CIMETRIX INC - FORM 10-Q - August 14, 2012

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EX-99.1 - EXHIBIT 99.1 - CIMETRIX INC	ex991.htm
EX-32.2 - EXHIBIT 32.2 - CIMETRIX INC	ex322.htm
EX-31.2 - EXHIBIT 31.2 - CIMETRIX INC	ex312.htm
EX-31.1 - EXHIBIT 31.1 - CIMETRIX INC	ex311.htm
EX-32.1 - EXHIBIT 32.1 - CIMETRIX INC	ex321.htm
EXCEL - IDEA: XBRL DOCUMENT - CIMETRIX INC	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2012

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 ý 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 August 1, 2012:

Common stock, par value $.0001 - 45,542,006 shares

CIMETRIX INCORPORATED

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2012

INDEX

PART I Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income and Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15


PART II Other Information

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3.	Defaults Upon Senior Securities	16

Item 5.	Other Information	16

Item 6.	Exhibits	16

Signatures		17

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PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIMETRIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2012			December 31,
ASSETS	(Unaudited)			2011
Current assets:
Cash and cash equivalents	$	1,124,000		$	871,000
Accounts receivable, net		687,000			944,000
Inventories		22,000			22,000
Prepaid expenses and other current assets		89,000			64,000
Total current assets		1,922,000			1,901,000

Property and equipment, net		106,000			122,000
Goodwill		64,000			64,000
Other assets		20,000			20,000

	$	2,112,000		$	2,107,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	156,000		$	224,000
Accrued expenses		199,000			485,000
Deferred revenue		484,000			213,000
Total current liabilities		839,000			922,000


Total liabilities		839,000			922,000

Commitments and contingencies

Stockholders’ equity:
Common stock; $.0001 par value, 100,000,000 shares
authorized, 45,474,256 and 45,234,256 shares issued,
respectively		4,000			4,000
Additional paid-in capital		33,645,000			33,601,000
Treasury stock, 25,000 shares at cost		(49,000	)		(49,000	)
Accumulated deficit		(32,327,000	)		(32,371,000	)
Total stockholders’ equity		1,273,000			1,185,000

	$	2,112,000		$	2,107,000

See accompanying notes to consolidated financial statements

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CIMETRIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Revenues:
New software licenses	$	1,106,000		$	1,483,000		$	2,074,000		$	2,931,000
Software license updates and product support		216,000			215,000			458,000			437,000
Total software revenues		1,322,000			1,698,000			2,532,000			3,368,000
Professional services		95,000			571,000			473,000			954,000

Total revenues		1,417,000			2,269,000			3,005,000			4,322,000

Operating costs and expenses:
Cost of revenues		569,000			957,000			1,313,000			1,781,000
Sales and marketing		239,000			279,000			510,000			552,000
Research and development		232,000			443,000			450,000			720,000
General and administrative		325,000			337,000			648,000			702,000
Depreciation and amortization		16,000			12,000			31,000			23,000

Total operating costs and expenses		1,381,000			2,028,000			2,952,000			3,778,000

Income from operations		36,000			241,000			53,000			544,000

Other income (expenses):
Interest income		-			1,000			-			2,000
Interest expense		(3,000	)		(17,000	)		(3,000	)		(31,000	)

Total other expenses, net		(3,000	)		(16,000	)		(3,000	)		(29,000	)

Income before income taxes		33,000			225,000			50,000			515,000

Provision for income taxes		4,000			-			6,000			-

Net income and comprehensive income	$	29,000		$	225,000		$	44,000		$	515,000


Net income per common share:
Basic	$	0.00		$	0.00		$	0.00		$	0.01
Diluted	$	0.00		$	0.00		$	0.00		$	0.01

Weighted average number of shares
outstanding:
Basic		45,722,000			45,196,000			45,710,000			45,107,000
Diluted		46,353,000			46,813,000			45,710,000			46,742,000

