CIMETRIX INC - FORM 10-Q - November 16, 2009

Attached files

file	filename
EX-99.1 - PRESS RELEASE - CIMETRIX INC	ex911111209.htm
EX-31.1 - EXHIBIT 31.1 - CIMETRIX INC	ex311111209.htm
EX-32.2 - EXHIBIT 32.2 - CIMETRIX INC	ex322111209.htm
EX-32.1 - EXHIBIT 32.1 - CIMETRIX INC	ex321111209.htm
EX-31.2 - EXHIBIT 31.2 - CIMETRIX INC	ex312111209.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009

 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 (State or other jurisdiction of incorporation or organization)	87-0439107 (I.R.S. Employer Identification No.)

6979 South High Tech Drive, Salt Lake City, Utah (Address of principal executive office)	84047-3757 (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 or 15(d) of the Securities Exchange Act 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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-3 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	ý
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

The number of shares outstanding of the registrant's common stock as of November 9, 2009:

Common stock, par value $.0001 – 46,643,057 shares

CIMETRIX INCORPORATED

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2009

INDEX

PART I Financial Information

Item 1. Financial Statements

Consolidated Condensed Balance Sheets	3
Consolidated Condensed Statements of Operations	4
Consolidated Condensed Statements of Cash Flows	5
Notes to Consolidated Condensed Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3. Quantitative and Qualitative Disclosures About Market Risk	22

Item 4T. Controls and Procedures	22

PART II Other Information

Item 1. Legal Proceedings	22

Item 1A. Risk Factors	23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3. Defaults Upon Senior Securities	23

Item 4. Submission of Matters to a Vote of Security Holders	24

Item 5. Other Information	24

Item 6. Exhibits	24

Signatures	25

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIMETRIX INCORPORATED AND SUBSIDIARIES
Consolidated Condensed Balance Sheets

ASSETS	September 30, 2009 (Unaudited)			December 31, 2008
Current assets:
Cash and cash equivalents	$	431,000		$	15,000
Restricted cash		-			121,000
Accounts receivable, net		349,000			407,000
Inventories		-			2,000
Prepaid expenses and other current assets		16,000			25,000
Total current assets		796,000			570,000

Property and equipment, net		19,000			57,000
Intangible assets, net		15,000			56,000
Goodwill		64,000			64,000
Other assets		20,000			29,000

	$	914,000		$	776,000

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	132,000		$	184,000
Accrued expenses		392,000			321,000
Deferred revenue		236,000			460,000
Current portion of notes payable and capital lease obligations		702,000			503,000
Current portion of notes payable – related party		438,000			-
Total current liabilities		1,900,000			1,468,000

Long-term liabilities:
Notes payable – related parties, net		-			188,000
Long-term portion of notes payable and capital lease obligations		10,000			335,000
Total long-term liabilities		10,000			523,000

Total liabilities		1,910,000			1,991,000

Commitments and contingencies

Stockholders’ deficit:
Common stock; $.0001 par value, 100,000,000 shares authorized, 46,668,057 and 33,568,057 shares issued, respectively		5,000			3,000
Additional paid-in capital		33,392,000			32,669,000
Treasury stock, 25,000 shares at cost		(49,000	)		(49,000	)
Accumulated deficit		(34,344,000	)		(33,838,000	)
Total stockholders’ deficit		(996,000	)		(1,215,000	)

	$	914,000		$	776,000
See accompanying notes to consolidated condensed financial statements

CIMETRIX INCORPORATED AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Revenues:
New software licenses	$	367,000		$	437,000		$	872,000		$	1,583,000
Software license updates and product support		202,000			240,000			639,000			783,000
Total software revenues		569,000			677,000			1,511,000			2,366,000
Professional services		209,000			331,000			791,000			992,000

Total revenues		778,000			1,008,000			2,302,000			3,358,000

Operating costs and expenses:
Cost of revenues		198,000			383,000			815,000			1,440,000
Sales and marketing		176,000			292,000			597,000			875,000
Research and development		99,000			195,000			392,000			677,000
General and administrative		250,000			374,000			835,000			1,252,000
Depreciation and amortization		22,000			50,000			71,000			158,000

Total operating costs and expenses		745,000			1,294,000			2,710,000			4,402,000

Income (loss) from operations		33,000			(286,000	)		(408,000	)		(1,044,000	)

Other income (expense):
Interest and other income		-			-			-			1,000
Interest expense		(31,000	)		(26,000	)		(99,000	)		(88,000	)
Gain on sale of assets		-			-			1,000			-

Total other expense, net		(31,000	)		(26,000	)		(98,000	)		(87,000	)

Income (loss) before income taxes		2,000			(312,000	)		(506,000	)		(1,131,000	)

Provision for income taxes		-			-			-			-

Net income (loss)	$	2,000		$	(312,000	)	$	(506,000	)	$	(1,131,000	)


Income (loss) per common share:
Basic	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.04	)
Diluted	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.04	)

Weighted average number of shares outstanding:
Basic		36,640,000			32,843,000			34,747,000			32,258,000
Diluted		36,640,000			32,843,000			34,747,000			32,258,000
See accompanying notes to consolidated condensed financial statements

CIMETRIX INCORPORATED AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(506,000	)	$	(1,131,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		71,000			158,000
Provision for doubtful accounts		29,000			(20,000	)
Stock-based compensation		44,000			376,000
Stock issued for services		-			3,000
Gain on sale of assets		(1,000	)		-
(Increase) decrease in:
Restricted cash		121,000			-
Accounts receivable		29,000			471,000
Inventories		2,000			1,000
Prepaid expenses and other current assets		17,000			31,000
Other assets		5,000			-
Increase (decrease) in:
Accounts payable		(6,000	)		(287,000	)
Accrued expenses		126,000			(191,000	)
Deferred revenue		(224,000	)		(33,000	)

