Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - CIMETRIX INC | Financial_Report.xls |
| EX-32.2 - EXHIBIT 32.2 - CIMETRIX INC | ex322.htm |
| EX-99.1 - EXHIBIT 99.1 - CIMETRIX INC | ex991.htm |
| EX-32.1 - EXHIBIT 32.1 - CIMETRIX INC | ex321.htm |
| EX-31.2 - EXHIBIT 31.2 - CIMETRIX INC | ex312.htm |
| EX-31.1 - EXHIBIT 31.1 - CIMETRIX INC | ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2013
o 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)
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Nevada
(State or other jurisdiction of
incorporation or organization)
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87-0439107
(I.R.S. Employer
Identification No.)
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6979 South High Tech Drive, Salt Lake City, Utah
(Address of principal executive office)
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84047-3757
(Zip Code)
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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):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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|
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Non-accelerated filer
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¨
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Smaller reporting company
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ý
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|
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(Do not check if a smaller reporting company)
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||||
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 May 8, 2013:
Common stock, par value $.0001 - 45,467,006 shares
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2013
TABLE OF CONTENTS
ITEM 1. FINANCIAL STATEMENTS
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CIMETRIX INCORPORATED AND SUBSIDIARIES
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||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
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||||||||
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March 31, 2013
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December 31,
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|||||||
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ASSETS
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(Unaudited)
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2012
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||||||
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Current assets:
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||||||||
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Cash
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$ | 1,036,000 | $ | 1,027,000 | ||||
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Accounts receivable, net
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656,000 | 642,000 | ||||||
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Inventories
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11,000 | 16,000 | ||||||
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Prepaid expenses and other current assets
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97,000 | 102,000 | ||||||
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Total current assets
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1,800,000 | 1,787,000 | ||||||
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Property and equipment, net
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82,000 | 81,000 | ||||||
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Goodwill
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64,000 | 64,000 | ||||||
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Other assets
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15,000 | 20,000 | ||||||
| $ | 1,961,000 | $ | 1,952,000 | |||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
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Current liabilities:
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||||||||
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Accounts payable
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$ | 46,000 | $ | 49,000 | ||||
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Accrued expenses
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156,000 | 230,000 | ||||||
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Deferred revenue
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382,000 | 338,000 | ||||||
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Total current liabilities
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584,000 | 617,000 | ||||||
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Total liabilities
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584,000 | 617,000 | ||||||
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Commitments and contingencies
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||||||||
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Stockholders’ equity:
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||||||||
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Common stock; $.0001 par value, 100,000,000 shares
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||||||||
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authorized, 45,467,006 and 45,567,006 shares issued,
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||||||||
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respectively
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4,000 | 4,000 | ||||||
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Additional paid-in capital
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33,705,000 | 33,683,000 | ||||||
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Treasury stock, 25,000 shares at cost
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(49,000 | ) | (49,000 | ) | ||||
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Accumulated deficit
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(32,283,000 | ) | (32,303,000 | ) | ||||
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Total stockholders’ equity
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1,377,000 | 1,335,000 | ||||||
| $ | 1,961,000 | $ | 1,952,000 | |||||
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See accompanying notes to condensed consolidated financial statements
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||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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||||||||
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(Unaudited)
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||||||||
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Three Months Ended
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||||||||
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March 31,
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||||||||
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2013
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2012
|
|||||||
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Revenues:
|
||||||||
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New software licenses
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$ | 1,115,000 | $ | 968,000 | ||||
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Software license updates and product support
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234,000 | 242,000 | ||||||
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Total software revenues
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1,349,000 | 1,210,000 | ||||||
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Professional services
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50,000 | 378,000 | ||||||
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Total revenues
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1,399,000 | 1,588,000 | ||||||
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Operating costs and expenses:
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||||||||
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Cost of revenues
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583,000 | 744,000 | ||||||
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Sales and marketing
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266,000 | 271,000 | ||||||
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Research and development
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191,000 | 218,000 | ||||||
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General and administrative
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315,000 | 323,000 | ||||||
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Depreciation and amortization
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17,000 | 15,000 | ||||||
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Total operating costs and expenses
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1,372,000 | 1,571,000 | ||||||
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Income from operations
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27,000 | 17,000 | ||||||
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Other income (expenses):
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||||||||
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Other income
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3,000 | - | ||||||
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Total other expenses, net
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3,000 | - | ||||||
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Income before income taxes
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30,000 | 17,000 | ||||||
