item 2. Changes in Securities.......................................10
Item 3. Defaults Upon Senior Securities.............................10
Item 4. Submission of Matters to a Vote of Security Holders.........10
Item 5. Other Information...........................................10
Item 6. Exhibits and Reports on Form 8-K............................10
Signature...........................................................11
1
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share and share amounts)
(Unaudited)
Three Months Ended
March 31,
--------------------------------
2000 1999
NET SALES $757 1,021
--- -----
OPERATING EXPENSES
Cost of sales 34 15
Selling, marketing and customer support 229 192
Research and development 500 374
General and administrative 408 300
--- ---
Total operating expenses 1,171 881
----- ---
INCOME (LOSS) FROM OPERATIONS (414) 140
----- ---
OTHER INCOME (EXPENSES)
Interest income 20 17
Interest expense (67) (69)
---- ----
Total other income (expense) (47) (52)
---- ----
INCOME (LOSS) BEFORE INCOME TAXES (461) 88
INCOME TAX EXPENSE (BENEFIT) -- --
NET INCOME (LOSS) $ (461) $ 88
===== ==
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE $ (.02) $ (.00)
===== =====
WEIGHTED AVERAGE SHARES OUTSTANDING 23,139,976 22,695,800
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CIMETRIX INCORPORATED
CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
March 31, December 31,
2000 1999
------------ ----
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 4,472 $ 1,042
Accounts receivable, net 712 1,440
Inventories 162 102
Stock subscription receivable 250 -
Prepaid expenses and other current assets 4 6
- -
Total current assets 5,600 2,590
Property and equipment, net 327 340
Capitalized software costs, net 95 119
Technology, net 6,017 6,149
Investment in affiliate 522 132
Other assets 124 44
--- --
$ 12,685 $ 9,374
====== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 134 $ 170
Accrued expenses 713 643
Customer deposits 63 70
-- --
Total current liabilities 910 883
LONG TERM DEBT, net of current portion 2,681 2,681
----- -----
Total Liabilities 3,591 3,564
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value:
100,000,000 shares authorized;
24,426,690 and 23,125,690 shares issued
and outstanding, respectively 3 2
Additional paid-in capital 29,054 24,810
Treasury stock, at cost (1) (1)
Stock subscription receivable (500) -
Accumulated deficit (19,462) (19,001)
------- --------
Net Stockholders' Equity 9,094 5,810
----- -----
$ 12,685 $ 9,374
====== =====
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CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Cash Flows to Operating Activities:
Net Income (Loss) $ (461) $ 88
Adjustments to reconcile net loss to net cash used by
Operating activities:
Amortization and depreciation 203 89
Changes in assets and liabilities:
(Increase)decrease in accounts receivable 698 (118)
(Increase) decrease in inventory (60) (45)
(Increase) decrease in prepaid expenses 2 16
Increase (decrease) in accounts payable (36) 165
Increase (decrease) in accrued expenses 70 (27)
Increase (decrease) in other assets 8 -
Increase (decrease) in customer deposits (7) 63
Net Cash Flow Provided(Used)by Operating Activities 417 231
--- ---
Cash Flows to Investing Activities:
Purchase of property and equipment, net of retirements (9) (6)
Investment in affiliates (478) --
Net Cash Flow Used by Investing Activities (487) (6)
--- --
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 3,250 --
Purchase of Treasury Stock -- (301)
Proceeds from stock subscription receivable 250 --
Net Cash Flow Provided (Used) by Financing Activities 3,500 (301)
----- ---
Net Increase (Decrease) in Cash and Cash Equivalents 3,430 (76)
Cash and Cash Equivalents at the Beginning of Period 1,042 1,645
Cash and Cash Equivalents at the End of Period $ 4,472 $ 1,569
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ -- $ --
Supplemental Schedule of Noncash Investing and Financing
Activities:
Issuance of stock upon exercise of non-qualified
Options or warrant, net of repurchase $ -- $ --
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CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited
condensed financial statements of Cimetrix Incorporated have been prepared
in accordance with the Securities and Exchange Commission's instructions to
Form 10-Q and, therefore, omit or condense footnotes and certain other
information normally included in financial statements prepared in
accordance with generally accepted accounting principles. The accounting
policies followed for quarterly financial reporting conform with generally
accepted accounting policies disclosed in Note 1 to the Notes to Financial
Statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999. In the opinion of management, all adjustments
of a normal recurring nature that are necessary for a fair presentation of
the financial information for the interim periods reported have been made.
