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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
[ ] 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, UT 84047-3757
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (801) 256-6500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.0001
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[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 29, 2001, the registrant had 24,057,690 shares of its common stock,
par value $.0001, issued and outstanding. The aggregate market value of the
common stock held by non-affiliates of the registrant as of March 29, 2001 was
approximately $25,148,324.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to shareholders in
connection with the Annual Meeting of Shareholders to be held May 12, 2001 are
incorporated by reference into Part III hereof.
FORM 10-K
For the Fiscal Year Ended December 31, 2000
TABLE OF CONTENTS
PART I
Item 1. Business...........................................................3
Item 2. Properties........................................................16
Item 3. Legal Proceedings.................................................16
Item 4. Submission of Matters to a Vote of Security Holders...............17
PART II
Item 5. Market for Company's Common Stock and Related Stockholder Matters.18
Item 6. Selected Financial Data...........................................20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................21
Item 7A Quantitative and Qualitative Disclosures about Market Risk........24
Item 8. Financial Statements and Supplementary Data.......................24
Item 9. Changes and Disagreements with Accountants on Accounting
and Financial Disclosures.........................................24
PART III
Item 10. Directors and Executive Officers of the Company...................25
Item 11. Executive Compensation............................................25
Item 12. Security Ownership of Certain Beneficial Owners and Management....25
Item 13. Certain Relationships and Related Transactions....................25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...26
Signatures...................................................................27
-2-
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS.
The following Annual Report on Form 10-K contains various "forward
looking statements" within the meaning of federal securities laws. These forward
looking statements represent management's expectations or beliefs concerning
future events, including statements regarding anticipated product introductions,
changes in markets, customers and customer order rates, expenditures in research
and development, growth in revenue, taxation levels, the effects of pricing, and
the ability to continue to price foreign transactions in US currency. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties and several factors could cause actual results to differ
materially from those in the forward-looking statements.
These, and other forward looking statements made by the Company, must
be evaluated in the context of a number of factors that may affect the Company's
financial condition and results of operations, including, but not limited to,
those factors listed at the end of Part I, Item 1. Business, titled "FORWARD
LOOKING STATEMENTS CAUTIONARY STATEMENT".
PART I
ITEM 1. BUSINESS
Cimetrix is the developer of the world's first open architecture,
standards-based, personal computer (PC) software for controlling motion-oriented
equipment that operates on the factory floor. Cimetrix introduced its first
motion control products in 1989, and has developed considerable expertise
through working with demanding original equipment manufacturer (OEM) customers.
We have since expanded our original solutions to include products that simulate
and control production equipment; and communicate data to host computers and the
Internet. Our products allow equipment OEMs to build new products in less time,
and equipment users to benefit from modern PC technologies. We develop
significant expertise in each market we target, and tailor our products to give
the OEMs and Users the benefits they demand. Our core strengths are in complex
motion control, object-oriented designs, and the implementation of standards.
In 2000, Cimetrix designed and introduced two new product families
using the latest in software technologies. Both products compliment complement
our CODE motion control family. CIMConnect(TM) is a next generation design for
enabling production equipment in the electronics industries to communicate data
to the factory's host computer using the SECS/GEM SEMI (Semiconductor Equipment
and Materials International) standard. It also allows easy migration to new
emerging Internet communications standards. The CIM300 family is a set of five
software products that reduces the time required to connect new semiconductor
300mm semiconductor tools to each other and host computers into a factory by
using the new SEMI 300mm standards. With the large semiconductor industry push
to develop and ship 300mm tools, we expect rapidly increasing revenues from
these new products.
Cimetrix has invested significant resources to update our original
software products with the latest object oriented technology and add new
features required by the market. Considerable investments in research and
development have been made and will continue to be made to transition the
original software products to use the latest object oriented technology and add
new features required by the market. In addition, we are always listening to our
customers to learn new ideas for products to reduce their costs and improve
performance. CIM300 is an excellent example of this, and the market is
responding very positively.
