UNITED STATES
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 June 30, 2001
|_| 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:
The number of shares outstanding of the registrant's common stock as of
August 14, 2001: Common stock, par value $.0001 - 24,025,968
CIMETRIX INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
PART I Financial Information
Item 1. Financial Statements
a) Condensed Statements of Operations.................................1
b) Condensed Balance Sheets...........................................2
c) Condensed Statements of Cash Flows.................................3
d) Notes to Condensed Financial Statements............................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........12
PART II Other Information
Item 1. Legal Proceedings....................................................13
Item 2. Changes in Securities................................................13
Item 3. Defaults Upon Senior Securities......................................13
Item 4. Submission of Matters to a Vote of Security Holders..................14
Item 5. Other Information....................................................14
Item 6. Exhibits and Reports on Form 8-K.....................................15
Signatures....................................................................16
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<caption>
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 Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $ 970 $ 1,587 $ 2,507 $ 2,345
---------- ---------- ------------- -------------
OPERATING EXPENSES
Cost of sales 242 37 374 71
Selling, marketing and customer support 466 275 891 504
Research and development 566 435 1,014 935
General and administrative 496 419 917 827
---------- ---------- ------------- -------------
Total operating expenses 1,770 1,166 3,196 2,337
---------- ---------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (800) 421 (689) 8
----------- ---------- -------------- -------------
OTHER INCOME (EXPENSES)
Interest income 128 58 160 77
Interest expense (67) (67) (134) (134)
Loss on asset disposal (5) - (5) -
----------- ---------- -------------- -------------
Total other income (expense) 56 (9) 22 (57)
---------- ----------- ------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (744) 412 (667) (49)
CURRENT INCOME TAX EXPENSE
(BENEFIT) - - - -
NET INCOME (LOSS) $ (744) $ 412 $ (667) $ (49)
=========== ========== ============== ==============
BASIC INCOME (LOSS) PER
COMMON SHARE $ (.03) $ .02 $ (.03) $ .00
===== === ===== ===
DILUTED INCOME (LOSS) PER
COMMON SHARE $ (.03) $ .02 $ (.03) $ .00
===== === ===== ===
WEIGHTED AVERAGE SHARES
OUTSTANDING, BASIC 24,026,000 24,837,000 24,159,000 23,995,000
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING, DILUTED 24,026,000 25,792,000 24,159,000 23,995,000
========== ========== ========== ==========
-1-
See notes to condensed financial statements
<page>
CIMETRIX INCORPORATED
CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
June 30, December 31,
2001 2000
------------- ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 3,372 $ 3,525
Accounts receivable, net 2,376 2,365
Inventories 141 121
Prepaid expenses and other current assets 23 29
------------ ------------
Total current assets 5,912 6,040
Property and equipment, net 366 359
Technology, net 4,876 5,675
Related party note receivable -- 416
Other assets 616 636
------------ ------------
$ 11,770 $ 13,126
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 266 $ 200
Accrued expenses 404 532
Deferred revenue 214 43
Current portion, notes payable 4 4
------------ ------------
Total current liabilities 888 779
LONG TERM DEBT, net of current portion 2,704 2,704
------------ ------------
Total Liabilities 3,592 3,483
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value: 100,000,000 shares
Authorized, 24,025,968 and 24,456,690 shares issued
and outstanding, respectively 2 2
Additional paid-in capital 27,381 28,130
Treasury stock, at cost (50) (1)
Accumulated deficit (19,155) (18,488)
------------- -------------
Net Stockholders' Equity 8,178 9,643
------------- -------------
$ 11,770 $ 13,126
============= =============
See notes to condensed financial statements