Net cash provided by (used in) operating activities		(293,000	)		(622,000	)

Cash flows from investing activities:
Proceeds from sale of property and equipment		12,000			-
Purchase of property and equipment		(2,000	)		(2,000	)
Sale of common stock		650,000			-

Net cash provided by (used in) investing activities		660,000			(2,000	)

Cash flows from financing activities:
Proceeds from the issuance of debt		1,687,000			2,388,000
Proceeds from the issuance of debt to related parties		175,000			-
Proceeds from related party advances		125,000			185,000
Payments of debt		(1,863,000	)		(2,066,000	)
Payments of related party advances		(75,000	)		(185,000	)

Net cash provided by (used in) financing activities		49,000			322,000

Net increase (decrease) in cash and cash equivalents		416,000			(302,000	)
Cash and cash equivalents, beginning of period		15,000			339,000

Cash and cash equivalents, end of period	$	431,000		$	37,000

Supplemental non-cash financing and investing activities
Discount on debt through issuance of warrants	$	1,000		$	-
Reduction of accounts payable through issuance of debt	$	50,000		$	-
Reduction of accrued expenses through issuance of debt	$	24,000		$	-
Reduction of restricted stock payable from issuance of stock	$	30,000		$	270,000
See accompanying notes to consolidated condensed financial statements

CIMETRIX INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – Cimetrix Incorporated, a Nevada corporation, and its subsidiaries (“Cimetrix” or the “Company”) are primarily engaged in the development and sale of open architecture, standards-based, computer software for controlling machine tools, robots and electronic equipment; communication products that allow communication between equipment on the factory floor and host systems; and semiconductor connectivity products that connect new semiconductor tools to each other and to host systems.

Basis of Presentation – The consolidated condensed financial statements include the accounts of the Company and its wholly owned subsidiaries, Cimetrix Europe, Inc. and Cimetrix Data Management Solutions, Inc. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim financial information of the Company as of September 30, 2009 and for the three and nine-month periods ended September 30, 2009 and 2008 is unaudited, and the balance sheet as of December 31, 2008 is derived from audited financial statements. The accompanying consolidated condensed financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense footnotes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 1 to the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2009. The unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

NOTE 2 – SUBSEQUENT EVENTS

In preparing the accompanying unaudited condensed consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after September 30, 2009, up until the financial statements are available for issuance, which occurred on November 13, 2009.

NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses which have resulted in an accumulated deficit of $34,344,000 as of September 30, 2009. While Management believes that the incremental increases in software revenues, combined with the completed sale of its common stock in September 2009 and its cost reduction efforts will be sufficient to fund planned operations at these lower revenue levels for the next twelve months, there remains doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects related to recovery and classification of assets, or the amounts and classifications of liabilities that might result from the outcome of this uncertainty.

NOTE 4 – STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) Topic 718. Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award granted and recognized as expense over the period in which the award is expected to vest.

The stock-based compensation expense for the three-month and nine-month periods ended September 30, 2009 and September 30, 2008 has been allocated to the various categories of operating costs and expenses in a manner similar to the allocation of payroll expense as follows:

	Three Months Ended September 30 ,
	2009		2008

Cost of revenues	$	2,000	$	23,000
Sales and marketing		2,000		39,000
Research and development		1,000		9,000
General and administrative		-		75,000

Total stock-based compensation expense realized and increase in net loss	$	5,000	$	146,000

	Nine Months Ended September 30 ,
	2009		2008

Cost of revenues	$	7,000	$	33,000
Sales and marketing		15,000		104,000
Research and development		3,000		24,000
General and administrative		19,000		215,000

Total stock-based compensation expense realized and increase in net loss	$	44,000	$	376,000

During the nine months ended September 30, 2009, options to purchase 500,000 shares of the Company’s common stock were issued to the Company’s employees, with an exercise price of $0.02 per share. The Company estimated the grant-date fair value of these options using the Black-Scholes option pricing modeling using the following assumptions:

Expected dividend yield	0.00%
Expected stock price volatility	71.85%
Risk free interest rate	2.65%
Expected life of option	5.84 years

As of September 30, 2009, the total future compensation cost related to non-vested stock-based awards not yet recognized in the condensed consolidated statements of operations was $32,000, and the weighted average period over which these awards are expected to be recognized was 1.55 years.

The following table summarizes the stock option activity during the nine months ended September 30, 2009:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contract Term	Aggregate Intrinsic Value

Outstanding at December 31, 2008	4,219,000	$ 0.32
Granted	500,000	$ 0.02
Exercised	-	-
Expired	(505,000)	$ 0.34
Forfeited	(236,000)	$ 0.20

Outstanding at September 30, 2009	3,978,000	$ 0.29	3.87	$ 5,000

Options vested and exercisable at September 30, 2009	3,428,000	$ 0.32	3.58	$ 2,000

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $0.02 as of September 30, 2009, which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.

During the nine months ended September 30, 2009, there were no restricted stock awards granted. The total fair value of restricted stock shares vesting in the nine month periods of September 30, 2009 and 2008 was $2,000 and $162,000, respectively.

Included in accrued expenses in the accompanying consolidated balance sheets at September 30, 2009 and December 31, 2008 are liabilities of $21,000 and $48,000 respectively, representing vested restricted stock awards for which shares have not been issued. These amounts represent 173,361 and 169,611 vested restricted stock awards that have not been issued as of September 30, 2009 and December 31, 2008, respectively.

NOTE 5 – EARNINGS (LOSS) PER SHARE

The computation of basic earnings per common share is based on the weighted average number of shares outstanding plus unissued and vested restricted stock shares deemed as participating securities during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding plus unissued and vested restricted stock shares deemed as participating securities during the period plus the weighted average common stock equivalents which would arise from the exercise of dilutive stock options and warrants outstanding using the treasury stock method and the average market price per share during the period.