See accompanying notes to consolidated financial statements

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CIMETRIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	June 30,
	2012			2011
Cash flows from operating activities:
Net income	$	44,000		$	515,000
Adjustments to reconcile net income to net
cash from (used in) operating activities:
Depreciation and amortization		31,000			23,000
Stock-based compensation		44,000			27,000
Changes in operating assets and liabilities
Accounts receivable		257,000			(652,000	)
Prepaid expenses and other current assets		(25,000	)		(6,000	)
Accounts payable		(71,000	)		60,000
Accrued expenses		(286,000	)		(160,000	)
Deferred revenue		271,000			(1,000	)

Net cash from (used in) operating activities		265,000			(194,000	)

Cash flows from investing activities:
Purchase of property and equipment		(12,000	)		(41,000	)

Net cash (used) in investing activities		(12,000	)		(41,000	)

Cash flows from financing activities:
Proceeds from the exercise of warrants and stock options		-			11,000
Payments of debt to related parties		-			(75,000	)

Net cash (used) in financing activities		-			(64,000	)

Net increase (decrease) in cash and cash equivalents		253,000			(299,000	)
Cash and cash equivalents, beginning of period		871,000			1,559,000

Cash and cash equivalents, end of period	$	1,124,000		$	1,260,000

Supplemental Cash Flow Information
	Six Months Ended
	June 30,
		2012			2011
Cash paid for interest	$	3,000		$	39,000
Cash paid for income taxes	$	2,000		$	-

See accompanying notes to consolidated financial statements

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CIMETRIX INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated 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, personal computer software for controlling machine tools, robots, electronic equipment, and communication products that allow communication between equipment on the factory floor and host systems, and semiconductor connectivity products that connect new semiconductor equipment to other equipment and to host systems.

Basis of Presentation – The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Cimetrix Japan K.K., 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 June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011 is unaudited, and the balance sheet as of December 31, 2011 is derived from audited financial statements. The accompanying condensed consolidated 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, 2011. 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 six months ended June 30, 2012 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2012. The unaudited condensed consolidated 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, 2011.

NOTE 2 – 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 six-month periods ended June 30, 2012 and June 30, 2011 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				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Cost of revenues	$	6,000	$	1,000	$	12,000	$	2,000
Sales and marketing		2,000		3,000		4,000		6,000
Research and development		3,000		3,000		6,000		4,000
General and administrative		8,000		9,000		22,000		15,000
Total stock-based compensation expense	$	19,000	$	16,000	$	44,000	$	27,000

Impact on basic income per common share	$	0.00	$	0.00	$	0.00	$	0.00
Impact on diluted income per common share	$	0.00	$	0.00	$	0.00	$	0.00

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During the six months ended June 30, 2012, options to purchase 160,000 shares of the Company’s common stock were granted to the Company’s employees and directors, with exercise prices ranging from $0.13 to $0.19 per share.

The total stock-based compensation costs from vesting restricted stock shares in the six month periods of June 30, 2012 and 2011 was $13,000 for both periods.

As of June 30, 2012, the total future compensation cost related to non-vested stock-based awards not yet recognized in the Condensed Consolidated Statements of Income and Comprehensive Income was $181,000, and the weighted average period over which these awards are expected to be recognized was 2.43 years.

NOTE 3 – EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by dividing the net income for the period by the sum of the weighted-average number of common shares outstanding plus the weighted average common stock equivalents, which would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options and unvested restricted stock. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method.

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Numerator:
Net income	$	29,000	$	225,000	$	44,000	$	515,000
Denominator:
Basic weighted average shares outstanding		45,722,000		45,196,000		45,710,000		45,107,000
Effect of dilutive securities:
Stock options		631,000		1,229,000		-		1,254,000
Unvested restricted stock		-		244,000		-		237,000
Warrants		-		144,000		-		144,000
Diluted weighted average shares outstanding		46,353,000		46,813,000		45,710,000		46,742,000

Net income per share
Basic	$	0.00	$	0.00	$	0.00	$	0.01
Diluted	$	0.00	$	0.00	$	0.00	$	0.01

Potentially dilutive securities representing approximately 2,626,000 and 530,000 shares of common stock at June 30, 2012 and 2011, respectively, were not included in the computation of net income per diluted share because the options’ exercise prices were greater than the average market price of the underlying shares.