-3-
Target Markets
Cimetrix has chosen a business approach of targeting specific vertical
markets that, need solutions for complex motion control; are adopting PC based
solutions; and understand the value of software based solutions. We then develop
expertise and specific product features for each market. This approach allows us
to continually broaden our potential market by adding new vertical markets. The
result of this screening process has us focused heavily in the electronics
markets, as they are most amenable to new technologies. It has also allowed us
to develop considerable expertise in using the SECS/GEM communications standards
for moving equipment data to host computers and the Internet. Each year, we will
select new verticals and develop products and channels to serve a new audience
of customers.
SMT Industry
The Surface Mount Technology (SMT) market includes all factory
equipment to produce and test printed circuit boards. Applications involve
high-speed multi-axis motion control with very tight integration with vision.
The need to connect factory equipment to host computer systems is growing in
importance. Typical equipment can cost up to $500,000 or more. This industry has
quickly adopted the use of PCs as equipment controllers and uses very few
proprietary controllers. With electronic components changing very rapidly, each
OEM is under pressure to create new faster machines in short time periods.
Cimetrix supplies software to most major suppliers in this industry and is
actively involved in industry organizations such as NEMI (National Electronics
Manufacturing Initiative) and IPC. One of the NEMI teams has produced and
released a specification on "Low Cost Controller APIs" aimed at defining an
industry standard for an Open Architecture Controller Application Programming
Interface (API). This specification was subsequently released by the IEEE
standards organization as IEEE PR 1533-1998 Low-Cost Open Architecture
Controller API Specification. Cimetrix has been significantly involved in the
development of this specification and has enhanced the CODE product to comply
with the specification.
Semiconductor Industry
The semiconductor industry includes the manufacturing, packaging and
testing of semiconductor wafers. It is a very large cyclical industry that spent
$48 billion in 2000 on semiconductor equipment. Starting last year, the
semiconductor industry began the migration from building 8-inch (200 mm) wafers
to building 12-inch (300 mm) wafers. This will require the wafer fabs to
significantly increase the level of automation. Processed in "boats" of 25
wafers, the product is both too heavy for workers to move in the fab and too
expensive (approximately $1 million per boat) to risk human error. The industry
organization (SEMI) has created many new standards to assist with and promote
increased automation. Management responded quickly to this opportunity by
building five new software products, named CIM300(TM), and staffing a new
separate division to quickly penetrate and support new customers. Shortly, we
will be offering new motion control products that will provide flexibility and
cost savings to semiconductor OEMs. Management expects this industry to have an
increasing role in future revenues.
-4-
Small Parts Assembly Industry
This industry assembles small parts such as cell phones, engine control
modules and disk drives. Accuracy, integration with vision, time to market, and
open architecture are all needs of this diverse industry. Long time Cimetrix
customers such as Delphi and Lucent are experts in deploying assembly cells.
These cells typically involve a small Cartesian or SCARA robot and require
integration with many other automation components. The CODE solution allows all
these components to be controlled with one PC instead of several different
proprietary controllers. Our new CIMBuilder(TM) product will add new potential
customers in this market.
Robotics Industry
Industrial robots are used for tasks that are tedious, repetitive and
exhausting for humans and typically are employed to reduce the costs and improve
the quality of highly labor-intensive tasks. Industrial robots are typically
multi-axis manipulators used for welding, painting and material handling
applications. The automotive industry is currently the primary end-user of
robots. Other end-users include the aerospace, steel, heavy equipment, packaging
and electronics industries.
Nearly all robot controllers are proprietary devices manufactured by
the major industrial robot vendors, which are supplied with their own robot
systems as a complete, proprietary solution. These robot controllers are only
compatible with robots supplied by the same vendor, and in many cases, are only
compatible with specific robot models of that vendor. These systems represent an
enormous technology investment "legacy," and are difficult and time consuming to
program, configure, implement and modify. The RIA (Robotic Industries
Association) has started an effort to address the use of open architecture
controllers for robots, but is meeting significant resistance from the
traditional robot OEMs. Cimetrix targets progressive robot manufacturers who see
the need for modern open solutions. Such was the case with SIG Pack, one of the
largest packaging machine OEMs in the world. Their robot division selected
Cimetrix CODE software as their standard solution in 2000.