The results of operations for the three month period ended March 31, 2000
are not necessarily indicative of the results that can be expected for the
entire year ending December 31, 2000. The unaudited condensed financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
NOTE 2 - STOCK OPTIONS, SENIOR NOTES AND WARRANTS
A total of 2,000,000 shares of common stock have been
reserved for issuance under the Company's stock option plans. As of May 12,
2000, there were issued and outstanding, options for the purchase of
1,350,000 shares of the Company's common stock, under the Company's 1998
Stock Option Plan. Of these options, approximately 345,000 are exercisable
at $3.00 per share with the remaining 1,005,000 exercisable at $2.50 per
share. Additionally 1,005,000 of these options are registered for resale,
pursuant to a Form S-3 Registration Statement, which became effective
December 9, 1998. These options will begin to expire in December 2003, and
continue to expire through February 2005.
As of May 12, 2000, there were issued and outstanding,
options for the purchase of 258,000 shares of the Company's common stock,
under the Company's Director Stock Option Plan. All of these options are
exercisable at $2.50 per share. Approximately 160,000 of these options are
registered for resale, pursuant to the Form S-3 Registration Statement
discussed earlier in this section. These options will begin to expire in
January 2003, and continue to expire through June 2004.
As of May 12, 2000, there were $2,681,000 of the Company's
Senior Notes issued and outstanding, held by 52 bondholders. The Senior
Notes are due and payable September 30, 2002. There were also 3,306
warrants issued with the Senior Notes, all of which are outstanding, held
by 52 warrant holders. The number of potential shares represented by these
outstanding warrants is 826,500, or 250 shares for each warrant. The
exercise price for the warrants is $2.50 per share, with the warrants
expiring October 1, 2002. On December 9, 1998, the underlying shares from
the outstanding warrants were registered for resale pursuant to the Form
S-3 Registration Statement discussed earlier in this section.
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NOTE 3 - COMMON STOCK
On May 12, 2000, the closing quotation for the Company's
common stock on the NASDAQ Bulletin Board was $4.69 per share. Potential
investors should be aware that the price of the common stock in the trading
market can change dramatically over short periods as a result of factors
unrelated to the earnings and business activities of the Company.
On May 12, 2000, there were 24,426,690 shares of common stock issued
and outstanding, held by approximately 2,500 beneficial shareholders.
NOTE 4 - PRIVATE PLACEMENT
Beginning on March 10, 2000, the Company sold 1,700,000 shares of its
common stock for $4,250,000 in a Private Placement. The net proceeds to the
Company from the private placement was approximately $4,245,000. The shares
were offered only to "accredited investors" as that term is defined in
Regulation D promulgated under the 1933 Act. The shares sold in the
offering were restricted shares and were therefore discounted from the
existing market price at that time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Following is a brief discussion and explanation of significant
financial data, which is presented to help the reader better understand the
results of the Company's financial performance for the first quarter of 2000.
The information includes discussions of sales, expenses, capital resources and
other significant items. Generally the information is presented in a two-year
comparison format using the first quarter data of 2000 and 1999.
Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's Condensed
Financial Statements and Notes thereto included elsewhere in this Quarterly
Report. The ensuing discussion and analysis contains both statements of
historical fact and forward-looking statements. Forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, generally are
identified by the words "expects," "believes" and "anticipates" or words of
similar import. Examples of forward-looking statements include: (a) projections
regarding sales, revenue, liquidity, capital expenditures and other financial
items; (b) statements of the plans, beliefs and objectives of the Company or its
management; (c) statements of future economic performance, and (d) assumptions
underlying statements regarding the Company or its business. Forward-looking
statements are subject to certain factors and uncertainties that could cause
actual results to differ materially from the forward-looking statements,
including, but not limited to, those factors and uncertainties described below
under "Liquidity and Capital Resources" and "Factors Affecting Future Results."