NOTE 4 – NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Revolving Bank Line of Credit - The Company and Silicon Valley Bank (the “Bank”) entered into a Loan and Security Agreement, effective as of September 27, 2011. Line of credit advances are available to the Company in accordance with a defined “Availability Amount”, based in part on qualifying accounts receivable, up to a maximum of $1 million. The line of credit bears interest at the prime rate plus 1.75%, payable monthly, and matures September 26, 2012. The line of credit is collateralized by substantially all operating assets of the Company. Interest payments are payable on the first day of each month with all principal advances payable on the maturity date of the line of credit. As of June 30, 2012, the Company had no borrowings against the line of credit.

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Under the line of credit agreement, the Company is required to comply with the following financial covenants:

·	Maintain a ratio of quick assets to current liabilities minus deferred revenue of at least: 1.50 to 1.00

Maintain a tangible net worth equal to or greater than the sum of (i) $500,000, plus (ii) for each successive quarter, commencing as of the quarter ending December 31, 2011, 50% of net proceeds received by Company in the preceding quarter from bona-fide issuances of new equity or bridge financing which constitutes “subordinated debt”.

The line of credit agreement also contains numerous negative covenants restricting certain actions by the Company without the bank’s consent, such as are typically included in similar loan agreements, including restrictions on the payment of dividends, restrictions on incurring additional debt, prohibitions restricting major corporation transactions, including a sale of the business, and a requirement that the Company retain certain key employees.

At June 30, 2012, the Company was in compliance with all covenants.

NOTE 5 – COMMON STOCK

The Company had 277,000 and 476,000 vested restricted stock awards for which shares of common stock have not been issued as of June 30, 2012 and December 31, 2011, respectively.

NOTE 6 – RELATED PARTY TRANSACTIONS

During the three and six months ended June 30, 2012 and 2011, the Company had the following revenues from one customer that was also a shareholder of the Company:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
New software licenses	$	19,000	$	169,000	$	93,000	$	225,000
Software license updates and product support		27,000		29,000		52,000		53,000
Total software revenues	$	46,000	$	198,000	$	145,000	$	278,000

The Company had accounts receivable from two customers that were also shareholders totaling $41,000 and $61,000 at June 30, 2012 and 2011, respectively.

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, which approximates fair value because of the immediate or short-term maturities of the financial instruments included in this category.

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2012, the Company adopted Financial Accounting Standards Board (“FASB”) accounting guidance which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. The guidance eliminates the option to present components of other comprehensive income as part of the statement of equity. In addition, in December 2011, the FASB issued an amendment to the accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. In accordance with the guidance, the Company has presented condensed statements of income and comprehensive income as a single continuous statement.

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In September 2011, the FASB issued new guidance on the annual testing of goodwill for impairment. The guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance will be effective for the Company for the year ending December 31, 2012, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on it consolidated financial statements.

NOTE 9 – SUBSEQUENT EVENTS

Management has evaluated events through the date the condensed consolidated financial statements were filed with the Securities and Exchanges Commission and concluded there were no subsequent events to report in the notes to the 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 six-month periods ended June 30, 2012 and June 30, 2011 and the Company’s financial position at June 30, 2012. 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, 2011. 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, 2011.

Cimetrix is a software company that designs, develops, markets and supports factory automation and equipment control solutions worldwide. The Company offers software products and professional services tailored to meet the needs of equipment suppliers in the areas of advanced equipment 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 that equipment suppliers purchase for each machine shipped with Cimetrix software and annual contracts for software license updates and product support. Services include the sale of professional services that provide customers with software solutions typically incorporating Cimetrix software products. While Cimetrix products are installed in equipment in a wide range of industries, the Company has focused on the global semiconductor, photovoltaic (PV) and high brightness light emitting diode (HB-LED) industries.