No stock options, warrants or unvested restricted stock shares are included in the computation of weighted average number of shares for the periods ending September 30, 2009 and 2008 because their effect would be antidilutive. At September 30, 2009, the Company had outstanding options, warrants and unvested restricted stock awards to purchase a total of 4,604,000 common shares of the Company that could have a future dilutive effect on the calculation of earnings per share.

NOTE 6 – NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

The Company’s notes payable and capital lease obligations consisted of the following:

Related Party:	September 30, 2009		December 31, 2008
Senior Notes, unsecured, with interest at 10% payable semiannually
on April 1 and October 1, 2009 and 2010, maturing September 30, 2010
payable to officers, employees, or their affiliates	$	388,000	$	189,000

Stand-Alone Revolving Note, with interest at 10%, maturing
December 31, 2009 payable to officer	$	50,000		-
Less discount		-		(1,000	)
Total		438,000		188,000
Less current portion		438,000		-
Long-term portion	$	-	$	188,000

Other:	September 30, 2009			December 31, 2008
Senior Notes, unsecured, with interest at 10% payable semiannually on
April 1 and October 1, 2009 and 2010, maturing September 30, 2010	$	433,000		$	308,000

Bank loan, secured by accounts receivable with interest at 7.75% per
annum plus a collateral handling fee of .30% per month on face
amount of financed receivables		246,000			482,000

Installment notes payable to financing company, payable in
monthly payments totaling $1,901, including interest at 24.49%,
from March 2008 through February 2011		27,000			38,000

Capital lease payable to financing company, payable in monthly payments
of $426 including interest at 4.0%, from March 2008 through
February 2011		7,000			11,000

Less discount		(1,000	)		(1,000	)
Total		712,000			838,000
Less current portion		702,000			503,000
Long-term portion	$	10,000		$	335,000

Senior Notes - At September 30, 2009, there were warrants issued to the Senior Note holders to purchase a total of 441,000 common shares of the Company at an exercise price of $0.05 per share. The warrants expire on September 30, 2010.

During September 2008, the Company and the holders of the Senior Notes formerly due September 30, 2008 agreed to an extension of the maturity date to September 30, 2010. As part of this extension, the exercise price of the warrants associated with the Senior Notes was reduced to $0.05 per share and the expiration date of the warrants extended to September 30, 2010.

In connection with the offer to extend, the interest rate on the Senior Notes was adjusted from 8% to 10% and the warrant price was adjusted from an exercise price of $0.35 per share to $0.05 per share. The value of the net adjustment in warrant price has been recorded as a reduction of the principal amount of the Senior Notes and an increase to additional paid-in capital. This discount will be accreted and recognized as interest expense over the remaining life of the Senior Notes.

In conjunction with the offer to extend the maturity date, the Company also offered new Notes and Warrants (the “New Offer”). The Notes included in the New Offer bear interest at 10% per annum, payable April 1 and October 1 of each year, and are due and payable September 30, 2010. Purchasers of the Notes received a Warrant to purchase a share of restricted common stock of the Company for each $2.00 in principal amount of the Note. As of September 30, 2009, the Company had secured at total of $350,000 in new Notes and issued warrants to purchase 175,000 shares of common shares of the Company at $0.05 per share.

Revolving Bank Line of Credit and Bank Loan - The Company and Silicon Valley Bank (the “Bank”) entered into a Loan and Security Agreement, effective as of December 26, 2007. This agreement was amended and restated by a Loan and Security Agreement dated April 9, 2008 (as amended and restated, the “Facility Agreement”). On January 20, 2009, the Company and the Bank entered into a First Amendment to the Facility Agreement (the “Amendment”), effective December 25, 2008. The Amendment extended the maturity date of the Facility Agreement to December 24, 2009, reduced the applicable interest rate and certain other fees associated with the credit facility and required the Company to obtain an additional $250,000 in equity or subordinated debt financing.

Subject to the terms of the Facility Agreement, the Company may request that the Bank finance qualified accounts receivable (“Eligible Accounts”, and, after an advance is made, “Financed Receivables”) by extending credit to the Company in an amount equal to 80% or, in the case of receivables from non-U.S. account debtors, 90% of the Financed Receivable. The Bank may, in its sole discretion, change the percentage of the advance rate for a particular Financed Receivable on a case by case basis.

The aggregate face amount of Financed Receivables may not exceed One Million Two Hundred Fifty Dollars ($1,250,000), including a maximum of Nine Hundred Fifty Thousand Dollars ($950,000) non-U.S. Financed Receivables. Advances under the Agreement are collateralized by substantially all operating assets of the Company.

Subject to the terms of the Amendment, the Company will pay a fixed finance charge equal to 7.75% per annum, multiplied by the face amount of the Financed Receivables. There is also a collateral handling fee of .30% per month of the face amount of the Financed Receivables. In the event of a default, both of these rates are increased.

The Company will repay each advance on the earliest of: (a) the date on which payment is received on the Financed Receivable, (b) the date on which the Financed Receivable is no longer an Eligible Account, (c) the date on which any Adjustment is asserted to the Financed Receivable (but only to the extent of the Adjustment if the Financed Receivable remains otherwise an Eligible Account), (d) the date on which there is a breach of any warranty or representation set forth in the Facility Agreement, or (e) the maturity date of the Facility Agreement of December 24, 2009. Each payment will also include all accrued finance charges and collateral handling fees with respect to such Advance and all other amounts then due and payable in accordance with the Agreement.