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Provision for income taxes
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1,000 | 2,000 | ||||||
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Net income
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$ | 29,000 | $ | 15,000 | ||||
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Net income per common share:
|
||||||||
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Basic
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$ | 0.00 | $ | 0.00 | ||||
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Diluted
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$ | 0.00 | $ | 0.00 | ||||
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Weighted average number of shares
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||||||||
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outstanding:
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||||||||
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Basic
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45,746,000 | 45,698,000 | ||||||
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Diluted
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46,373,000 | 45,763,000 | ||||||
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See accompanying notes to condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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||||||||
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(Unaudited)
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||||||||
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Three Months Ended
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||||||||
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March 31,
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||||||||
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2013
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2012
|
|||||||
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Cash flows from operating activities:
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||||||||
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Net income
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$ | 29,000 | $ | 15,000 | ||||
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Adjustments to reconcile net income to net
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||||||||
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cash used in operating activities:
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||||||||
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Depreciation and amortization
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17,000 | 15,000 | ||||||
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Stock-based compensation
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22,000 | 25,000 | ||||||
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Changes in operating assets and liabilities
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||||||||
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Accounts receivable
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(14,000 | ) | (74,000 | ) | ||||
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Prepaid expenses and other current assets
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10,000 | 7,000 | ||||||
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Accounts payable
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(5,000 | ) | (37,000 | ) | ||||
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Accrued expenses
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(74,000 | ) | (285,000 | ) | ||||
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Deferred revenue
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44,000 | 105,000 | ||||||
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Net cash from (used in) operating activities
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29,000 | (229,000 | ) | |||||
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Cash flows from investing activities:
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||||||||
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Proceeds received from deposits
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5,000 | - | ||||||
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Purchase of property and equipment
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(16,000 | ) | (7,000 | ) | ||||
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Net cash used in investing activities
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(11,000 | ) | (7,000 | ) | ||||
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Cash flows from financing activities:
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||||||||
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Payments for repurchase of common stock
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(9,000 | ) | - | |||||
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Net cash used in financing activities
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(9,000 | ) | - | |||||
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Net increase (decrease) in cash
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9,000 | (236,000 | ) | |||||
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Cash, beginning of period
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1,027,000 | 871,000 | ||||||
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Cash, end of period
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$ | 1,036,000 | $ | 635,000 | ||||
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Supplemental Cash Flow Information
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Three Months Ended
|
||||||||
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March 31,
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||||||||
| 2013 | 2012 | |||||||
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Cash paid for interest
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$ | - | $ | - | ||||
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Cash paid for income taxes
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$ | 1,000 | $ | 2,000 | ||||
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See accompanying notes to condensed 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) is a software engineering company that designs, develops, markets and supports factory connectivity and equipment control products for today’s smart, connected factories. The Company’s primary customers are original equipment manufacturers (OEMs) that supply precision electronics manufacturing equipment for semiconductor wafer fabrication, solar/photovoltaic (PV), high-brightness light-emitting diode (HB-LED) and other electronics manufacturing.
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 March 31, 2013 and for the three month periods ended March 31, 2013 and 2012 is unaudited, and the balance sheet as of December 31, 2012 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, 2012. 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 months ended March 31, 2013 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2013. 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, 2012.
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 has been allocated to the various categories of operating costs and expenses in a manner similar to the allocation of payroll expense as follows:
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Three Months Ended
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||||||||
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March 31,
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||||||||
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2013
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2012
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|||||||
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Cost of revenues
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$ | 6,000 | $ | 6,000 | ||||
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Sales and marketing
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3,000 | 2,000 | ||||||
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Research and development
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4,000 | 3,000 | ||||||
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General and administrative
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9,000 | 14,000 | ||||||
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Total stock-based compensation expense
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$ | 22,000 | $ | 25,000 | ||||
During the three months ended March 31, 2013, no options to purchase shares of the Company’s common stock were granted to the Company’s employees.
The total stock-based compensation costs from vesting restricted stock shares in the three month periods of March 31, 2013 and 2012 was $0 and $10,000, respectively.
As of March 31, 2013, the total unrecognized compensation cost related to non-vested stock-based awards was $185,000. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.54 years.
NOTE 3 – EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding, including unissued awards of restricted stock, which are deemed to be participating securities, during the period. Diluted earnings per common share is computed by dividing the net income for the period by the sum of the weighted-average number of common shares outstanding plus the weighted-average common stock equivalents, which would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options and unvested restricted stock. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method.