Packaging Industry
The packaging industry supplies equipment that handles and prepares
products for shipment and display to customers. Packaging machines typically
involve high speed motion control and cover a wide range in terms of complexity.
Currently, proprietary controllers are used extensively, but the OMAC (Open
Modular Architecture Controls) group has formed a working group to specifically
drive packaging toward open controllers. Cimetrix, together with our partner
Siemens ISBU, have a good opportunity to grow in this industry depending on
their adoption of open controllers. Our new CIMBuilder product will offer good
advantages to OEMs. SIG Pack, is one of the largest OEMs in this industry. By
working closely with their robotics division, we will gain expertise and add
product features necessary to further penetrate this industry.
-5-
Machine Tool Industry (CNC Controllers)
Machine tools consist of metal cutting machines such as milling
machines, lathes, machining centers, grinders, and lasers; and metal forming
equipment such as press brakes, turret punches and tube benders. These machine
tools, which are used by a wide variety of manufacturers, utilize a computer
numerical control, or CNC type controller. Despite the PC revolution that has
taken place over the past decade, the underlying technology and software for
machine tool controllers has changed very little during the same period. Most
major machine tool manufacturers purchase proprietary controllers from several
CNC controller vendors. The interest level of tool manufacturers in open
architecture CNCs is very high. The proprietary CNC manufacturers are developing
ways to configure the graphical user interface of the CNCs so they appear to be
open. Cimetrix has not directly targeted this industry, but is actively looking
for a partner.
General Automation Industry (PLC and general-purpose motion controllers)
This segment includes general-purpose machinery, automotive, textiles,
packaging, food & beverage, and pharmaceutical markets. These markets typically
require less sophisticated motion control and very little communications with
host computers. The transition from proprietary to PC-based controllers has been
slow, partly because they use older software technologies. Soon this segment
will recognize the cost savings possible with the open architecture approach.
Through our partnership with Siemens and the development of new products, we
will begin targeting these industries in 2001.
The Movement Towards Open Architecture Controllers
Over the past 17 years, the primary driver for the revolution in and
proliferation of office technology was the standardization of the PC's operating
system, processors and buses. Expensive hardware components became commodities,
with powerful software applications delivering value to the system. The
evolution of software standards and Object Oriented design techniques
significantly increased the reliability of software applications due to software
re-use. The Company believes this movement to standards-based systems is still
in the beginning stages in manufacturing.
Currently, the automation control industry consists of a heterogeneous,
complex environment of vendor-specific machines and proprietary control systems,
which are limited in function and expensive to use. Motion controllers were
originally developed without the benefit of the powerful PCs and software design
tools available today. Robot and controller vendors were forced to develop
motion controllers internally, creating an environment in which each vendor's
system remains incompatible with the programming and interface methods of the
others. As a result, companies today have factory floors with islands of
automation, including robots, machine tools and assembly equipment, each
separated by vendor- specific hardware peripherals, operating systems and
programming languages. The proprietary nature of these systems constrains the
design of optimal workcells and prevents end-users from managing the factory
floor as a coordinated and unified technology platform. Proprietary control
vendors have responded to this challenge by introducing controllers with PC
"front-ends" that allow some level of changes primarily in the user interface.
True open architecture must occur from an open software design, which few
suppliers are willing to offer. At this point, it is unclear whether the
manufacturing end users will accept a PC front-end as a long-term solution.
-6-
Enabling Technologies Drive the Solution
The current environment of multiple, vendor-specific technology
platforms emerged from the motion control industry at a time when PCs were too
slow and standard computer operating systems lacked the power and flexibility
required for motion control operations. Until now, these vendors developed
motion controllers with proprietary hardware platforms, operating systems and
assembly code programming languages that often locked end-users into older,
slower, expensive solutions. The software tools on these controllers are
constrained by older, legacy hardware and proprietary operating platforms.