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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 to the Company’s audited financial statements included in the Company’s 2011 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

Revenues

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
New software licenses	$	1,106,000	78%	$	1,483,000	65%	$	2,074,000	69%	$	2,931,000	68%
Software license updates and product support		216,000	15%		215,000	10%		458,000	15%		437,000	10%
Total software revenues		1,322,000	93%		1,698,000	75%		2,532,000	84%		3,368,000	78%
Professional services		95,000	7%		571,000	25%		473,000	16%		954,000	22%
Total revenues	$	1,417,000	100%	$	2,269,000	100%	$	3,005,000	100%	$	4,322,000	100%

Total revenue decreased by $852,000, or 38%, to $1,417,000 for the three months ended June 30, 2012, compared to total revenue of $2,269,000 for the three months ended June 30, 2011. For the six months ended June 30, 2012, total revenue decreased by $1,317,000 or 30% to $3,005,000 from $4,322,000 for the six months ended June 30, 2011. On a sequential basis, total revenue decreased by $171,000 or 11%, compared to the three months ended March 31, 2012. The decrease in revenue year-over-year was aligned with industry analysts’ 2012 forecasts for the overall semiconductor capital equipment market to decline 10-20% year-over-year, along with declines in the PV and HB-LED capital markets of 60% and 40%, respectively. The primary markets served by Cimetrix customers are the semiconductor, PV, HB-LED, and other electronics markets.

New software license revenue includes the initial sale of software development kits and the ongoing runtime licenses that equipment suppliers purchase for each machine shipped with Cimetrix software. New software license revenue decreased by $377,000, or 25%, to $1,106,000 for the three months ended June 30, 2012, compared to new software license revenue of $1,483,000 for the three months ended June 30, 2011. For the six months ended June 30, 2012, new software license revenue decreased $857,000 or 29% to $2,074,000 from $2,931,000 for the six months ended June 30, 2011. On a sequential basis, new software license revenue increased by $138,000, or 14%, compared to the three months ended March 31, 2012. As expected, new software license revenue decreased significantly year-over-year, but increased on a sequential basis as the semiconductor capital equipment market began to recover from its lower levels in the second half of 2011.

Revenue associated with software license updates and product support remained relatively flat for the three months ended June 30, 2012 as compared to the prior year period. For the six months ended June 30, 2012, revenue associated with software license updates and product support increased 5% over the six months ended June 30, 2011. The increase in revenue from software license updates and product support was a result of new customers added since June 30, 2011.

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Total software revenue decreased to $1,322,000 for the three months ended June 30, 2012, as compared to $1,698,000 for the three months ended June 30, 2011. For the six months ended June 30, 2012, software revenue decreased to $2,532,000 as compared to $3,368,000 for the six months ended June 30, 2011. Again, this decrease in revenue is attributable to the overall decline in the semiconductor, PV and HB-LED capital equipment markets since the second half of 2011. On a sequential basis, total software revenues increased 9%, compared to the three months ended March 31, 2012.

Similarly, professional services revenue decreased, year-over-year for the six months ended June 30, 2012. The decrease in professional services contracts is partially due to the overall decline in the semiconductor, PV and HB-LED industry as equipment makers look to save costs. While Cimetrix is a software products company, professional services is a complementary service we offer to assist customers in using Cimetrix products. Some customers purchase Cimetrix software development kits and perform the integration work themselves. Other customers will only purchase Cimetrix products if Cimetrix is also able to provide professional services assistance. Professional service projects are difficult to forecast and are subject to wide fluctuations in revenue.

Results of Operations

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Total Revenues		100	%		100	%		100	%		100	%

Operating costs and expense:
Cost of revenues		40			42			44			41
Sales and marketing		17			12			17			13
Research and development		17			20			15			17
General and administrative		23			15			22			16
Depreciation and amortization		1			1			1			1

Total operating costs and expenses		98			90			99			88

Income from operations		2			10			1			12
Other expense, net		-			-			-			-
Total other expenses, net		-			-			-			-

Income before income taxes		2			10			1			12
Provision for income taxes		-			-			-			-

