UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________to__________
Commission File Number: 022597
CIMNET, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 52-2075851
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State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization
946 W. Penn Avenue, Robesonia, Pennsylvania 19551
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (610) 693-3114
Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 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. (1) Yes [X] No [ ]
The Company has 6,093,131 shares, value $.0001 per share, outstanding as of July
31, 2000.
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<PAGE>
Item 1 - FINANCIAL STATEMENTS
CIMNET, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 2000 December 31,
(Unaudited) 1999
----------- -----------
CURRENT ASSETS
Cash $ 28,972 $ 68,744
Accounts receivable, net of allowance of $25,556
and $25,686 at June 30, 2000 and December 31,
1999, respectively 490,529 488,035
Inventories 36,589 38,814
Prepaid expenses 74,733 117,064
Deferred tax asset 53,123 53,123
----------- -----------
Total current assets 683,946 761,780
PROPERTY AND EQUIPMENT, NET 226,822 232,097
Goodwill 2,631,781 --
----------- -----------
$ 3,542,549 $ 993,877
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 76,500 $ 44,992
Current portion of long-term debt 17,459 38,368
Accounts payable 136,384 118,520
Accrued expenses 59,640 73,063
Due to related parties 10,000 40,023
Deferred income 647,543 547,739
----------- -----------
Total current liabilities 947,526 862,795
LONG-TERM DEBT, net of current portion 4,148 10,198
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, par value $.0001 per shares;
5,000,000 shares authorized (no shares issued
and outstanding) Common Stock, $0.0001 par
value, authorized 15,000,000 shares, 609 490
issued and outstanding 6,093,131 shares -
June 30, 2000 and 4,899,000 shares -
December 31, 1999 814,021
Additional paid-in capital 3,789,805
Accumulated deficit (859,845) (603,937)
----------- -----------
2,929,960 210,574
Less
Deferred compensation 339,694 89,600
2,590,875 120,974
----------- -----------
$ 3,542,549 $ 993,877
=========== ===========
The accompanying notes are an integral part of these statements.
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CIMNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 939,839 $ 779,319 $ 1,659,723 $ 1,763,944
Cost of goods sold 116,073 124,354 260,857 274,569
----------- ----------- ----------- -----------
Gross Profit 823,765 654,965 1,398,866 1,489,375
----------- ----------- ----------- -----------
Operating expenses
Selling, general and administrative 668,692 395,042 1,156,054 829,637
Research and development 215,177 189,398 440,913 430,969
Amortization of Goodwill 44,606 44,606
----------- ----------- ----------- -----------
928,475 584,440 1,641,539 1,260,606
----------- ----------- ----------- -----------
Operating income (loss) (104,710) 70,525 (242,673) 228,768
Non operating interest expense, net 9,092 12,594 13,200 24,909
----------- ----------- ----------- -----------
Income (loss) before income taxes (113,802) 57,731 (255,907) 203,860
Income taxes 19,050 82,800
----------- ----------- ----------- -----------
Net Income (loss) $ (113,802) $ 38,881 $ (255,907) $ 121,060
=========== =========== =========== ===========
Net Income (loss) per common share -
basic and diluted $ (0.02) $ 0.01 $ (0.05) $ 0.02
=========== =========== =========== ===========
</TABLE>
3
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CIMNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended June 30,
-------------------------
2000 1999
--------- ---------
Cash flows from operating activities
Net Income (loss) $(255,907) $ 121,060
Adjustments to reconcile net income to net
cash provided by operating activities 31,962 38,389
Depreciation and amortization 4,709
Amortization of Goodwill 44,606
Employee Stock Options 39,014
(Increase) decrease in assets
Accounts receivable 16,468 66,719
Inventories 2,225 (13,140)
Deferred tax asset -- 10,500
Prepaid expenses 42,331 (32,495)
Increase (decrease) in liabilities
Accounts payable 11,751 (23,670)
Accrued expenses (18,091) (25,118)
DEFERRED INCOME 99,804 (84,718)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,163 31,818
--------- ---------
Cash flows from investing activities
Purchase of property and equipment (18,461) (11,516)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (18,461) (11,516)
--------- ---------
Cash flows from financing activities
Net proceeds from line of credit 31,508 96,000
Principal payments on long-term borrowings (26,959) (54,212)
Payment of offering costs -- (25,000)
Net repayments to shareholder (40,023) --
--------- ---------
Net cash provided by (used in)
financing activities (35,474) 16,788
--------- ---------
NET INCREASE (DECREASE) IN CASH (39,772) 37,090
Cash at beginning of the period 68,744 31,505
--------- ---------
Cash at end of the period $ 28,972 $ 68,595
========= =========
The accompanying notes are an integral part of these statements.