The following table sets forth the computation of basic and diluted earnings per common share:
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Three Months Ended
|
||||||||
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March 31,
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2013
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2012
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Numerator:
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||||||||
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Net income
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$ | 29,000 | $ | 15,000 | ||||
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Denominator:
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Basic weighted average shares outstanding
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45,746,000 | 45,698,000 | ||||||
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Effect of dilutive securities:
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||||||||
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Stock options
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627,000 | 65,000 | ||||||
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Diluted weighted average shares outstanding
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46,373,000 | 45,763,000 | ||||||
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Net income per share
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||||||||
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Basic
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$ | 0.00 | $ | 0.00 | ||||
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Diluted
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$ | 0.00 | $ | 0.00 | ||||
Potentially dilutive securities representing approximately 3,031,000 and 1,224,000 shares of common stock at March 31, 2013 and 2012, respectively, were excluded from the computation of diluted earnings per common share because their effect would have been anti-dilutive.
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. On September 26, 2012, the Company and the Bank entered into a First Amendment to Loan and Security Agreement. The First Amendment extended the maturity date of the Agreement to September 25, 2013. 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. 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 March 31, 2013, the Company had no borrowings against the line of credit.
Under the line of credit agreement, the Company is required to comply with the following financial covenants:
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·
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Maintain a ratio of quick assets to current liabilities minus deferred revenue of at least: 1.50 to 1.00
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·
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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”.
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The line of credit agreement also contains numerous negative comments 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 March 31, 2013, the Company was in compliance with all covenants.
NOTE 5 – COMMON STOCK
The Company had 185,000 vested restricted stock awards for which shares of common stock have not been issued as of March 31, 2013 and December 31, 2012.
On March 28, 2013, the Company entered into a transaction with one of its shareholders to repurchase 100,000 shares of stock for $9,000 which is included as a reduction in accumulated deficit, at cost. The 100,000 shares returned were retired.
NOTE 6 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2013 and 2012, the Company had the following revenues from one customer that was also a shareholder of the Company:
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Three Months Ended
|
||||||||
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March 31,
|
||||||||
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2013
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2012
|
|||||||
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New software licenses
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$ | 13,000 | $ | 74,000 | ||||
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Software license updates and product support
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19,000 | 25,000 | ||||||
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Total software revenues
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32,000 | 99,000 | ||||||
The Company had accounts receivable from one customer that was also a shareholder totaling $23,000 and $22,000 at March 31, 2013 and December 31, 2012, respectively.
NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash, 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
None
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 periods ended March 31, 2013 and March 31, 2012 and the Company’s financial position at March 31, 2013. 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, 2012. 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, 2012.
Cimetrix is a software engineering company that designs, develops, markets and supports factory connectivity and equipment control products for today’s smart, connected factories. The Company’s primary customers are original equipment manufacturers (OEMs) that supply precision electronics manufacturing equipment for semiconductor wafer fabrication, solar/photovoltaic (PV), high-brightness light-emitting diode (HB-LED) and other electronics manufacturing.
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.
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 2012 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
|
||||||||||
|
March 31,
|
||||||||||
|
2013
|
2012
|
|||||||||
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New software licenses
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$ | 1,115,000 | 80% | $ | 968,000 | 61% | ||||
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Software license updates and product support
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234,000 | 16% | 242,000 | 15% | ||||||
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Total software revenues
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1,349,000 | 96% | 1,210,000 | 76% | ||||||
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Professional services
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50,000 | 4% | 378,000 | 24% | ||||||
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Total revenues
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$ | 1,399,000 | 100% | $ | 1,588,000 | 100% | ||||
Total revenue decreased by $189,000, or 12%, to $1,399,000 for the three months ended March 31, 2013, compared to total revenue of $1,588,000 for the three months ended March 31, 2012. On a sequential basis, total revenue increased by $79,000 or 5%, compared to the three months ended December 31, 2012. The decrease in revenue year-over-year was attributed primarily to decreased revenues from professional services resulting from implementing a new services strategy in the second quarter of 2012 as discussed later in this section.
New software license revenues include 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 increased by $147,000, or 15%, to $1,115,000 for the three months ended March 31, 2013, compared to new software license revenue of $968,000 for the three months ended March 31, 2012. On a sequential basis, new software license revenue increased by $133,000, or 14%, compared to the three months ended December 31, 2012. The increase in new software license revenues was mostly attributable to an increase in software development kits (SDK’s), which generally, result in a long-term revenue stream from future machine shipments.