Net income		2	%		10	%		1	%		12	%

The Company reported net income of $29,000 for the three months ended June 30, 2012, compared to $225,000 for the three months ended June 30, 2011.As stated earlier, a recent pull-back in the semiconductor, PV and HB-LED capital markets that began in the middle of 2011 impacted our first half of 2012’s revenues and operating results. The net results for all periods include non-cash stock-based compensation expense and non-cash depreciation and amortization expense. For the three-month periods ended June 30, 2012 and June 30, 2011, stock-based compensation expense was $19,000 and $16,000, respectively, and depreciation and amortization expense was $16,000 and $12,000, respectively. The Company reported net income of $44,000 for the six months ended June 30, 2012 as compared to the net income of $515,000 for the six months ended June 30, 2011. For the six-month periods ended June 30, 2012 and June 30, 2011, the Company did not have any bad debt expense. For the six-month periods ended June 30, 2012 and June 30, 2011, the stock-based compensation expense was 44,000 and 27,000, respectively and depreciation and amortization expense was $31,000 and $23,000 respectively.

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The Company generated net cash from operating activities totaling $265,000 for the six months ended June 30, 2012, compared to net cash used in operating activities of $194,000 for the six months ended June 30, 2011.

Cost of Revenues

The Company's cost of revenue for the three months ended June 30, 2012 decreased by $388,000, or 41% to $569,000 from $957,000 for three months ended June 30, 2011. For the six-month periods ended June 30, 2012 and June 20, 2011, the Company’s cost of revenues decreased by $468,000, or 26 % to $1,313,000 from $1,781,000. This decrease was primarily a result of the decrease in revenues over the same periods, but included a combination of investment in our current products and reduction of the use of service partners to augment our engineering team to deliver Professional Services netted against the increased head-count and related payroll and benefit costs. Cost of revenue 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 $40,000, or 14%, to $239,000 during the three months ended June 30, 2012, from $279,000 during the three months ended June 30, 2011. During the six months ended June 30, 2012, sales and marketing expenses decreased $42,000 or 8% to $510,000 from $552,000. The decrease was primarily a result of reduced commissions on lower revenues offset by increased costs for our Japan operations. 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 $211,000 or 48%, to $232,000 during the three months ended June 30, 2012, from $443,000 during the three months ended June 30, 2011. During the six months ended June 30, 2012, research and development expenses decreased $270,000 or 38% to $450,000 from $720,000 for the six months ended June 30, 2011. The decrease was primarily due to the reduction of use of service partners to augment our engineering team. Research and development expenses include only direct costs for wages, benefits, materials, and education of technical personnel involved in new product development activities. 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 $12,000 or 4%, to $325,000 in the three months ended June 30, 2012, from $337,000 in the three months ended June 30, 2011. During the six months ended June 30, 2012, general and administrative expenses decreased $54,000 or 8% to $648,000 from 702,000 for the six months ended June 30, 2011. The decrease was primarily due to lower net income and related profit sharing costs. General and administrative expenses include all direct costs for administrative and accounting personnel, and all rents and utilities for maintaining Company offices.

Depreciation and Amortization

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Depreciation and amortization expense increased $4,000 or 33% to $16,000 in the three months ended June 30, 2012, from $12,000 in the three months ended June 30, 2011. During the six months ended June 30, 2012, depreciation and amortization increased $8,000 or 35% to $31,000 from $23,000 in the six months ended June 30, 2011. The increase is a result the Company’s investment in equipment upgrades and new financial software.

Other Income (Expense)

Interest expense for the three months ended June 30, 2012 decreased by $14,000 to $3,000. During the six months ended June 30, 2012, interest expense decreased $28,000 to $3,000. The decrease in interest expense for the three months and six months ended June 30, 2012, compared to the same periods in 2011 was due to the repayment of the Company’s Senior Notes in July 2011.

Interest income for the three months ended June 30, 2012 was $0 and $1,000 for the three months ended June 30, 2011. During the six months ended June 30, 2012, interest income was $0 compared to $2,000 for the same period in 2011. The absence of interest income in 2012 was a result of lower cash reserves combined with near zero interest rates.