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CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2001 2000
---- ----
Cash Flows from Operating Activities:
Net income (loss) $ (667) $ (49)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Amortization and depreciation 374 412
Increase in receivables allowance account 100 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (188) (272)
(Increase) decrease in inventory (20) (65)
(Increase) decrease in prepaid expenses 6 15
Increase (decrease) in accounts payable 66 14
Increase (decrease) in accrued expenses (128) (480)
Increase (decrease) in other assets 20 (11)
Increase (decrease) in customer deposits 171 58
------------- --------------
Net cash flow used in operating activities (266) (378)
------------- --------------
Cash Flows from Investing Activities:
Purchase of property and equipment, net of retirements (39) (10)
Investment in affiliates -- (478)
Purchase of technology (215) --
Principal advances on note receivable 416 (416)
Net cash flow provided by (used in)
investing activities 162 (904)
------------ -------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock -- 4,283
Purchase of treasury stock (49) --
Net cash flow (used in) provided by
financing activities (49) 4,283
------------- -------------
Net (Decrease) Increase in Cash and Cash Equivalents (153) 3,001
Cash and Cash Equivalents at the Beginning of Period 3,525 1,042
------------ -------------
Cash and Cash Equivalents at the End of Period 3,372 4,043
============ =============
-3-
<page>
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(CONTINUED)
Six Months Ended
June 30,
2001 2000
---- ----
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 134 $ 134
Income taxes $ 15 $ --
Supplemental Schedule of Noncash Investing and Financing
Activities:
The Company received back 400,000 shares of its common $ 749 $ --
stock that had been issued to acquire technology. This
resulted in a decrease of technology of $749 and a
corresponding decrease in stockholders' equity.
The Company acquired equipment in satisfaction of $ 76 $ 30
accounts receivable.
-4-
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, 2000. 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 and six month periods ended June 30, 2001 are not
necessarily indicative of the results that can be expected for the
entire year ending December 31, 2001. 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, 2000.
NOTE 2 - STOCK OPTIONS AND WARRANTS
As of August 14, 2001, there were issued and outstanding to the
Company's employees, options for the purchase of 1,622,000 shares of
the Company's common stock, under the Company's 1998 Stock Option
Plan. The following table summarizes the quantity and exercise price
of the options.
Option Price Quantity
----------------------------------
$1.00 35,000
$2.50 892,000
$3.00 420,000
$3.50 275,000
-------
Total Options 1,622,000
Approximately 452,000 of these outstanding options are registered
for resale, pursuant to a Form S-3 Registration Statement, which
became effective December 9, 1998. A total of 3,000,000 shares of
common stock have been reserved for issuance under the plan. This
total includes an additional 1,000,000 options that were authorized by
a vote of shareowners at the June 2, 2001 Annual Meeting, held in Salt
Lake City, Utah. These options will begin to expire in December 2002,
and continue to expire through July 2006.
As of August 14, 2001, there were issued and outstanding options
for the purchase of 354,000 shares of the Company's common stock,
under the Company's Director Stock Option Plan. Of these options,
258,000 are exercisable at $2.50 per share, and 96,000 are exercisable
at $3.50 per share. Approximately 162,000 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 2006.
As of August 14, 2001, there were $2,681,000 of the Company's
Senior Notes issued and outstanding, held by approximately 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.
-5-
<page>
NOTE 3 - COMMON STOCK
On August 13, 2001, the closing quotation for the Company's
common stock on the NASDAQ Bulletin Board was $.65 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 August 14, 2001, there were 24,457,690 (including treasury
shares) of common stock issued, and 24,025,968 shares of common stock
outstanding, held by approximately 2,000 beneficial shareholders.