Overview
The Company is the developer of the world's first open architecture,
standards-based, personal computer (PC) software for controlling machine tools,
industrial robots and industrial automation equipment that operates on the
factory floor. The Cimetrix Open Development Environment (CODE(TM)) software
products are based on standard computer platforms using Microsoft Windows NT
operating system. Cimetrix believes that manufacturing companies will
increasingly demand open architecture, PC-based controllers on the equipment
they purchase, transforming the worldwide controller market from proprietary
solutions to open architecture, PC-based solutions.
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Statements of Operations Summary
The following table sets forth the percentage of costs and
expenses to net sales derived from the Company's Condensed Statements of
Operations for the three months ended March 31, 2000 and 1999:
Three Months Ended
March 31,
2000 1999
---- ----
NET SALES 100% 100%
---- ----
OPERATING EXPENSES
Cost of sales 5 1
Selling, marketing and customer support 30 19
Research and development 66 37
General and administrative 54 29
Total operating expenses 155 86
--- --
INCOME (LOSS) FROM OPERATIONS (55) 14
Interest income 3 2
Interest expense ( 9) ( 7)
---- ----
NET INCOME (LOSS) (61)% 9%
== ==
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net Sales
Net sales decreased by $264,000, or 26%, to $757,000 for the three
months ended March 31, 2000, from $1,021,000 for the comparable period in 1999.
Net sales for the first quarter of 2000 consisted of sales of software (52%),
engineering services (31%) and support and training (16%). Net sales for the
same period in 1999 consisted of sales of software (80%), engineering services
(8%) and support and training (12%).
The Company anticipated a large amount of work to integrate its newly
acquired IEC 1131 and GEM software products with its existing products and had
forecasted a loss for the first quarter. However the integration of these new
products required substantially more engineering effort than originally planned,
resulting in a delay in the Company's products and a decrease in sales. The
Company has completed this work and the new products are now available. The
Company also intends to broaden its coverage of the PLC (Programmable Logic
Controller) market by integrating and offering products developed by a major
international supplier. The Company has signed a contract with this supplier of
PLC products, which the Company believes will add significant value to its
current product line. The Company expects to announce the details of the
contract and its estimated future impact on sales in the third quarter of 2000.
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Major Customers
Sales to major customers that exceeded 10 percent of net sales are approximately
as follows (in thousands):
Three Months Ended
March 31,
2000 1999
---- ----
Company A * 179
Company B * 145
Company C * 432
Company D 104 *
Company E 114 *
Cost of Sales
Cost of sales increased by $19,000, or 127%, to $34,000 for the three
months ended March 31, 2000, from $15,000 for the comparable period in 1999.
This increase was attributable to an increase in sales of engineering services,
which have a higher cost of sales. In the first quarter 2000, engineering
services represented 31% of sales, compared to 8% in the first quarter of 1999.
Disproportionate amounts of engineering services are required in the early
stages of major OEM contracts. This increase reflects two new major OEM
relationships.
Selling, Marketing and Customer Support
Selling, marketing and customer support increased by $37,000, or 19%,
to $229,000 for the three months ended March 31, 2000, from $192,000 for the
comparable period in 1999. This increase, which was anticipated, resulted from
the addition of sales personnel that coincided with the release of the Company's
new software products and the targeting of new markets.
Research and Development
Research and development expenses increased by $126,000, or 34% to
$500,000 for the three months ended March 31, 2000, from $374,000 for the
comparable period in 1999. This increase, which was anticipated, was
attributable to the addition of research and development personnel working on
the Company's newly acquired software products. Personnel costs represent the
most significant portion of the Company's research and development costs, due to
its focus on software products. The Company plans to continue to make
significant investments in research and development and expects to incur
research and development expenses of approximately $2.0 million during 2000.
Research and development expenses include only direct costs for wages, benefits,
materials and education of technical personnel. All indirect costs such as
rents, utilities, depreciation and amortization are reflected in general and
administrative costs.