Revenue associated with software license updates and product support decreased to $234,000 for the three months ended March 31, 2013, as compared to $242,000 for the three months ended March 31, 2012. The decrease was due to adjustments in support pricing and customer renewal decisions.
Total software revenues increased by $139,000, or 11% to $1,349,000 for the three months ended March 31, 2013, as compared to $1,210,000 for the three months ended March 31, 2012. Again, this increase in total software revenues is attributable to an increase in software development kits (SDK). On a sequential basis, total software revenues increased 8%, compared to the three months ended December 31, 2012.
Professional services revenue was down by 87% to $50,000 for the three months ended March 31, 2013, as compared to $378,000 for the three months ended March 31, 2012. The decrease in services revenue year-over-year resulted from implementing a revised Cimetrix services strategy starting in the second quarter of 2012. The new strategy focuses Cimetrix services on training and coaching our OEM customers in the use of Cimetrix products, instead of implementing turnkey solutions. To support this new services strategy, Cimetrix established a global network of service providers trained in Cimetrix products that are able to provide services to assist customers with software development activities. While this strategy reduces Cimetrix professional services revenue, it enables us to focus on sustaining and enhancing current product lines, as well as R&D for new products that should fuel long term growth.
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 Operations:
|
Three Months Ended
|
||||||||
|
March 31,
|
||||||||
|
2013
|
2012
|
|||||||
|
Total Revenues
|
100 | % | 100 | % | ||||
|
Operating costs and expense:
|
||||||||
|
Cost of revenues
|
42 | 47 | ||||||
|
Sales and marketing
|
19 | 17 | ||||||
|
Research and development
|
14 | 14 | ||||||
|
General and administrative
|
23 | 20 | ||||||
|
Depreciation and amortization
|
1 | 1 | ||||||
|
Total operating costs and expenses
|
99 | 99 | ||||||
|
Income from operations
|
1 | 1 | ||||||
|
Other expense, net
|
- | - | ||||||
|
Total other expenses, net
|
- | - | ||||||
|
Income before income taxes
|
1 | 1 | ||||||
|
Provision for income taxes
|
- | - | ||||||
|
Net income
|
1 | % | 1 | % | ||||
The Company reported net income of $29,000 for the three months ended March 31, 2013, compared to $15,000 for the three months ended March 31, 2012.As stated earlier, increased sales of SDK’s combined with our new professional services strategy enabled us to manage costs and remain profitable. 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 March 31, 2013 and March 31, 2012, stock-based compensation expense was $22,000 and $25,000, respectively, and depreciation and amortization expense was $17,000 and $15,000, respectively.
Net cash generated by operating activities for the three months ended March 31, 2013 was $29,000 compared to $229,000 net cash used by operating activities for the three months ended March 31, 2012. The difference between the two periods was mostly due to the reduction of the profit sharing and incentive plan bonus accruals at the end of 2012 as compared to the same accruals at the end of 2011, subsequently paid in the first quarters of 2013 and 2012, respectively.
Cost of Revenues
The Company's cost of revenues for the three months ended March 31, 2013 decreased by $161,000, or 22% to $583,000 from $744,000 for three months ended March 31, 2012. This decrease primarily resulted from the reduction of the use of service partners to augment our engineering team starting in the second quarter of 2012. 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 $5,000, or 2%, to $266,000 during the three months ended March 31, 2013, from $271,000 during the three months ended March 31, 2012. The decrease was primarily a result of reduced sales and marketing 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 $27,000 or 12%, to $191,000 during the three months ended March 31, 2013, from $218,000 during the three months ended March 31, 2012. The decrease was primarily due to the reduction of use of service partners to augment our engineering team in 2013 which resulted in lower costs. 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 $8,000 or 2%, to $315,000 in the three months ended March 31, 2013, from $323,000 in the three months ended March 31, 2012. The decrease was primarily due to reduced rent costs as a result of renegotiating lease terms in the fourth quarter of 2012. 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
Depreciation and amortization expense increased $2,000 or 13% to $17,000 in the three months ended March 31, 2013, from $15,000 in the three months ended March 31, 2012. The increase is a result the Company’s investment in equipment upgrades.
