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 quarterly period ended March 31, 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.
(Exact name of registrant as specified in charter)
DELAWARE 52-2075851
------------------------------ --------------------------
State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization
946 W. Penn Avenue, Robesonia, Pennsylvania 19551
---------------------------------------------------
(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 4,899,000 shares of no par common stock outstanding as of March
31, 2000.
<PAGE>
<TABLE>
<CAPTION>
Item 1 - FINANCIAL STATEMENTS
CIMNET, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 2000 December 31, 1999
(unaudited)
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,877 68,744
Accounts receivable, net of allowance of $30,097 and
$25,686 at March 31, 2000 and December 31, 1999, respectively 571,839 488,035
Inventories 42,351 34,814
Prepaid expenses 103,220 117,064
Deferred tax asset 53,123 53,123
-------------- --------------
Total current assets 773,410 761,780
PROPERTY AND EQUIPMENT, NET 224,512 232,097
-------------- --------------
$ 997,922 $ 993,877
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Line of credit $ 235,000 $ 44,992
Current portion of long-term debt 18,306 38,368
Accounts payable 164,266 118,520
Accrued expenses 58,884 73,063
Due to related party 40,023 40,023
Deferred income 483,706 547,739
-------------- --------------
Total current liabilities 1,000,185 862,705
LONG-TERM DEBT, net of current portion 3,339 10,198
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, par value $.0001 per shares; 5,000,000
shares authorized (no shares issued and outstanding) 490 490
Common stock, $0.0001 par value, authorized 15,000,000 shares
issued and outstanding 4,899,000 shares, March 31,2000 and
4,899,000 shares with no stated par value- December 31, 1999
Additional paid in capital 1,031,384 814,021
Accumulated deficit (746,043) (603,937)
-------------- --------------
285,831 210,574
Less
Deferred compensation 291,433 89,600
-------------- --------------
$ (5,602) $ 120,974
-------------- --------------
$ 993,877 $ 997,922
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements
2
<PAGE>
<TABLE>
<CAPTION>
CIMNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
----------------------------
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 719,884 $ 984,625
Cost of goods sold 144,784 150,215
------------ ------------
Gross profit 575,100 834,410
------------ ------------
Operating expenses
Selling, general and administrative 487,362 434,595
Research and development 225,736 241,571
------------ ------------
713,098 676,166
Operating income (137,998) 158,244
Non operating interest expense 4,108 12,315
------------ ------------
Income/loss) before income tax taxes (142,106) 145,929
Income taxes -- 63,750
------------ ------------
NET INCOME ($ 142,106) $ 82,179
============ ============
Net Income per common share - basic and diluted $ (0.03) $ 0.02
------------ ------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CIMNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ (142,106) $ 82,179
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities
Depreciation and amortization 15,411 19,194
Allowance for future returns 4,411 3,357
Non-cash compensation expense 15,530 --
(Increase) decrease in assets
Accounts receivable (88,215) (94,245)
Inventories (7,537) (10,536)
Deferred tax asset -- 23,000
Prepaid expenses 13,844 (8,630)
Increase (decrease) in liabilities
Accounts payable 45,746 47,068
Accrued expenses (14,179) 3,575
Deferred income (64,033) (43,152)
------------ ------------
Net cash (used in) provided by operating activities (221,128) 21,810
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (7,826) (5,785)
------------ ------------
Net cash used in investing activities (7,826) (5,785)
------------ ------------
Cash flows from financing activities
Net (payments on) proceeds from line of credit 190,008 71,000
Principal payments on long-term borrowings (26,921) (30,737)
Payment of offering costs (25,000)
------------ ------------
Net cash provided by (used in) financing activities 163,087 15,263
NET (DECREASE) IN CASH (65,867) 31,288
Cash at beginning of the period 68,744 31,505
------------ ------------
Cash at end of the period $ 2,877 $ 62,793
============ ============
</TABLE>
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 months ended March 31, 2000, are not necessarily indicative of the
results which may be expected for the entire fiscal year.
On March 2, 1999, Western Technology a non-operating public company with
750,000 common shares outstanding and immaterial net assets, acquired 100%
of the outstanding common stock of Cimnet, Inc. ("Cimnet") (the
"Acquisition"). The Acquisition resulted in the owners and management of
Cimnet having effective operating control of the combined entity after the
Acquisition, with the existing Western Technology investors continuing as
only passive investors.