NOTE 4 - EARNINGS PER SHARE
A reconciliation of the shares used in the computation of the
Company's basic and diluted earnings per common shares is as follows
(in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2001 2000 2001 2000
---- ---- ---- ----
Weighted average common shares
Outstanding 24,026 24,837 24,159 23,995
Dilutive effect of:
Stock options -- 603 -- --
Warrants -- 352 -- --
------ ------ ------ ------
Weighted average common shares
outstanding, assuming dilution 24,026 25,792 24,159 23,995
------ ------ ------ ------
Weighted average common shares outstanding, assuming dilution,
includes the incremental shares that would be issued upon the assumed
exercise of stock options and warrants (see Note 2 - Stock Options and
Warrants). During the three months ended June 30, 2001 and the six
months ended June 30, 2001 and 2000, stock options and warrants to
exercise 3,000, 3,000 and 801,000 shares, respectively, were excluded
from the calculation of diluted earnings per share because they were
antidilutive. These options and warrants could be dilutive in the
future.
-6-
<page>
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 second quarter of 2001. 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 second quarter data of 2001 and 2000.
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 motion-oriented
equipment that operates on the factory floor. The Company introduced its first
motion control products (CODE) in 1989, and has developed considerable expertise
through working with demanding original equipment manufacturer (OEM) customers.
In 2000, the Company introduced two new product families using the latest
in software technologies. Both products complement the Company's CODE motion
control family of products. CIMConnect is a next generation design for enabling
production equipment in the electronics industries to communicate data to the
factory's host computer using the SECS/GEM SEMI (Semi Conductor Equipment and
Materials International) standard. CIM300 is a family of seven software products
that reduces the time required to connect new 300mm semiconductor tools to each
other and host computers into a factory by using the new SEMI 300mm standards.
-7-
<page>
Statement of Operations Summary
The following table sets forth the percentage of costs and expenses to
net revenues derived from the Company's Condensed Statements of Operations for
the three and six months ended June 30, 2001 and 2000:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES 100% 100% 100% 100%
---- ---- ---- ----
OPERATING EXPENSES
Cost of sales 25 2 15 3
Selling, marketing and customer support 48 17 36 21
Research and development 58 28 40 40
General and administrative 51 26 37 35
---------- ---------- ---------- ----------
Total operating expenses 182 73 128 99
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (82) 27 (28) 1
Interest income 13 4 6 3
Interest expense (7) (5) (5) (6)
----------- ----------- ----------- -----------
NET INCOME (LOSS) (77)% 26% (27)% (2)%
----------- ----------- ------------ -----------
Results of Operations
Three and Six Months Ended June 30, 2001 Compared to Three and Six Months Ended
June 30, 2000
Net Sales
Net sales decreased by $617,000, or 39%, to $970,000 for the three months
ended June 30, 2001, from $1,587,000 for the three months ended June 30, 2000.
Net sales for the three months ended June 30, 2001, consisted of sales of
software (71%), engineering services (17%), and support and training (12%). Net
sales for the same period in 2000 consisted of sales of software (83%),
engineering services (9%), and support and training (8%). The decrease in second
quarter sales is primarily the result of a significant drop in software
revenues. The Company's OEM customers in the robot, SMT and semiconductor
markets have all been negatively impacted by the current economic slowdown, as
their customer base has significantly reduced orders for new equipment, which
would include the Company's software products. It is not apparent whether the
market will remain slow or will recover in the third quarter.
-8-
<page>
Net sales increased by $162,000, or 7%, to $2,507,000 for the six months
ended June 30, 2001, from $2,345,000 for the six months ended June 30, 2000. Net
sales for the six months ended June 30, 2001, consisted of sales of software
(77%), engineering services (15%), and support and training (8%). Net sales for
six months ended June 30, 2000, consisted of sales of software (73%),
engineering services (16%), and support and training (13%). This 7% increase in
year to date sales over the prior year is due to increased software sales in the
first quarter of the year. A significant portion of these software sales were to
new customers. Despite the poor results for the second quarter, the Company
remains hopeful because of its broadening customer base.
Major Customers
Sales to two non-affiliated customers accounted for 14% and 21% of the
Company's revenues for the three months ended June 30, 2001. Sales to one
non-affiliated customer accounted for 52% of the Company's revenues for the
three months ended June 30, 2000. No other customers, for the three months ended
June 30, 2001 and 2000, accounted for 10% or more of the Company's revenues.
