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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
------ --------
---------------------
Commission File Number: 0-16454
CIMETRIX INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada 87-0439107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
(Address of principal executive office) (Zip Code)
Registrant's telephone number,
including area code: (801) 256-6500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the
Securities Exchange Act of 1934 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 [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1998:
Common stock, par value $.0001 - 24,143,928.
Exhibit Index on Page 12
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share and share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
-------------- -----------
<S> <C> <C>
NET SALES $ 764 $ 512
-------------- -----------
OPERATING EXPENSES
Cost of sales 42 119
Selling, marketing
and customer support 194 380
Research and development 320 361
General and administrative 376 493
------------- -----------
Total operating expenses 932 1,353
------------- -----------
LOSS FROM OPERATIONS (168) (841)
------------- -----------
OTHER INCOME (EXPENSES)
Interest income 15 21
Interest expense (92) (5)
------------ -----------
Total other income (expense) (77) 16
------------ -----------
LOSS BEFORE INCOME TAXES (245) (825)
INCOME TAX EXPENSE (BENEFIT) -- --
NET LOSS $ (245) $ (825)
============ ===========
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (.01) $ (.05)
============ ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 24,143,928 18,136,428
=========== ===========
</TABLE>
<PAGE>
CIMETRIX INCORPORATED
CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,664 $ 1,927
Accounts receivable, net 768 701
Inventories 53 53
Prepaid expenses and
other current assets 119 121
---------- ---------
Total current assets 2,604 2,802
Property and equipment, net 1,032 1,101
Capitalized software costs, net 462 511
Technology, net 649 662
Goodwill, net 2,699 2,753
Other assets 190 190
---------- ---------
$ 7,636 $ 8,019
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 36 $ 36
Accounts payable 203 355
Accrued expenses 226 183
Customer deposits 24 49
---------- --------
Total current liabilities 489 623
LONG TERM DEBT, net of
current portion 3,542 3,546
---------- ---------
Total Liabilities 4,031 4,169
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value:
100,000,000 shares
Authorized; 24,143,928 and
24,143,928 shares issued
and outstanding, respectively 2 2
Additional paid-in capital 19,881 19,881
Treasury stock, at cost (1,000) (1,000)
Accumulated deficit (15,278) (15,033)
--------- --------
Net Stockholders' Equity 3,605 3,850
--------- --------
$ 7,636 $ 8,019
========= ===========
</TABLE>
<PAGE>
CIMETRIX INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
<S> <C> <C>
Cash Flows to Operating Activities:
Net Loss $ (245) $ (825)
Adjustments to reconcile
net loss to net cash used by
Operating activities:
Amortization and depreciation 197 163
Changes in assets and liabilities:
(Increase) decrease in
accounts receivable (67) (104)
(Increase) decrease in inventory -- 1
(Increase) decrease in
prepaid expenses 2 30
Increase (decrease) in
accounts payable (152) (212)
Increase (decrease) in
accrued expenses 43 (373)
Increase (decrease) in
customer deposits (25) 20
Net Cash Flow Used
by Operating Activities (247) (1,300)
------- --------
Cash Flows to Investing Activities:
Purchase of property and equipment,
net of retirements (12) (190)
Net Cash Flow Used by
Investing Activities (12) (190)
------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock -- 90
Payments for capital lease
obligations, net (4) (6)
Net Cash Flow Provided by (Used in)
Financing Activities (4) 84
------ --------
Net Decrease in Cash and
Cash Equivalents (263) (1,406)
Cash and Cash Equivalents at the
Beginning of Period 1,927 2,785
Cash and Cash Equivalents at the
End of Period $1,664 $ 1,379
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ 6
Income taxes $ -- $ --
Supplemental Schedule of Noncash
Investing and Financing Activities:
Issuance of stock upon exercise
of non-qualified Options or
warrant, net of repurchase $ -- $ 90
</TABLE>
<PAGE>
CIMETRIX INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited
condensed financial statements of Cimetrix Incorporated have been
prepared in accordance with the Securities and Exchange
Commission's instructions to Form 10-Q and, therefore, omit or
condense footnotes and certain other information normally
included in financial statements prepared in accordance with
generally accepted accounting principles. The accounting