Under generally accepted accounting principles, the Acquisition is
considered to be a capital transaction in substance, rather than a business
combination. That is, the Acquisition is equivalent to the issuance of
stock by Cimnet for the net monetary assets of Western Technology,
accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the Acquisition is
identical to that resulting from a reverse acquisition, except that no
goodwill intangible is recorded. Under reverse takeover accounting, the
post reverse-acquisition comparative historical financial statements of the
"legal acquirer" (Western Technology), are those of the "legal acquiree"
(Cimnet) (i.e. the accounting acquirer). The Securities and Exchange
Commission requires that capital transaction consummated after year end but
prior to the issuance of the consolidated financial statements should be
given retroactive effect as if the transaction had occurred on December 31,
1998.
Accordingly, the consolidated financial statements of Western Technology as
of December 31, 1998 and for the three months ended March 31, 1999, are the
historical financial statements of Cimnet for the same periods adjusted for
the exchange of the common stock as defined in the Agreement and Plan of
Merger (the "Agreement") executed at consummation of the Acquisition.
Under the terms of the Agreement, each outstanding common share, $0.0001
par value, of Cimnet was converted into one common share of Western
Technology's common stock, no par value. The additional paid-in capital
account has been combined with common stock as presented in the statement
of changes in shareholders' equity. The common stock exchanged, in addition
to the existing Western Technology shares outstanding, collectively
resulted in the recapitalization of the Company. Earnings per share (EPS)
calculations include the Company's change in capital structure for all
periods presented.
NOTE 2 - NET INCOME PER COMMON SHARE
Basic net income per common share is calculated by dividing net income 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.
5
<PAGE>
CIMNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted average shares for the three months ended March 31, 2000 and 1999
were 4,899,000 5,150,000 shares. Options to purchase 895,000 shares of
common stock for $0.05-$1.50 per share were outstanding during 2000. They
were not included in the computation of diluted earnings per share because
the option exercise price was greater than the average market price.
NOTE 3 - SUBSEQUENT EVENTS
On April 26, 2000, the Company announced that it signed a letter of intent
regarding the proposed merger of the Company with Applied Statistics, Inc.
and Advanced Systems and Designs, Inc. The merger transaction is subject to
the satisfaction of several conditions, including the execution of
definitive agreements and the approval by the boards of directors and
stockholders of each of the companies. It is presently contemplated that
the present stockholders of the Company will own approximately 42% of the
Company's outstanding shares of common stock following consummation of the
Merger.
On April 14, 2000, Cimnet, Inc. (the "Company") and the stockholders of
RealTime Information Systems, PTY (the "RealTime Stockholders"), an
Australian company engaged in the business of creating and developing
software for shop floor control, entered into a Stock Purchase Agreement
(the "Purchase Agreement"). Contemporaneous with the execution and delivery
of the Purchase Agreement, the Company and the RealTime Stockholders closed
the transaction contemplated by the Purchase Agreement. 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 will be accounted for under the purchase
method of accounting.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This section presents a review of the Corporation'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.
OPERATIONS
Results of operations for the three months ended March 31, 2000.
Net Sales for the three months ended March 31, 2000 decreased by 26.9% or
$(264,741) over net sales for the three months ended March 31, 1999. This
decrease resulted from discontinuation of our Suite 2k product line and the lack
of a one time sale of rights of Folders Sales to Profitkey for $200,000 in the
first quarter of 1999.
Costs of goods sold for the first three months of 2000 were $144,784 or 20.1% of
net sales compared to $150,215 or 15.3% of net sales for the same period in
1999, an increase 4.8%. This increase in the percentage of costs of goods sold
is related to the one time sale of $200,000 of software (with no attributable
cost of goods sold) that took place in the first three months of 1999.
Gross Profit for the first three months of 2000 was $575,100, compared to
$834,410 for the first three months of 1999, a decrease of $259,310 or 31.1%.
This decrease is due to an overall decrease in sales.
Selling, general and administrative expenses for the first three months of 2000
were $471,832 or 65.5% of net sales, and total R&D expenses were $225,736 or
31.4% of net sales compared to selling, general and administrative expenses of
$434,595 or 44.1% of net sales and total R&D expenses were $241,571 or 24.5% net
sales for the first three months of 1999. As a percentage of net sales, both
categories of expenses have gone up in 2000, due to the overall decrease in
sales and an increase in costs for selling, general and administration expenses.