Other Income (Expense)
Other income for the three months ended March 31, 2013 was $3,000 compared to $0 for the three months ended March 31, 2012. This other income was from our Japan subsidiary, Cimetrix Japan K.K., due to a Japanese tax law, whereby companies are exempt from turning over collected consumption tax to the government if annual revenues to not meet regulatory thresholds.
Liquidity and Capital Resources
At March 31, 2013, the Company had current assets of $1,800,000, including of $1,036,000 in cash, and current liabilities of $584,000, resulting in working capital of $1,216,000. Excluding deferred revenue of $382,000, 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 $1,598,000 at March 31, 2013.
Revolving Bank Line of Credit - The Company and Silicon Valley Bank (the “Bank”) entered into a Loan and Security Agreement which expires in September 2013. 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 terms of this credit facility are summarized in Note 4 to the Condensed Consolidated Financial Statements included in this report.
As of March 31, 2013, the Company had no borrowings against the line of credit.
Results of Operations and Cash Flows – The Company has posted fifteen consecutive quarters of positive net income, beginning in mid-2009. As of March 31, 2013, the Company had total stockholders’ equity of $1,377,000. During the three months ended March 31, 2013, the Company reported net income of $29,000 compared to $15,000 for the same period in 2012. The Company generated net cash in operating activities of $29,000 for the three months ended March 31, 2013 as compared to net cash used in operating activities of $229,000 for the same period in 2012.
Net cash used in investing activities during the three months ended March 31, 2013, was $11,000 and consisted of the purchase of hardware and software upgrades and the refund of a security deposit related to the capital lease. Net cash used in investing activities during the three months ended March 31, 2012, was $7,000 and consisted of hardware and software upgrades.
Net cash used in financing activities for the three months ended March 31, 2013 was $9,000 compared to $0 for the three months ended March 31, 2012. This payment of $9,000 represented the use of Company funds to repurchase 100,000 shares of the Company’s common stock from a shareholder.
The Company has not been adversely affected by inflation. Revenues from foreign customers were $631,000 during the three months ended March 31, 2013, representing 45% of the Company’s total revenues, compared to $595,000 or 37%, of total revenues during the same period in 2012. The increase in foreign customer sales year-over-year is primarily attributable to new customer design wins for software development kits (SDKs) combined with strong performances from top-tier European OEM customers. 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 three months of 2013 decreased 12% compared to the first three months of 2012, reflecting the increased sales of SDK’s offset by the decreased sales of professional services as previously discussed in the Operations Review section. 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 now focused on training and coaching our OEM customers in the use of Cimetrix products instead of implementing turnkey solutions. This approach prepares the OEM customer to quickly address changing needs from their customers. We have established a set of integration partners for those customers who do require a turnkey solution. This change in strategy allows us to focus on delivering great products.
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 as a smaller reporting company.
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.
The Company is not currently involved in any pending litigation.
ITEM 1A. RISK FACTORS
The Company is not subject to this requirement as a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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Date
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Total number of shares purchased
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Average price per share
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Total number of shares purchased as part of publically announced plans or programs
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Maximum number of shares that may yet be purchased under the plans or programs
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||||||||||||
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March 1 to March 31, 2013
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100,000 | $ | 0.09 | - | - | |||||||||||
The table above summarizes stock repurchases for the three months ended March 31, 2013. The 100,000 shares were repurchased directly from the shareholder and not in a market transaction. The repurchased shares were retired.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
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Exhibit No.
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Description
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10.1
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Loan and Security Agreement dated September 27, 2011 between Silicon Valley Bank and Cimetrix Incorporated (1)
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| 10.2 |
Loan and Security Agreement dated September 26, 2012 between Silicon Valley Bank and Cimetrix Incorporated (2)
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31.1
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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*
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31.2
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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*
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32.1
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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*
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32.2
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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*
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99.1
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Press Release dated May 13, 2013*
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| 101 | Interactive Data Files* |
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______________________________________
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(1) Included in the Company’s Form 10-Q for the Quarterly Period Ended September 30, 2011
(2) Included in the Company’s Form 10-Q for the Quarterly Period Ended September 30, 2012
* Exhibits filed with this report
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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: May 15, 2013
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By:
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/S/ Robert H. Reback | ||
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Robert H. Reback
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President and Chief Executive Officer
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(Principal Executive Officer)
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By:
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/S/ Jodi M. Juretich | |
| Jodi M. Juretich | |||
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Chief Financial Officer
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|||
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(Principal Financial and Accounting Officer)
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17