policies followed for quarterly financial reporting conform with
generally accepted accounting policies disclosed in Note 1 to the
Notes to Financial Statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. In the
opinion of management, all adjustments of a normal recurring
nature that are necessary for a fair presentation of the
financial information for the interim periods reported have been
made. Certain amounts for the three month period ended March 31,
1997 have been reclassified to conform to the March 31, 1998
classification. The results of operations for the three month
period ended March 31, 1998 are not necessarily indicative of the
results that can be expected for the entire year ending December
31, 1998. The unaudited condensed financial statements should be
read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
NOTE 2 - STOCK OPTIONS AND WARRANTS
On January 23, 1998, the Company's Board of Directors
adopted, effective January 1, 1998 subject to shareholder
approval at the annual meeting of shareholders to be held May 16,
1998, a stock option plan under which options may be granted to
officers, employees, directors and others. The plan is intended
to replace all prior option agreements between the Company and
its employees. A total of 2,000,000 shares of common stock have
been reserved for issuance under the plan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the
Company's Condensed Financial Statements and Notes thereto
included elsewhere in this Quarterly Report. The ensuing
discussion and analysis contains both statements of historical
fact and forward-looking statements. Forward-looking statements
generally are identified by the words "expects," "believes" and
"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 certain 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" and "Factors Affecting
Future Results."
Overview
- --------
The Company is the developer of the world's first open
architecture, standards-based, personal computer (PC) software
for controlling machine tools, industrial robots and industrial
automation equipment that operates on the factory floor. The
following table sets forth the percentage of costs and expenses
to net revenues derived from the Company's Condensed Statements
of Operations for the three months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1998 1997
---- ----
<S> <C> <C>
NET SALES 100% 100%
OPERATING EXPENSES
Cost of sales 5 23
Selling, marketing and
customer support 25 74
Research and development 42 71
General and administrative 49 96
Total operating expenses 121 264
------ -----
LOSS FROM OPERATIONS (22) (164)
Interest income 2 4
Interest expense (12) (1)
------ ------
NET LOSS (32%) (161%)
====== =======
</TABLE>
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months
Ended March 31, 1997
Net Sales
Net sales increased by $252,000, or 49%, to $764,000 for
the three months ended March 31, 1998, from $512,000 for the
three months ended March 31, 1997. Net sales for the first
quarter of 1998 consisted of sales of software (60%), engineering
services (25%) and support and training (15%). Net sales for the
first quarter of 1997 consisted of sales of software (82%),
hardware (4%) and support and training (14%).
Cost of Sales
Cost of sales decreased by $77,000, or 65%, to $42,000 for
the first quarter 1998, from $119,000 for the comparable period
in 1997. This decrease was attributable to the elimination of
sales of hardware products, effective cost control measures and
an increase in chargeable engineering services. The profit
margin on software, custom applications and systems integration
projects is higher than the profit margin on sales of hardware
products.
Selling, Marketing and Customer Support
Selling, marketing and customer support decreased by
$186,000, or 49%, to $194,000 for the first quarter of 1998, from
$380,000 for the comparable period in 1997. This decrease was
primarily due to the closure of sales offices with the
elimination of the associated overhead costs. There was also a
decrease in the number of sales personnel and related support
staff.
Research and Development
Research and development expenses decreased by $41,000, or
8% to $320,000 for the first quarter of 1998, from $361,000 for
the comparable period in 1997. The Company's extensive effort to
develop its products for WindowsNT and the continued development
of the Company's GEM software products represents most of the
research and development expenditures. The Company has a need
and plans to continue to make significant investments in research
and development and expects to incur research and development
expenses of approximately $1.5 million during 1998.