The Company, without the Bank’s consent, may not:

·	Convey, sell, transfer or otherwise dispose of its business or property other than in the ordinary course;

·	Engage in any new line of business, permit a change in control or change its jurisdiction of formation;

·	Merge or consolidate with another entity or acquire all of the capital stock or property of another entity;

·	Create, incur, assume or be liable for any new indebtedness other than permitted indebtedness as defined in the Agreement;

·	Create, incur, allow or suffer any lien on its property, or assign any right to receive income;

·	Maintain any other collateral account;

·	Pay any dividends or make any distributions or payments or redeem, retire or purchase any capital stock, or make other than certain defined investments;

·	Directly or indirectly enter into any material transaction with any affiliate, except for transactions that are in the ordinary course of business;

·	Make any payment on subordinated debt other than ordinary interest when due, or amend any provision in any document relating to subordinated debt;

·	Become an “investment company” or a company controlled by an “investment company” under the Investment Company Act of 1940.

Stand-Alone Revolving Note – The Company and an officer of the Company entered into a Stand-Alone Revolving Note (“Note”) dated November 8, 2007 and amended by the First Amendment to Stand Alone Revolving Note on April 13, 2009. The balance of this Note at September 30, 2009 was $50,000.

Subject to the terms of the agreement, the Company may borrow up to $100,000 with an interest rate equal to 10% per annum on the outstanding balance. Interest and principal payments are made on a mutually agreeable schedule, as determined by the Company and the officer. This Note is unsecured and matures on December 31, 2009.

NOTE 7 – COMMON STOCK

In February 2009, the Company issued 100,000 shares of its restricted common stock to officers and directors in satisfaction of prior year awards that had fully vested.

In August 2009, the Company entered into a Common Stock Purchase Agreement and sold 13,000,000 shares of restricted Common Stock in exchange for $650,000.

As of September 30, 2009 and December 31, 2008, an obligation of $21,000 and $48,000, respectively, was reflected as an accrued liability on the Company’s balance sheet related to unissued shares of its restricted common stock to officers and directors.

NOTE 8 – RELATED PARTY TRANSACTIONS

During the nine-months ended September 30, 2009, the Company did not have any sales to related customers. For the three and nine months ended September 30, 2008, the Company had the following revenues from two customers that were also shareholders of the Company:

	Three Months Ended September 30, 2008		Nine Months Ended September 30, 2008
New software licenses	$	60,000	$	86,000
Software license updates and product support		39,000		82,000
Total software revenues		99,000		168,000
Professional Services		28,000		28,000
Total software revenues	$	127,000	$	196,000

The Company did not have any accounts receivable from related customers at September 30, 2009. The Company had accounts receivable from the two customers identified above totaling $209,000 at September 30, 2008.

NOTE 9 – MAJOR CUSTOMERS

During the three months ended September 30, 2009, no customer accounted for 10% or more of the Company’s total revenues. During the three months ended September 30, 2008, two customers

accounted for 13% and 10% of the Company’s total revenues. During the nine months ended September 30, 2009, one customer accounted for 15% or more of the Company’s total revenues. During the nine months ended September 30, 2008, no customer accounted for 10% or more of the Company’s total revenues.

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, receivables, payables, and notes payable. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value because of the short-term nature of these items. The carrying amount of the notes payable approximates fair value as the individual borrowings bear interest at rates that approximate market interest rates for similar debt instruments.

NOTE 11 – RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB issued guidance under Accounting Standards Codification (“ASC”) Topic 105, “Generally Accepted Accounting Principles” (SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles). This guidance establishes the FASB ASC as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 and the ASC are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the ASC have become non-authoritative. Following SFAS 168, the FASB will no longer issue new standards in the form of Statements, FSPs, or EITF Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the ASC. The Company adopted this guidance effective for its financial statements issued as of September 30, 2009. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements but will alter the references to accounting literature within the consolidated financial statements.

In April 2009, the FASB issued guidance under ASC 825-10, Financial Instruments (FSP SFAS 107-1 and APB Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments”). This guidance amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. The guidance is effective for interim periods ending after June 15, 2009. The Company adopted this guidance for the second quarter 2009. See Note 10 for required disclosures.

In April 2009, the FASB issued guidance under ASC 820, Fair Value Measurements and Disclosures, (FSP SFAS 157-4, “Determining Whether a Market Is Not Active and a Transaction Is Not Distressed”). This guidance provides guidelines in determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in the previous standard SFAS 157, “Fair Value Measurements.” This guidance is effective for interim periods ending after June 15, 2009, and the Company has adopted its provisions for second quarter 2009. This guidance did not have a significant impact on the Company’s financial statements.

In April 2009, the FASB issued guidance under ASC 320, Investments – Debt and Equity Securities (FSP SFAS 115-2 and SFAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”). This guidance provides clarity and consistency in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This guidance is effective for interim periods ending after June 15, 2009, and the Company adopted its provisions for second quarter 2009. This guidance did not have a significant impact on the Company’s financial statements.

In May 2009, the FASB issued guidance under ASC 855, Subsequent Events, (SFAS No. 165, “Subsequent Events”). This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures an entity should make about events or transactions that occurred after the balance sheet date. This guidance is effective for fiscal years and interim periods ending after June 15, 2009. The Company adopted this guidance effective June 30, 2009. The adoption of this guidance did not have a material impact on the Company financial statements. See Note 2 for required disclosure.