Sales to two non-affiliated customers accounted for 10% and 11% of the
Company's revenues for the six months ended June 30, 2001. Sales to one
non-affiliated customer accounted for 37% of the Company's revenues for the six
months ended June 30, 2000. No other customers, for the six months ended June
30, 2001 and 2000, accounted for 10% or more of the Company's revenues.
Sales to Aries, Inc., the Company's Japanese affiliate, accounted for 19%
and less than 10% of the Company's revenues for the three months ended June 30,
2001 and 2000, respectively. Sales to Aries also accounted for 16% and less than
10% of the Company's revenues for the six months ended June 30, 2001 and 2000,
respectively.
During the period ended June 30, 2001, the Company entered into an OEM
Agreement with a major Surface Mount Technology manufacturer, which extends for
an initial period of five years, with a renewal option for an additional five
years. The contract includes the Company's CIMControl and CIMConnect products as
well as options for additional Cimetrix products. This contract is expected to
provide significant revenues for the Company beginning in 2003.
Cost of Sales
Cost of sales increased by $205,000, or 554%, to $242,000 for the three
months ended June 30, 2001, from $37,000 for the comparable period in 2000. Cost
of sales increased by $303,000, or 427%, to $374,000 for the six months ended
June 30, 2001, from $71,000 for the comparable period in 2000. Of this increase
in cost of sales in the three months ended June 30, 2001, $100,000 was
attributable to a charge against income that the Company took to increase its
allowance for accounts receivable. The remaining amount of increase was
attributable to the sale of outside engineering services. While the Company's
focus is on the sale of software products, it does provide application and
integration services to its customers who want to purchase a complete turnkey
system. When possible, the Company contracts with resellers/distributors, such
as Systematic Designs International, Inc. (SDI) of Vancouver Washington to
perform these engineering services.
-9-
<page>
Selling, Marketing and Customer Support
Selling, marketing and customer support costs increased by $191,000, or
69%, to $466,000 for the three months ended June 30, 2001, from $275,000 for the
comparable period in 2000. Selling, marketing and customer support costs
increased by $387,000, or 77%, to $891,000 for the six months ended June 30,
2001, from $504,000 for the comparable period in 2000. These increases were due
to the additional costs incurred to operate the Company's new semiconductor
division, which markets and sells the Company's new CIM300 family of products.
Selling, marketing and customer support expenses reflect the direct payroll
and related travel expenses of the Company's sales, marketing and customer
support staff, the development of product brochures and marketing material, and
the costs related to the Company's representation at industry trade shows.
Research and Development
Research and development expenses increased by $131,000, or 30%, to
$566,000 for the three months ended June 30, 2001, from $435,000 for the
comparable period in 2000. Research and development expenses increased by
$79,000, or 8%, to $1,014,000 for the six months ended June 30, 2001, from
$935,000 for the comparable period in 2000. These increases were due to the
addition of software development personnel for the development of the Company's
products.
The Company will continue to make significant investments in research and
development and expects to incur research and development expenses of
approximately $2 million during 2001. 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.
General and Administrative
General and administrative expenses increased by $77,000, or 18%, to
$496,000 for the three months ended June 30, 2001, from $419,000 for the
comparable period in 2000. General and administrative expenses increased by
$90,000, or 11%, to $917,000 for the six months ended June 30, 2001, from
$827,000 for the comparable period in 2000. These increases were the result of
increased legal costs. Management has made every effort to eliminate and/or
minimize these costs going forward through settlement of any outstanding
lawsuits. All other general and administrative expenses, taken as a whole, were
down slightly for the period.
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 six months ended June 30, 2001, was approximately $374,000, or 42%, of all
general and administrative expenses, compared to $412,000, or 50%, for the same
period in 2000.