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General and Administrative
General and administrative expenses increased by $108,000, or 36%, to
$408,000 for the three months ended March 31, 2000, from $300,000 for the
comparable period in 1999. The primary reason for this increase was the increase
in amortization expense.
General and administrative expenses include all direct costs for
administrative and accounting personnel, all rents and utilities for maintaining
company offices. These costs also include all indirect costs such as
depreciation of fixed assets and amortization of intangible assets, such as
capitalized software and technology. Amortization and depreciation expense for
the three months ended March 31, 2000, was $203,000, or 50% of all general and
administrative expenses, compared to $89,000, or 30%, for the same period in
1999. Amortization expense increased due to the addition of approximately
$6,000,000 in intangible technology assets, being amortized over a 12 year
period, resulting in an additional $500,000 of expense annually. All other
general and administrative costs remained constant or declined compared to the
prior year.
Other Income (expenses)
Interest income increased slightly by $3,000, or 18% to $20,000 for
the three months ended March 31, 2000, from $17,000 for the same period in 1999.
Improved operating results have allowed the Company to maintain a cash reserve.
Cash reserves are invested in conservative money market fund accounts.
Interest expense decreased slightly by $2,000, or 3%, to $67,000 for
the three months ended March 31, 2000, from $69,000 for the same period in 1999.
The decrease was attributable to the retirement of a small portion of the
Company's 10% Senior Notes.
Liquidity and Capital Resources
The Company had approximately $4.69 million of working capital at March
31, 2000, compared with approximately $1.71 million at December 31, 1999. This
increase was a result of a positive cash flow of $417,000 from operations and
the sale of 1,700,000 shares of the Company's common stock in a Private
Placement, discussed in Note 4 to the financial statements.
Cash used in investing activities for the three months ended March 31,
2000 was $487,000, compared with $6,000 for the same period in 1999, and was for
the purchase of an additional interest in the Company's Japanese affiliate as
well as computer software and hardware. Cash provided by financing activities
for the period ended March 31, 2000, was $3,500,000 compared to cash used in
investing activities of $301,000 for the same period in 1999. The Company also
had a positive cash flow from operating activities of $417,000 for the three
months ended March 31, 2000, compared to a positive cash flow of $231,000 for
the same period in 1999.
Management believes that the Company's existing working capital is
sufficient to maintain its current and foreseeable levels of operations.
Management also believes that the Company has sufficient funds to meet its
capital expenditure requirements for 2000. The Company anticipates that capital
expenditures for fiscal year 2000, primarily for computer software and
equipment, will be approximately $50,000, compared to $25,000 for 1999.
-8-
Quantitative and Qualitative Disclosures about Market Risk
The Company has no activities in derivative financial or commodity
instruments. The Company's exposure to market risks, (i.e. interest rate risk,
foreign currency exchange rate risk, equity price risk) through other financial
instruments, including cash equivalents, accounts receivable, lines of credit,
is not material.
Factors Affecting Future Results
The Company's future operating results and financial condition are
difficult to predict and will be affected by a number of factors. The markets
for the Company's products are emerging and specialized, and the Company's
technology has been commercially available for a relatively short time.
Accordingly, the Company has limited experience with the commercial use and
acceptance of its products and the extent of the modifications, adaptations and
custom applications that are required to integrate its products and satisfy
customer performance requirements. There can be no assurance that the emerging
markets for industrial motion control that are served by the Company will
continue to grow or that the Company's existing and new products will satisfy
the requirements of those markets and achieve a successful level of customer
acceptance. Because of this, the Company continues to devote significant
research and development resources to improve its existing products and towards
the development of new products.
Because of these and other factors, past financial performance
is not necessarily indicative of future performance, historical trends should
not be used to anticipate future operating results, and the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results and market conditions.
-9-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
27 Financial Data Schedule (Filed electronically with this 10-Q).
(b)Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
March 31, 2000.
-10-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT
CIMETRIX INCORPORATED
Registrant
Dated: May 15, 2000 By: /s/ Riley G. Astill
-------------------
RILEY G. ASTILL
Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
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