In June 2009, the FASB issued guidance under SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 amends SFAS 140 by including: the elimination of the qualifying special-purpose entity (QSPE) concept; a new participating interest definition that must be met for transfers of portions of financial assets to be eligible for sale accounting; clarifications and changes to the derecognition criteria for a transfer to be accounted for as a sale; and a change to the amount of recognized gain or loss on a transfer of financial assets accounted for as a sale when beneficial interests are received by the transferor. Additionally, the standard requires extensive new disclosures regarding an entity’s involvement in a transfer of financial assets. Finally, existing QSPEs (prior to the effective date of SFAS 166) must be evaluated for consolidation by reporting entities in accordance with the applicable consolidation guidance upon the elimination of this concept. This guidance is effective for the Company beginning on January 1, 2010. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In June 2009, the FASB issued guidance under SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”. Among other items, this guidance responds to concerns about the application of certain key provisions of FIN 46(R), including those regarding the transparency of the involvement with variable interest entities. This guidance is effective for the Company beginning on January 1, 2010. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In August 2009, the FASB issued guidance under Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value”. This guidance clarifies how the fair value a liability should be determined. This guidance is effective for the first reporting period after issuance. The Company will adopt this guidance for its period ending December 31, 2009. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Overview

The following is a brief discussion and explanation of significant financial data, which is presented to help the reader understand the results of the Company’s financial performance for the three-month and nine-month periods ended September 30, 2009 and September 30, 2008 and the Company’s financial position at September 30, 2009. The information includes discussions of sales, expenses, capital resources and other significant financial items.

This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. 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,” “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 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,” “Factors Affecting Future Results” and “Risk Factors,” and those factors set forth under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Cimetrix is a software company that designs, develops, markets and supports factory automation solutions worldwide. The Company offers software products and professional services tailored to meet the needs of equipment suppliers in the areas of advanced tool control, general purpose equipment connectivity, and specialized connectivity for 300mm semiconductor wafer fabrication facilities. Revenues are derived from the sales of software and services. Software includes the initial sale of software development kits, the ongoing runtime licenses for each machine shipped with Cimetrix software and annual contracts for software license updates and product support. Services include the sales of professional services that provide customers with software solutions typically incorporating Cimetrix software products. While Cimetrix products are installed in a wide range of industries, the Company has focused over the past several years on the global semiconductor and electronics industries, which includes the growing solar photovoltaic (PV) market.

Critical Accounting Policies

The Company prepares its condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles. The Company's condensed consolidated financial statements are based on the application of certain accounting policies, the most significant of which are described in Note 1—Summary of Significant Accounting Policies included in the Company’s Annual Report filed on Form 10-K. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or be subject to variations and may significantly affect the Company's reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on the Company's future financial condition and results of operations.

Operations Review

The following table sets forth the percentage of costs and expenses to total revenues derived from the Company's Consolidated Condensed Statements of Operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008

Net sales		100	%		100	%		100	%		100	%

Operating costs and expense:
Cost of revenues		25			38			35			43
Sales and marketing		23			29			26			26
Research and development		13			19			17			20
General and administration		32			37			37			37
Depreciation and amortization		3			5			3			5

Total operating costs and expenses		96			128			118			131

Income (loss) from operations		4			(28	)		(18	)		(31	)
Other expense, net		(4	)		(3	)		(4	)		(3	)

Net income (loss)		0	%		(31	)%		(22	)%		(34	)%

The Company’s operating results for the three-month period September 30, 2009 reflect the current challenging semiconductor industry conditions and a continuing recessionary global economy. As revenues are substantially lower than the prior year period, the Company managed the cost structure of the Company, seeking to keep operating costs and expenses in line with the forecasted revenues.

The Company reported net income of $2,000 for the three months ended September 30, 2009, compared to a net loss of $312,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, the Company reported a net loss of $506,000, compared to a net loss of $1,131,000 for the nine months ended September 30, 2008. The net results for all periods include non-cash stock-based compensation expense and non-cash depreciation and amortization expense. The net loss for the nine months ended September 30, 2009 includes a non-cash adjustment of $29,000 to bad debt expense. For the three-month periods ended September 30, 2009 and September 30, 2008, stock-based compensation expense was $5,000 and $146,000, respectively, and depreciation and amortization expense was $22,000 and $50,000, respectively. For the nine-month periods ended September 30, 2009 and September 30, 2008, stock based compensation expense was $44,000 and $376,000, respectively, and depreciation and amortization was $71,000 and $158,000, respectively.

Net cash used in operating activities was $293,000 for the nine months ended September 30, 2009, compared to net cash used in operating activities of $622,000 for the nine months ended September 30, 2008.

Results of Operations

Revenues

The following table summarizes revenues by category and as a percent of total revenues:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
New software licenses	$ 367,000	47%	$ 437,000	43%	$ 872,000	38%	$ 1,583,000	47%
Software license updates and product support	202,000	26%	240,000	24%	639,000	28%	783,000	23%

Total software revenues	569,000	73%	677,000	67%	1,511,000	66%	2,366,000	70%

Professional services	209,000	27%	331,000	33%	791,000	34%	992,000	30%

Total revenues	$ 778,000	100%	$1,008,000	100%	$2,302,000	100%	$ 3,358,000	100%

Total revenues decreased by $230,000, or 23%, to $778,000 for the three months ended September 30, 2009, from $1,008,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, total revenues decreased by $1,056,000 or 31% to $2,302,000 from $3,358,000 for the nine months ended September 30, 2008. As the table above indicates, the decrease in net sales in the first three quarters of 2009 as compared to the prior year’s quarters was attributable to decreases in all categories as our customers responded to the global economic crisis by curtailing expenditures. The market for semiconductor 300mm capital equipment, our largest source of revenue for the past several years, virtually came to a stop in the first quarter of 2009. Customer shipments of 300mm equipment increased slightly in the second and third quarters of 2009, but were still far below prior year levels. The decrease in software license revenues in the current year compared to last year can be attributed to lower revenues from the sale of software development kits to new customers, the decrease in software license revenue associated with machine shipments and the decrease in revenue associated with software license updates and product support as some customers went out of business or could no longer afford to purchase annual support.

Total software revenues decreased to $569,000 for the three months ended September 30, 2009, as compared to $677,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, software revenues decreased to $1,511,000 for the nine months ended September 30, 2009 as compared to $2,366,000 for the nine months ended September 30, 2008. The mix of revenue categories is subject to change on a quarter-to-quarter basis, and it is difficult to predict the timing and probability of “design win” opportunities. Due to the industry slowdown and reluctance to initiate new projects, there were not many opportunities for design wins for the Company’s products worldwide during the first nine months of 2009. However, Cimetrix did gain four design wins for its CIMConnect product line for SECS/GEM connectivity during the third quarter of 2009.