Loss from operations for the three months ended March 31, 2000 was $122,468
compared to income of $158,244 for the three months ended March 31, 1999, an
decrease of $280,712. This is due to the decrease in sales of 26.9% and an
increase in operating expenses of 3.2%.
Interest expense for the first three months of 2000 was $4,108 or 0.06% of net
sales, compared to $12,315 or 1.3% of net sales for the three months of 1999.
This decrease is due to a decrease of company debt.
Net loss for the three months ended March 31, 2000 was ($142,106) or $(.03) per
share as compared to net income of $82,179 or $0.02 per share for the three
months ended March 31,1999.
6
<PAGE>
Liquidity and Capital Resources
At March 31, 2000, the Company had current assets of $773,410 as compared to
$761,780 at December 31, 1999. This increase is due to an increase in accounts
receivable. Current liabilities increased $137,479 from December 31, 1999. This
increase is due to increased borrowing from the line of credit.
Operating Activities
Cash provided by (used in) operations for the three months ended March 31, 2000
and 1999 was $(221,128) and $21,810, respectively. The decrease in cash provided
by operations in 2000 was due to a net operating loss for the three months ended
March 31, 2000 along with an increase in Accounts Receivable due to slower
turnover.
Investing Activities
Investing activities consumed $ 7,826 and $ 5,785 in 2000 and 1999,
respectively, for purchases of capital assets.
On April 26, 2000, the Company announced that it signed a letter of intent
regarding the proposed merger of the Company with Applied Statistics, Inc. and
Advanced Systems and Designs, Inc. The merger transaction is subject to the
satisfaction of several conditions, including the execution of definitive
agreements and the approval by the boards of directors and stockholders of each
of the companies. It is presently contemplated that the present stockholders of
the Company will own approximately 42% of the Company's outstanding shares of
common stock following consummation of the Merger.
On April 14, 2000, Cimnet, Inc. (the "Company") and the stockholders of RealTime
Information Systems, PTY (the "RealTime Stockholders"), an Australian company
engaged in the business of creating and developing software for shop floor
control, entered into a Stock Purchase Agreement (the "Purchase Agreement").
Contemporaneous with the execution and delivery of the Purchase Agreement, the
Company and the RealTime Stockholders closed the transaction contemplated by the
Purchase Agreement. 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 will be
accounted for under the purchase method of accounting.
Financing Activities
Financing activities provided $ 163,087 in cash for the three months ended March
31, 2000 compared to $15,263 cash provided for the same period in 1999, an
increase of $147,824 in cash provided from financing. This increase is due to
the Company being more reliant on their line of credit as a result of the net
operating loss for the period.
Capital Resources
The Company has a line of credit with its bank. As of March 31, 2000, the
Company had approximately, $201,126 of unused credit available on its line of
credit, subject to borrowing base formula. The Company 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.
7
<PAGE>
PART II OTHER INFORMATION
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27.1 Financial Data Schedule
b. Reports on Form 8-K. The Registrant filed the following Reports on
Form 8-K during the quarterly period ended March 31, 2000:
None
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: May 22, 2000
Robesonia, PA
Cimnet, Inc.
BY: /s/ JOHN D. RICHARDSON
--------------------------
John D. Richardson
Chairman of the Board, Chief Executive Officer
and Chief Accounting Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001035901
<NAME> CIMNET, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2,877
<SECURITIES> 0
<RECEIVABLES> 601,936
<ALLOWANCES> (30,097)
<INVENTORY> 42,351
<CURRENT-ASSETS> 773,410
<PP&E> 650,668
<DEPRECIATION> 426,156
<TOTAL-ASSETS> 997,922
<CURRENT-LIABILITIES> 1,000,185
<BONDS> 0
490
0
<COMMON> 0
<OTHER-SE> (6,092)
<TOTAL-LIABILITY-AND-EQUITY> 997,922
<SALES> 719,884
<TOTAL-REVENUES> 719,884
<CGS> 144,784
<TOTAL-COSTS> 713,098
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,108
<INCOME-PRETAX> (142,106)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142,106)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,106)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