General and Administrative
General and administrative expenses decreased by $117,000,
or 24%, to $376,000 for the first quarter of 1998, from $493,000
for the comparable period in 1997. The primary reason for this
decrease was the closure of the Tampa, Florida office. The
closure eliminated the need for administrative and support
personnel and associated overhead costs. Discontinuing the sale
of hardware products also eliminated the need for additional
support personnel and overhead. A decrease in legal expenses
also contributed to the reduction in costs.
Liquidity and Capital Resources
The Company had approximately $2.1 million of working
capital at March 31, 1998, compared with approximately $2.2
million at December 31, 1997. The decrease in working capital
from December 31, 1997 to March 31, 1998 was primarily
attributable to the use of cash to fund the Company's operations.
Cash used in investing activities for the period ended March 31,
1998 was $12,000 compared with $190,000 for the same period in
1997. Cash used in financing activities for the first quarter
1998 was $4,000 compared to $84,000 of cash provided by financing
activities for the same period in 1997. The Company had negative
cash flow from operating activities of $247,000 for the first
quarter 1998, compared to $1,300,000 for the same period in 1997.
The Company's future liquidity will continue to be
dependent on the Company's operating cash flow and management of
trade receivables. Management believes that the Company's
existing working capital is sufficient to maintain its current
and foreseeable levels of operations. Management also believes
that the Company has sufficient funds to meet its capital
expenditure requirements for 1998. The Company anticipates that
capital expenditures for fiscal year 1998, primarily for computer
equipment and software, will be approximately $150,000.
Historically, the Company has raised the required financing
for its activities through the sale of common stock and notes.
During 1997, the Company sold $3,316,000 of 10% unsecured senior
notes due 2002 in a public offering.
The Company does not believe it has been significantly
affected by inflation as technological advances and competition
within the software industry, have generally caused prices of the
products sold by the Company to decline.
Sales to foreign customers account for a significant
percentage of the Company's revenues. Thus far, all the
Company's international sales are payable in United States
dollars, so foreign currency exchange rates have not had any
effect on the Company's liquidity or results of operations.
However, there are continued risks inherent in foreign trade with
respect to worldwide economic conditions. Management continues
to consider such risks with respect to it decision making and
strategic planning.
Factors Affecting Future Results
The Company's future operating results and financial
condition are difficult to predict and will be affected by a
number of factors, including the following:
The level of market acceptance of the Company's products
and technology;
Delays or difficulties encountered in customer testing,
evaluation and integration of the Company's software
products;
The ability and willingness of manufacturers of automated
manufacturing devices to substitute the Company's
technology for their own proprietary technology;
The willingness of industrial users of robots, machine
tools and other automated manufacturing equipment to
acquire new or more advanced models;
General business and economic conditions in the United
States and international markets;
External competitive factors, such as price pressures and
the development of substitute or competitive technology;
The economic and political risks inherent in foreign trade,
including currency controls, expropriation of property,
foreign taxation of sales, changes in currency exchange
rates and laws, taxes, tariffs, and governmental policies
that restrict, prohibit, or adversely affect foreign trade,
particularly with respect to Japan;
Technological changes that adversely affect the life cycle
of the Company's products, that require adaptation or
enhancement of the Company's products or that enhance or
diminish industrial use of automated manufacturing devices
that use computerized motion control;
Fluctuations in sales attributable to the extended sales
process for the Company's products, changes in customer
order patterns or the new product cycle for manufacturers
of automated manufacturing devices; and
The loss of, or a significant reduction in purchases by,
significant customers.