Cost of Revenues

The Company's cost of revenues as a percentage of total revenues for the three months ended September 30, 2009 was 25%, compared to 38% for the three months ended September 30, 2008. Cost of revenues decreased $185,000, or 49%, to $198,000 for the three months ended September 30, 2009, from $383,000 for the three months ended September 30, 2008. This decrease was due primarily to lower professional services revenue, which revenue has higher labor and other costs of revenues than software revenues. The Company’s cost of revenue as a percentage of total revenues for the nine months ended September 30, 2009 was 35% compared to 43% for the nine months ended September 30, 2008. Cost of revenues decreased $625,000 or 43%, to $815,000 for the nine months ended September 30, 2009, from $1,440,000 for the nine months ended September 30, 2008. These decreases were a combination of lower revenues, as discussed above and reduced costs, including furloughs, across the board pay cuts and head

count reductions. Cost of revenues as a percentage of total revenues will vary from period to period depending on the mix of software and professional service revenues, the type of service projects completed, the pricing strategy for the projects, the extent of utilization of outside resources, and other factors.

Sales and Marketing

Sales and marketing expenses decreased $116,000, or 40%, to $176,000 during the three months ended September 30, 2009, from $292,000 during the three months ended September 30, 2008. Sales and marketing expenses decreased to 23% of total revenues for the three months ended September 30, 2009 as compared to 29% of total revenues in the prior year period, primarily due to cost reduction efforts, including furloughs and across the board pay cuts. During the nine months ended September 30, 2009, sales and marketing expenses decreased $278,000 or 32% to $597,000 from $875,000 during the nine months ended September 30, 2008. Sales and marketing expenses reflect the direct payroll and related travel expenses of the Company’s sales and marketing staff, the development of product brochures and marketing materials, costs associated with press releases, branding, search engine optimization, website design improvements and costs related to the Company’s representation at industry trade shows.

Research and Development

Research and development expenses decreased $96,000, or 49%, to $99,000 during the three months ended September 30, 2009, from $195,000 during the three months ended September 30, 2008. During the nine months ended September 30, 2009, research and development expenses decreased $285,000 or 42% to $392,000 from $677,000 during the nine months ended September 30, 2008, primarily due to cost reduction efforts, including furloughs, across the board pay cuts and head count reductions. Research and development expenses include only direct costs for wages, benefits, materials, and education of technical personnel involved in product development. All indirect costs such as rents, utilities, depreciation and amortization are included in general and administrative expenses, as discussed below.

General and Administrative

General and administrative expenses decreased $124,000 or 33%, to $250,000 in the three months ended September 30, 2009, from $374,000 in the three months ended September 30, 2008. During the nine months ended September 30, 2009, general and administrative expenses decreased $417,000 or 33% to $835,000 from $1,252,000 during the nine months ended September 30, 2008. General and administrative expenses include all direct costs for administrative and accounting personnel, and all rents and utilities for maintaining Company offices. The majority of these decreases were a combination of (a) lower costs associated with stock-based compensation as prior year awards fully vested, expired or were forfeited, (b) renegotiated reduced rent for our principal administrative offices in Salt Lake City and termination and subsequent closure of our Tempe, Arizona facility closed on December 31, 2008, (c) reduced costs associated with benefits, professional fees, and consulting fees and (d) reduced costs related to across the board pay cuts and furloughs.

Depreciation and Amortization

Depreciation and amortization expense decreased $28,000 or 56% to $22,000 in the three months ended September 30, 2009, from $50,000 in the three months ended September 30, 2008. During the nine months ended September 30, 2009, depreciation and amortization decreased $87,000 or 55%, to $71,000 from $158,000 in the nine months ended September 30, 2008. The decrease in depreciation and amortization resulted from aging equipment becoming fully depreciated and the impairment write-down of the Customer Relations Intangible Asset during the period ended December 31, 2008.

Other Income (Expense)

Interest and other income for the three months ended September 30, 2009 and 2008 was $0. During the nine months ended September 30, 2009 and September 30, 2008, interest and other income was $1,000 and $1,000, respectively.

Interest expense for the three months ended September 30, 2009 increased by $5,000, to $31,000, from $26,000 for the three months ended September 30, 2008. During the nine months ended September 30, 2009, interest expense for the nine months ended September 30, 2009 increased $11,000 to $99,000 from $88,000 for the nine months ended September 30, 2008. The increase in interest expense for the three months and nine months ended September 30, 2009, compared to the same period in 2008 was due mostly from additional borrowings represented by the new Senior Notes secured in December 2008 and the first nine months of 2009, and the increase in interest rates on existing Senior Notes from 8% to 10% in conjunction with the extension of the maturity date of the Senior Notes from September 30, 2008 to September 30, 2010.

Liquidity and Capital Resources

At September 30, 2009, the Company had current assets of $796,000, including cash and cash equivalents of $431,000, and current liabilities of $1,900,000, resulting in a working capital deficiency of $1,104,000. Excluding deferred revenue of $236,000, which requires the Company to provide services and support but does not represent a scheduled obligation requiring the outlay of Company funds, and accrued expenses of $21,000, which will be paid through the issuance of the Company’s common stock for vested restricted stock awards, the Company’s current liabilities exceeded current assets by $847,000 at September 30, 2009. While the working capital deficit increased by $128,000 over last quarter, the company plans to renegotiate the Senior Notes Payable of $821,000 which moved from long-term liabilities to current liabilities in the three months ended September 30, 2009.