4
<PAGE>
CIMNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in
financial statements under generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations. These financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in Form 10-KSB for the fiscal year ended
December 31,1999. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been
included. The results of operations for the three and six months ended
June 30, 2000, are not necessarily indicative of the results which may
be expected for the entire fiscal year.
NOTE 2. ACQUISITION OF REALTIME
On April 14, 2000, Cimnet, Inc. (the "Company") completed its
acquisition of RealTime Information Systems, PTY (RealTime) an
Australian company engaged in the business of creating and developing
software for shop floor control. Under the terms of the Purchase
Agreement, the Company acquired all of the outstanding capital stock of
RealTime in exchange for (i) the payment by the Company of a total of
$10,000 and (ii) the issuance of 1,194,131 shares of the Company's
common stock. The transaction was accounted for under the purchase
method of accounting. Goodwill resulting from the purchase was $2.7
million and will be amortized over 15 years.
The following represents the unaudited pro forma financial information
of Cimnet as if the acquisition occurred on the first date of the
period indicated. The pro forma information should be read in
conjunction with the related historical information and is not
necessarily indicative of the results that would have been attained had
the transaction actually taken place.
For The Six Months For the year ended
Ended June 30, 2000 December 31, 1999
------------------- -----------------
Net Sales $ 1,712,220 $ 3,928,017
Cost of goods sold 260,857 654,421
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Gross Profit 1,451,363 3,273,596
Operating expenses 1,788,139 3,239,702
Other expenses (income) 15,384 10,166
Income taxes -- 54,766
----------- -----------
Net income (352,160) $ (31,038)
=========== ===========
NOTE 3. NET INCOME PER COMMON SHARE
Basic net income (loss) per common share is calculated by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding. Diluted net income per share is calculated by adjusting
the weighted average number of shares of common stock outstanding to
include the effect of stock options, if dilutive, using the treasury
stock method. Weighted average shares for the three and six months
ended June 30, 2000 were 5,404,239 and 5,909,419, respectively. At June
30, 2000 there were 845,000 options to purchase Cimnet's common stock
between $0.05 and $1.50.
5
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CIMNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's calculation of earnings per share in accordance with SFAS No. 128
for the six months ended June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Weighted
average
Income shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common stockholders $ 121,060 5,150,000 $ 0.02
Effect of dilutive securities
Options 119,149
--------- --------- --------
Diluted earnings per share
Net income available to common stockholders
plus assumed conversions $ 121,060 5,269,149 $ 0.02
========= ========= ========
</TABLE>
Warrants to purchase 300,000 shares of common stock for $2.50 per share
were outstanding during 1999 and expired in May, 1999. They were not
included in the computation of diluted earnings per share because the
option exercise price was greater than the average market price.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This section presents a review of the Company's financial condition and
results of operating and is intended to assist in the understanding and
evaluating major changes in the Corporation's financial position and earnings.
Per share information has been restated to reflect the recapitalization as if it
had occurred at the beginning of the most recent period presented.
In addition to historical information, this discussion and analysis contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Corporation undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.
On April 14, 2000, the Company completed its acquisition of RealTime Information
Systems, PTY (RealTime) an Australian company engaged in the business of
creating and developing software for shop floor control.. Under the terms of the
Purchase Agreement, the Company acquired all of the outstanding capital stock of
RealTime in exchange for (i) the payment by the Company of a total of $10,000
and (ii) the issuance of 1,194,131 shares of the Company's common stock. The
transaction was accounted for under the purchase method of accounting. Goodwill
resulting from the purchase was $2.7 million and will be amortized over 15
years.
OPERATIONS
RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000
Net Sales for the six months ended June 30, 2000 decreased by 5.9% or $104,221
over net sales for the six months ended June 30, 1999. This decrease is the
result of decrease in spending in the industry during the first half of 2000 as
a result of over spending in the 4th quarter of 1999 for y2k related purchases.
Costs of goods sold for the first six months of 2000 were $260,857 compared to
$274,569 for the same period in 1999, a decrease of $13,982 or 5.1%. This
decrease in costs of goods sold is related to the decrease of net sales by 5.9%.
Gross Profit for the first six months of 2000 was $1,398,866 compared to
$1,489,375 for the first six months of 1999, a decrease of $90,509 or 6.1%. This
decrease is due to an overall decrease in sales.
Selling, general and administrative expenses for the first six months
of 2000 were $1,156,054 or 69.7% of net sales, and total R&D expenses
were $440,913 or 26.6% of net sales compared to selling, general and
administrative expenses of $829,637 or 47.0% of net sales and total R&D
expenses were $430,969 or 24.4% of net sales for the first six months
of 1999. These increases are due to the Company's stock purchase
acquisition of Real Time in the second quarter of 2000 and the
consolidation of the two companies, combined with the compensation
charges related to stock options granted.