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<page>
Other Income (Expenses)
Interest income increased by $70,000, or 121%, to $128,000 for the three
months ended June 30, 2001, from $58,000 for the comparable period in 2000.
Interest income increased by $83,000, or 108%, to $160,000 for the six months
ended June 30, 2001, from $77,000 for the comparable period in 2000. The Company
invests portions of its cash reserves in conservative bond fund accounts, which
have provided additional interest income above what would be earned in money
market accounts.
Interest expense remained constant at $67,000 and $134,000, respectively,
for the three and six months ended June 30, 2001, compared to the same periods
in 2000.
Other Items
The Company is involved in a legal action that was settled subsequent to
the end of the quarter. This action is discussed in Item 1. Legal Proceedings of
Part II - Other Information, below in this document.
In May 2000, the Company purchased a residential property, which it
immediately re-sold to Michael Feaster, Vice President of the Company. The
Company held a 10% note with a principal balance of $417,557, secured by the
property. Interest payments were received twice monthly, with the principal
being due May 31, 2002. On April 27, 2001, Mr. Feaster repaid the note in full.
Subsequent to the end of the quarter ended June 30, 2001, the Company
received back and subsequently disposed of the passenger automobile that had
been purchased for the use of Paul Bilzerian, former President and Chief
Executive Officer of the Company.
Liquidity and Capital Resources
The Company had approximately $5 million of working capital at June 30,
2001, compared to $5.3 as of December 31, 2000.
Cash used by operating activities for the six months ended June 30, 2001,
was $266,000, compared to $378,000 for the same period in 2000. Cash provided by
investing activities for the six months ended June 30, 2001, was $162,000
compared to cash used by investing activities of $904,000 for the same period in
2000. In 2001, cash from investing activities was used to acquire new equipment
and technology, and the source of cash from investing activities was from the
collection of a note receivable. Cash used by financing activities for the
period ended June 30, 2001, was $49, as compared to cash provided by financing
activities of $4,283,000 for the same period in 2000. In 2000, the increase
resulted from the sale of common stock.
The Company's future liquidity will continue to be dependent on the
Company's operating cash flow and management of trade receivables. 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 the remainder of 2001. The Company anticipates that capital expenditures for
fiscal year 2001, primarily for computer equipment and software, will be
approximately $110,000.
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<page>
Factors Affecting Future Results
The second quarter results were a significant decrease compared to the
prior year, and well below the Company's target revenue. The current economic
slowdown has and continues to negatively impact the Company's revenues. The
Company's OEM customers have experienced significant declines in end-user orders
as capital spending was cut back, which translated into fewer sales for the
Company. The Company continues to add new customers and hopes to do so at an
increasing rate to offset the current decline in revenues. While management
remains hopeful that the successful completion and launch of new products will
provide the needed revenues, it is unable to forecast third and fourth quarter
results because of the poor current economic conditions. However, management
remains committed to the goals outlined at the 2001 Annual Meeting of revenues
of $20 million and net income of $8 million for fiscal 2003.
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 to 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.
ITEM 3. 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, and lines of
credit, is not material.
-12-
<page>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
An action was brought against the Company in August 1998 by Peter and Jana
Manley in the Third District Court of Salt Lake County, State of Utah. The
thrust of the claims by the Manleys relates to rights pertaining to
approximately 180,000 shares of stock in the Company. In the complaint,
declaratory relief is sought to have all restrictions removed from the stock of
the Manleys and that the Company not hinder in any way the transfer or sale of
the stock. Other claims include conversion, refusal to allow transfer of stock,
lost profits because of an asserted inability to have restrictions removed and
the Manleys being able to transfer their stock, breach of Stock Option Agreement
and Stock Option Plan, intentional interference with economic relations,
quantum-meruit-contract implied in fact, promissory estoppel/detrimental
reliance, civil conspiracy and breach of good faith and fair dealing.