As of September 30, 2009, the Company had notes payable and long-term debt totaling $1,204,000 net of discount, comprised of the following:

10% Senior Notes due September 30, 2010		$ 821,000
Secured bank loan due December 25, 2009		246,000
Stand-alone revolving note due December 31, 2009		50,000
Other		34,000
Senior Note Discount		(1,000)
Total		1,150,000
Less current portion		1,140,000
Long-term portion		$ 10,000

Included in the Senior Notes Payable at September 30, 2010, are Senior Notes outstanding of $388,000 held by officers, employees or their affiliates.

Senior Notes - The Senior Notes are due September 30, 2010 and bear interest at 10% per annum. Warrants representing the right to acquire 441,000 shares of common stock at $0.05 per share were issued in connection with this debt and expire September 30, 2010.

The Company, without the Bank’s consent, may not:

·	Convey, sell, transfer or otherwise dispose of its business or property other than in the ordinary course;

·	Engage in any new line of business, permit a change in control or change its jurisdiction of formation;

·	Merge or consolidate with another entity or acquire all of the capital stock or property of another entity;

·	Create, incur, assume or be liable for any new indebtedness other than permitted indebtedness as defined in the Agreement;

·	Create, incur, allow or suffer any lien on its property, or assign any right to receive income;

·	Maintain any other collateral account;

·	Pay any dividends or make any distributions or payments or redeem, retire or purchase any capital stock, or make other than certain defined investments;

·	Directly or indirectly enter into any material transaction with any affiliate, except for transactions that are in the ordinary course of business;

·	Make any payment on subordinated debt other than ordinary interest when due, or amend any provision in any document relating to subordinated debt;

·	Become an “investment company” or a company controlled by an “investment company” under the Investment Company Act of 1940.

Results of Operations and Cash Flows - Historically, the Company has incurred net losses and negative cash flows from operations. As of September 30, 2009, the Company had an accumulated deficit of $34,344,000 and total stockholders’ deficit of $996,000. During the three months ended September 30, 2009, the Company reported net income of $2,000 compared to a net loss of $312,000 for the same period in 2008. During the first nine months of 2009, the Company reported a net loss of $506,000 and net cash used in operating activities of $293,000, compared to a net loss of $1,131,000 and net cash used by operating activities of $622,000 for the same nine-month period in 2008. The decrease in net cash used in operating activities in the current year over the same period in 2008 was a combination of the reduction in cash compensation paid to executive and management employees, reduction in force, reduced headquarter and satellite office rent, and other reduced operating costs. Additionally, the Company deferred payment on a significant number of accounts payable and accrued expenses in the fourth quarter of 2007 which were subsequently paid in the first three months of 2008.

Net cash provided by investing activities, consisting of the sale of common stock and purchase and sale of property and equipment during the nine months ended September 30, 2009 was $660,000. Net cash used in investing activities, consisting of the purchase of property and equipment during the nine months ended September 30, 2008, was $2,000.

Net cash provided by financing activities for the nine months ended September 30, 2009 was $49,000, comprised of borrowings from the bank loan of $1,687,000, proceeds from the sale of Senior Notes of $175,000 and short-term related party advances of $125,000, partially offset by bank loan repayments of $1,858,000, repayment of short-term related party advances of $75,000 and payments of other debt of $5,000. Net cash provided by financing activities for the nine months ended September 30, 2008 was $322,000, comprised of net increases in borrowings from the bank loan of $2,388,000 and short-term related party advances of $185,000, partially offset by bank loan repayments of $2,056,000, payments of other debt of $10,000 and repayment of short-term related party advances of $185,000.

During the nine months ended September 30, 2009 and in addition to the stock-based compensation and depreciation and amortization expense, other significant non-cash transactions were recorded on the Company’s books. In exchange for New Senior Notes, two vendors cancelled accounts payable amounts due from the Company to the vendors totaling $50,000. In exchange for compensation accrued and not paid, the Company reduced accrued expenses related to accrued salaries for two employees of the Company and issued New Senior Notes totaling $28,000. In April, 2009, the Company adjusted its bad debt allowance to record a net $29,000 non-cash bad debt write off due to a customer filing bankruptcy.

On August 10, 2009, the Company entered into a Common Stock Purchase Agreement and sold 13,000,000 shares of restricted Common Stock in exchange for $650,000. Management believes that the proceeds from the Common Stock Purchase Agreement combined with its cost reduction efforts, including across the board pay cuts implemented on April 1, 2009 and Company furloughs scheduled for the remainder of 2009, combined with funds available from the bank loan facility and from short-term related party advances, will be sufficient to fund planned operations at lower revenue levels for the next twelve months. However, there can be no assurance that operations and operating cash flows will continue at the current levels or improve in the near future. If the Company is unable to obtain profitable operations and positive operating cash flows and extend the credit facility, revolving note and Senior Notes Payable, it may need to seek additional funding or be forced to scale back its development plans or significantly reduce or terminate operations.

The Company has not been adversely affected by inflation. Revenues from foreign customers were $1,267,000 during the nine months ended September 30, 2009, representing 55% of the Company’s total revenues, compared to $1,613,000, or 48%, of total revenues during the same period in 2008. There are potential economic risks inherent in foreign trade. To minimize the risk from changes in foreign currency exchange rates, the Company’s export sales are transacted in United States dollars.

Factors Affecting Future Results

Total revenues for the first nine months of 2009 decreased 31% compared to the first nine months of 2008, reflecting declines in software and support revenue and professional services revenue due to

negative industry conditions and the global economic downturn. Revenues from new software licenses include sales of software development kits and runtime revenue associated with OEM customer machine shipments. Runtime revenue decreased year-over-year as new customer shipments have been reduced due to the overall decline in capital equipment shipments by the Company’s customers. Sales of software development kits are difficult for the Company to forecast, as the Company is highly dependent on the timing of the decision of equipment suppliers to initiate a new machine development program and to utilize the Company’s products. While the Company believes it continues to win the majority of the available software development kit opportunities for its products, it appears that fewer companies are initiating new programs for semiconductor 300mm capital equipment, which has presented fewer opportunities for the Company. In addition, there is increased price pressure as some of the Company’s competitors have lowered their prices in an effort to more effectively compete with the Company.