Liquidity and Capital Resources

At June 30, 2012, the Company had current assets of $1,922,000, including cash and cash equivalents of $1,124,000, and current liabilities of $839,000, resulting in a working capital of $1,083,000. Excluding deferred revenue of $484,000, which requires the Company to provide services and support, but does not represent a scheduled obligation requiring the outlay of Company funds, the Company’s current assets exceeded current liabilities by $1,567,000 at June 30, 2012.

Under the line of credit agreement, the Company is required to comply with the following financial covenants:

·	Maintain a ratio of quick assets to current liabilities minus deferred revenue of at least: 1.50 to 1.00

At June 30, 2012, the Company was in compliance with all covenants.

Results of Operations and Cash Flows – The Company has posted twelve consecutive quarters of positive net income, beginning in mid-2009. As of June 30, 2012, the Company had total stockholders’ equity of $1,273,000. During the three months ended June 30, 2012, the Company reported net income of $29,000 compared to $225,000 for the same period in 2011. During the six months ended June 30, 2012, the Company reported net income of $44,000 compared to $515,000 for the same period in 2011. The Company generated net cash in operating activities of $265,000 for the six months ended June 30, 2012 as compared to net cash used in operating activities of $194,000 for the same period in 2011.

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Net cash used in investing activities during the six months ended June 30, 2012, was $12,000. Net cash used in investing activities during the six months ended June 30, 2011, was $41,000 and consisted of hardware and software upgrades.

Net cash used in financing activities for the six months ended June 30, 2012 was $0, compared to $64,000 for the three months ended June 30, 2011 which was comprised of $11,000 in proceeds from the issuance of common stock related to the exercise of Senior Note warrants, and payments of debt to related parties of $75,000.

The Company has not been adversely affected by inflation. Revenues from foreign customers were $1,277,000 during the six months ended June 30, 2012, representing 43% of the Company’s total revenues, compared to $1,904,000 or 44%, of total revenues during the same period in 2011. Most of Cimetrix’s PV and HB-LED sales came from customers outside the United States and the decrease in foreign customer sales year over year is mainly attributable to the significant downturn in the PV and HB-LED markets as described in the Operations Review section above. 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 primarily transacted in United States dollars.

Factors Affecting Future Results

Total revenues for the first six months of 2012 decreased 30% compared to the first six months of 2011, reflecting the significant decline in the semiconductor, PV and HB-LED capital equipment markets beginning in the second half of 2011. As anticipated, however, new software license revenues increased on a sequential basis from the first and second quarters of 2012, providing evidence that at least the semiconductor capital equipment market is growing from its low levels in the second half of 2011. Sales of software development kits are difficult for the Company to forecast, as the Company is highly dependent on the timing of the equipment suppliers’ decision to initiate a new machine development program and utilize the Company’s products.

The Company continues to focus on incrementally expanding its customer base and product line in order to increase revenues. In 2008, the Company introduced its CIMControlFramework product for equipment control, which enables the Company to provide equipment makers with a complete software solution that reduces their time-to-market for new equipment developments. As equipment makers reduce costs and internal resources, Cimetrix believes the market for CIMControlFramework will continue to grow as equipment makers invest in new machine development programs.

Ultimately, the Company’s business is driven by the global demand for electronic devices by consumers and businesses. Any changes in the global economic conditions could adversely affect Cimetrix’s business and results of operations.

The Company continues to pursue customers through its professional 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, reduce their internal staff, and prefer single source responsibility. The experience gained delivering professional services also provides valuable inputs to new product development roadmaps.

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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. There can be no assurance that the markets for industrial motion control, factory connectivity, and equipment 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 these and other factors, 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 4. 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.

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, 2011 which could materially affect its business, financial condition or future results of operations to which the reader is referred. There have been no material changes to the risk factors disclosed in that Form 10-K.

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

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None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit No.	Description

10.1	Loan and Security Agreement dated September 27, 2011 between Silicon Valley Bank and Cimetrix Incorporated (1)
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 August 8, 2012*
______________________________________

(1) Included in the Company’s Form 10-Q for the Quarterly Period Ended September 30, 2011
* Exhibits filed with this report

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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: August 14, 2012

	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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