The markets for the Company's products are emerging and
specialized, and the Company's technology has been commercially
available for a relatively short time. Accordingly, the Company
has limited experience with the commercial use and acceptance of
its products and the extent of the modifications, adaptations and
custom applications that are required to integrate its products
and satisfy customer performance requirements. There can be no
assurance that the emerging markets for industrial motion 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,
historical trends should not be used to anticipate future
operating results, and the trading price of the Company's common
stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results and market
conditions.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
None
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- --------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
Exhibit No. Document Name
----------- -------------
3.1 Articles of Incorporation (1)
3.2 Articles of Merger with Cimetrix (USA)
ncorporated (5)
3.3 Bylaws (1)
10.1 Proxy Agreement between the Seolas family
and Paul A. Bilzerian (3)
10.2 Consulting and Option Agreement with Paul
A. Bilzerian (3)
10.3 Indemnity Agreement with former officers
and directors (4)
10.4 Technology Sale and Purchase Agreement
with Brigham Young University (5)
10.5 1994 Stock Option Plan (2)
10.6 Lease with Capitol Properties Four, L.C.
(6)
10.7 Agreement with Bicoastal Holding Company
for services by Paul A. Bilzerian and
Terri L. Steffen. (6)
10.8 1998 Incentive Stock Option Plan. (7)
27 Financial Data Schedule
_______________________________________
(1) Incorporated by reference to Annual Report on Form
10-K for the fiscal year ended December 31, 1993.
(2) Incorporated by reference to Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
(3) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
(4) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
(5) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
(6) Incorporated by reference from the Registration
Statement on Form S-2, File No. 333-60, as filed on
July 2, 1997.
(7) Incorporated by reference from the Proxy Statement
dated April 20, 1998, pertaining to the 1998 Annual
Meeting of Shareholders.
(a) Reports on Form 8-K
The Company filed a report on Form 8-K with the Securities and
Exchange Commission on February 10, 1998. The report supplied
information under Item 5 thereof, captioned "Other Events,"
relating to the appointment of new directors to the Company's
Board of Directors.
The Company filed a report on Form 8-K with the Securities and
Exchange Commission on February 13, 1998. The report supplied
information under Item 4 thereof, captioned "Changes in
Registrant's Certifying Accountant," relating to a change in the
Company's accountants.
The Company filed a report on Form 8-K/A-1 with the Securities
and Exchange Commission on February 27, 1998. The report
supplied information under Item 4 thereof, captioned "Changes in
Registrant's Certifying Accountant," relating to a change in the
Company's accountants.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
REGISTRANT
CIMETRIX INCORPORATED
---------------------
Registrant
Dated: May 14, 1998 By: Paul A. Bilzerian
President and Chief Executive Officer
(Principal Executive Officer)
Dated: May 14, 1998 By: Riley G. Astill
Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE>
Sequential
Exhibit No. Document Name Page No.
- ----------- ------------- ----------
3.1 Articles of Incorporation *
3.2 Articles of Merger with Cimetrix
(USA) Incorporated *
3.3 Bylaws *
10.1 Proxy Agreement between the
Seolas family and Paul A. Bilzerian *
10.2 Consulting and Option Agreement with
Paul A. Bilzerian *
10.3 Indemnity Agreement with former
officers and directors *
10.4 Technology Sale and Purchase
Agreement with Brigham Young
University *
10.5 1994 Stock Option Plan *
10.6 Lease with Capitol Properties Four, L.C. *
10.7 Agreement with Bicoastal Holding
Company for services by Paul A.
Bilzerian and Terri L. Steffen *
10.8 1998 Incentive Stock Option Plan *
27 Financial Data Schedule 1
_______________________________________
* Incorporated by reference
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET OF CIMETRIX INCORPORATED AS OF MARCH 31, 1998,
AND THE RELATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,664,000
<SECURITIES> 0
<RECEIVABLES> 768,000
<ALLOWANCES> 0
<INVENTORY> 53,000
<CURRENT-ASSETS> 2,604,000
<PP&E> 1,800,000
<DEPRECIATION> 768,000
<TOTAL-ASSETS> 7,636,000
<CURRENT-LIABILITIES> 489,000
<BONDS> 3,542,000
0
0
<COMMON> 2,000
<OTHER-SE> (3,603,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,636,000
<SALES> 764,000
<TOTAL-REVENUES> 764,000
<CGS> 42,000
<TOTAL-COSTS> 932,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,000
<INCOME-PRETAX> (245,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (245,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (245,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