In the prayer for relief, the Manleys seek a declaration that all
restrictions including the Rule 144 restrictive legend be removed from the
stock, stop transfer orders be removed, that the Company cease and desist from
preventing the Manleys from selling their stock, judgment for direct and
consequential damages, punitive damages, costs, attorney's fees and a demand for
a jury trial.
On or about February 9, 2001, the Manleys filed a Motion for Partial
Summary Judgment, seeking a declaration that they are the sole owners of the
Cimetrix shares of stock, that the shares be held free of any restrictions and a
judgment for damages based on the difference in the value of the stock on the
date the Rule 144 restrictions should have been lifted and the date on which
they were actually lifted, $5.50 per share for the 180,722 shares of Cimetrix
stock, totaling $993,971.
The Company answered the complaint and filed a counterclaim. The counterclaims
asserts material misrepresentations concerning technology. Claims against Mr.
Manley include fraud in the inducement, common law fraud, declaration and return
of shares of stock against both of the Manleys, breach of contract against both
of the Manleys, fraud in the inducement against Mr. Manley, breach of covenant
of good faith and fair dealing against Mr. Manley.
In June 2001 an agreement in principal was reached to settle this
litigation, with the formal settlement agreement subsequently executed on August
9, 2001. Under the terms of the settlement, the Manley's were provided with an
option to require the Company to redeem up to 80,000 shares of their Cimetrix
stock during a period of time from December 1, 2002, through December 31, 2002,
at a redemption price of $2.80 per share, or a maximum total repurchase cost to
the Company of $224,000. The Manley's also have the right to redeem their shares
at $2.80 per share at an earlier date if the Company's average daily cash
balance computed on a monthly basis, is at or below $1,250,000 or if Paul A.
Bilzerian, the former President and Director of the Company, becomes an officer,
director, employee or agent of the Company prior to December 31, 2002.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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<page>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareowners of the Company was held on Saturday, June
2, 2001, with proxies for the meeting solicited by the Company's Board of
Directors, pursuant to Regulation 14A under the Securities and Exchange Act of
1934. Matters voted on at the meeting were as follows: the election of four
directors, the approval of amendment to the 1998 Stock Option Plan, to authorize
an additional 1,000,000 shares of common stock to be made available for issuance
under the plan, the ratification of Tanner + Co. as the Company's independent
public accountants. There was not any proxy solicitation in opposition to
management's proposals or nominees for election as directors.
All three proposals were approved and adopted by the margins indicated below:
1. To elect four directors to the Company's Board of Directors to serve for
one-year terms.
Number of Shares
For Withheld
Dr. Lowell K. Anderson 19,777,742 745,461
Richard Gommermann 13,570,600 6,952,603
Joe K. Johnson 19,777,742 745,461
Randall A. Mackey 19,777,742 745,461
2. To amend the Company's 1998 Stock Option Plan, to authorize an
additional 1,000,000 shares of common stock to be made available for issuance
under the plan.
For: 19,289,358
Against: 1,025,896
Abstain: 207,949
3. To ratify the appointment of Tanner + Co. as the Company's independent
public accountants.
For: 19,679,164
Against: 826,840
Abstain: 17,199
ITEM 5. OTHER INFORMATION
None
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<page>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On June 25, 2001, the Company filed a report on Form 8-K,
announcing the election of Randall A. Mackey to serve as Chairman of
the Board of Directors and that the Board of Directors had appointed
Robert H. Reback as its President and Chief Executive Officer.
Mr. Mackey has been a director of Cimetrix since January 1998.
Mr. Reback joined Cimetrix in January 1996 as its Vice President of
Sales. He was promoted to Executive Vice President of Sales in January
1997 and served in that position until this appointment.
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SIGNATURES
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
Dated: August 14, 2001 By: /s/ Robert H. Reback
--------------------
ROBERT H. REBACK
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Riley G. Astill
-------------------
RILEY G. ASTILL
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
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