The Company continues to focus on incrementally expanding its customer base and product line in order to increase revenues. This includes the Company’s efforts to promote the use of SEMI Standards in other markets, particularly the solar-photovoltaic market.

In the face of continued semiconductor industry difficulties, effective April 1, 2009, the Company implemented a further cost reduction program, including across the board pay cuts, furloughs scheduled through the end of 2009, and suspension of the Company’s matching 401(k) program to bring expenses in-line with the anticipated slowdown in revenues while it awaits the expected industry upturn. The executive and management team members continue to receive only a portion of their compensation under a policy first implemented in April 2008.

The Company has been investing in its new CIMPortal product line, which meets the new SEMI Standards for EDA (Interface A). While this new standard has been promulgated by SEMI, it is not yet a common requirement by end users in the marketplace. The timing of the widespread adoption of this standard by the semiconductor industry will directly affect the market opportunities for the Company’s CIMPortal product line. The Company believes that if the new SEMI Standards for EDA begin to obtain market acceptance, the number of software development kit opportunities will increase along with the resulting runtime license revenue.

The Company has also been investing in pursuing the Japanese market for its products with its distribution partner. However, the Japanese semiconductor market has been hit very hard by the global economic downturn and the Company has very limited visibility into future revenues from Japan or the financial viability of its distributor.

The Company continues to pursue customers through its Global Services group, which is available to assist customers by providing professional services and complete turnkey solutions. The ability of the Company to provide both products and services to its customer base is becoming a more important factor as customers seek to limit the number of suppliers and prefer single source responsibility. The experience gained delivering professional services also provides valuable inputs to new product development pipelines.

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 highly specialized. There can be no assurance about the timing of the recovery, if any, of the markets for industrial motion control that are served by the Company, or that the Company’s existing and new products will satisfy the requirements of those markets and achieve a successful level of customer acceptance. If the Company is unable to achieve positive cash flow from operations, it will be unable to survive in the long term.

Because the business of the Company is dependant to a large degree on industry factors beyond its control, past financial performance is not necessarily indicative of future performance, and historical trends should not be used to anticipate future operating results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not subject to this requirement since it is not an accelerated filer.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, we conducted an evaluation, under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness and the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the chief executive officer and the chief financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Exchange Act Rules 13a-15(f). The Company’s internal control system is designed to provide reasonable assurance to its management and board of directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, management concluded that our internal control over financial reporting was effective as of September 30, 2009.

Changes in internal controls

During the most recent fiscal quarter covered by this report, and since that date there has been no change in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

None

ITEM 1. LEGAL PROCEEDINGS

The Company is not currently involved in any pending litigation.

ITEM 1A. RISK FACTORS

The Company has disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2008 which could materially affect its business, financial condition or future results of operations. The risk factors discussed below update these risk factors and should be read in conjunction with the risk factors and information disclosed in that Form 10-K.

Difficulties in the semiconductor industry and worsening global economic conditions have had a significant negative impact on the Company’s operations and such negative conditions may continue for the foreseeable future.

The Company’s results of operations reflect current challenging semiconductor industry demand conditions and a worsening global economy. The Company’s management is currently seeking to manage the cost structure of the Company in the face of decreased revenues, but the Company is unable to predict when industry conditions will improve. If conditions do not improve or continue to deteriorate, the Company will be adversely affected.

The Company experienced increases in its accumulated deficit and used additional cash in operations during the nine months ended September 30, 2009.

Historically, the Company has incurred net losses and negative cash flows from operations. As of September 30, 2009, the Company had an accumulated deficit of $34,344,000 and total stockholders’ deficit of $996,000. At September 30, 2009, the Company had current assets of $796,000, including cash and cash equivalents of $431,000, and current liabilities of $1,900,000 resulting in a working capital deficit of $1,104,000. If the Company is unable to obtain profitable operations and positive operating cash flows and extend the credit facility, revolving note and Senior Notes Payable, it may need to seek additional funding or be forced to scale back its development plans or significantly reduce or terminate operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 10, 2009, the Company sold 13,000,000 shares of its restricted common stock, par value $0.0001 per share, for a price of $0.05 per share, or an aggregate of $650,000. No commissions were paid by the Company in connection with this transaction. The purchase price was payable in two installments, $325,000 paid on August 10, 2009 and the remaining $325,000 paid on September 11, 2009. The Company anticipates using the proceeds to pay current obligations and to provide working capital for the upcoming 12 months.

The sale was made in reliance on the exemptions from the registration requirements provided by Regulation D and Regulation S of the Securities Act of 1933, as amended. The sale was made to a single accredited purchaser which is organized under laws of Japan. The terms were privately negotiated and there was no general solicitation or directed selling efforts in connection with the transaction. The certificates representing the shares sold will bear a legend indicating that they have been issued in reliance on an exemption from the registration requirements of U.S. Securities laws and cannot be sold or transferred without compliance with such registration requirements or the availability of an exemption from such registration requirements.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter ended September 30, 2009.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.	Description

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002*
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002*
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.1	Press Release dated November 16, 2009*
______________________________________
* Exhibits filed with this report

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

REGISTRANT

CIMETRIX INCORPORATED

Dated: November 16, 2009

By: /S/ Robert H. Reback

Robert H. Reback

President and Chief Executive Officer

(Principal Executive Officer)

By: /S/ Jodi M. Juretich

Jodi M. Juretich

Chief Financial Officer

(Principal Financial and Accounting Officer)

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