Amortization expense of $44,606 was recognized for the first time due to the
Real Time acquisition on April 14, 2000.
Loss from operations for the six months ended June 30, 2000 was ($242,707)
compared to income of $228,768 for the six months ended June 30, 1999, a
decrease of $471,441. This decrease is due to legal, accounting, administrative
and goodwill combined with compensation charges related to stock options granted
to various employees.
On June 30, 2000 credit line was at $76,500 as compared to $394,992 on
June 30, 1999, a decrease of $318,492. Therefore, interest expense for the
first six months of 2000 was $13,234 or 0.8% of net sales, compared to
$24,909 or 1.4% of net sales for the first six months of 1999.
Net loss for the six months ended June 30, 2000 was ($255,907) or $(0.05) per
share as compared to net income of $121,060 or $0.02 per share for the six
months ended June 30, 1999.
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000
Net Sales for the three months ended June 30, 2000 increased by 20.6% or
$160,520 over net sales for the three months ended June 30, 1999. This increase
resulted from new product sales as a result of the acquisition of Real Time
which were $450,972 for Real Time product INFOLINK.
Costs of goods sold for the second three months of 2000 were $116,073 compared
to $124,354 for the second three months of 1999, a decrease of $8,281 or 6.7%.
This decrease in costs of goods sold is related to an increase of software sales
with low cost of goods sold.
Gross Profit for the three months ended June 30, 2000 was $823,765 compared to
$654,965 for the three months ended June 30 1999, an increase of $168,800 or
25.8%. This increase is due to an increase of software sales with low cost of
goods sold for the same period.
Selling, general and administrative expenses for the second three months of 2000
were $668,692 or 71.1% of net sales, and total R&D expenses for the same period
were $215,177 or 22.3% of net sales compared to selling, general and
administrative expenses of $395,042 or 50.7% of net sales and total R&D expenses
were $189,398 or 24.3% of net sales for the second three months of 1999. Both
administrative and R&D costs have gone up in a small part due to increase in net
sales of 20.6% over the same period in 1999. However the 69.3% increase in
selling and administration expenses is due to the addition of legal, accounting,
administrative and amortization expenses due to acquisition of Real Time in the
second quarter of 2000.
Loss from operations for the for the second three months of 2000 was ($104,710)
compared to income of $70,525 for the three months ended June 30, 1999, a
decrease of $175,235.
Interest expense for the second three months of 2000 was $9,092 or 1.0% of net
sales, compared to $12,594 or 1.6% of net sales for the second three months of
1999.
Net loss for the three months ended June 30, 2000 was ($113,802) or $(0.02) per
share as compared to net income of $38,881 or $0.01 per share for the three
months ended June 30, 1999.
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Liquidity and Capital Resources
At June 30, 2000, the Company had current assets of $683,946 as compared to
$761,780 at December 31, 1999. This decrease is due to decrease in accounts
receivable related to decrease in sales and a decrease in prepaid expenses.
Current liabilities increased $84,731 from December 31, 1999. This increase is
due current portion of lease payments and an increase in credit line.
Operating Activities
Cash provided by (used in) operations for the six months ended June 30, 2000 and
1999 was $14,163 and $31,818, respectively. The increase in cash provided by
operations in 2000 was due to net income of $121,060 for the six months ended
June 30, 2000.
Investing Activities
Investing activities consumed $18,461 and $11,516 in 2000 and 1999,
respectively, for purchases of capital assets.
Financing Activities
Financing activities provided $35,474 in cash for the six months ended June
30,2000 compared to $16,788 for the same period in 1999, an increase of $18,686
in cash provided from financing. This increase is due to the Company being more
reliant on their line of credit because of a decline in earnings.
Capital Resources
The Company has certain credit facilities with its bank including a line of
credit and two term loans. As of June 30, 2000, the Company had approximately,
$290,874 of unused credit available on its line of credit, subject to borrowing
base formula. The Company is current with all its obligations to its bank and
has met all financial covenants in its loan documents.
The Company has no material commitments for capital expenditures and believes
that its cash from operations, existing balances and available credit line will
be sufficient to satisfy the needs of its operations and its capital commitments
for the foreseeable future. However, if the need arose, the Company would seek
to obtain capital from such sources as continuing debt financing or equity
financing.
8
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(b) Reports on Form 8-K.
(i) Current Report on Form 8-K filed on April 28, 2000 with respect to
Items 2 and 5.
(ii) Current Report on Form 8-K filed on June 28, 2000
with respect to Item 4.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on the dates indicated:
Dated: Robesonia, Pennsylvania
August 13, 1999
CIMNET, INC.
BY: /s/ JOHN D. RICHARDSON
----------------------------------------------
John D. Richardson
Chairman of the Board, Chief Executive Officer
and Chief Accounting Officer
9