Hardware upgrades for simple items, such as expanded memory, can cost ten times
that of equivalent PC upgrades. Connections to host computers were expensive or
impossible. Today, the following improvements in PC technology have made most
vendor-specific solutions less desirable:
o PC technology has now advanced so significantly that today's low
cost PCs have several times more processing power than many higher
cost proprietary controllers.
o Software architecture design has shifted to using OO (Object
Oriented) analysis and design techniques, which result in
component based software solutions. This technology delivers
increased reliability and maximizes software re-use.
o The Microsoft Windows NT/2000 operating system has become the de
facto operating system in manufacturing. Features such as COM,
multi-tasking, multi-threading and real time capabilities have set
the stage for a common open software solution for machine motion
control. The recent introduction of NT Embedded allows further
tailoring of NT for industrial applications.
o New low cost motion control servo cards, machine vision
processor cards and I/O cards are now available from a variety of
vendors for use on standard PC platforms in the industrial
environment.
The Cimetrix Motion Control Solution
Cimetrix Open Development Environment (CODE(TM)) software is
the only software that currently provides all of the following
advantages:
1. Lower Hardware Costs. Because Cimetrix software products are
based on the PC computer platform and run on Microsoft's Windows
NT operating system, Cimetrix customers benefit from the
tremendous price/performance advantage of the PC platform. In
addition, the open architecture of Cimetrix software enables
Cimetrix customers to "mix and match" components to obtain the
optimal motion card, I/O subsystem and vision system for the
application.
2. Increased Software Reliability. The Cimetrix CODE products are
designed to allow our OEM and integrator customers to maximize
design and code re-use. By using OO design and redeploying
standard packages over multiple applications, reliability is
greatly enhanced.
3. Reduced Application Development Time. CODE utilizes an
extensive library of APIs to access the underlying Cimetrix motion
control and I/O control algorithms, which enable application
developers to program at very high levels using the programming
languages of their choice. Cimetrix customers estimate this
reduces development efforts for new applications by approximately
50%.
-7-
4. Reduced Time to Market. CODE contains two nearly identical
versions: (i) an off-line simulation version with output to a CRT
(CIMulation(TM)), and (ii) an on-line version with output to
motion control equipment (CIMControl(TM)). Unlike existing
systems, simulation and control are achieved with the same
application software and API set, enabling concurrent engineering
and reduced time to market. Cimetrix customers estimate the
ability to develop, test and debug an entire application in
simulation mode reduces the overall time to market by
approximately 30%.
5. Enhanced Safety. The simulation version of CODE allows
customers to develop and debug their application programs without
risking the safety of either employees or machines.
6. Customers control their own destiny. Cimetrix software provides
all of the software source code hooks for Cimetrix customers to
implement their own custom software or algorithms. This ensures
that Cimetrix customers control their own destiny and are able to
develop specialized or proprietary software to differentiate their
products.
7. Conforms to NEMI/IEEE Standard. Cimetrix CODE software
substantially conforms to the NEMI/IEEE standard for PC motion
controllers.
PRODUCTS
The Company has three main product families, the CODE
family, the Connect family, and the CIM300 family.
CODE (Cimetrix Open Development Environment)
CIMulation(TM): A version of the CIMServer in which workcell
operation is simulated on a graphical workstation. The graphical
simulation provides the programmer with an off-line, virtual
workcell, viewed as a three-dimensional solid model with fully
functional kinematics. All application programs can be directly
transported for use with CIMControl. CIMulation includes the CODE
API(TM), which is a standard C/C++ library of over 400 function
calls used for automation application development. It is also
available as an OO class structure. Functions are provided for
motion control, machine vision, I/O control, off-line collision
checking and other common workcell operations. In addition to
C/C++, customers can also develop their applications using Visual
Basic, Borland's Delphi and Cimetrix' CIMBuilder, a non-
programmers development environment based on the popular
IEC-61131-3 style of graphical programming. CIMulation uses the
same API set as CIMControl. There is no translation or post
processing required to run real machines.
CIMControl(TM): A version of the CIMServer which allows on-line
mechanism and I/O control through off-the-shelf servo and I/O
control cards. It turns any standards-based PC into an open
architecture controller. CIMControl also includes the CODE API.
Customer developed applications using CIMulation are directly
transportable to run on the physical mechanism using CIMControl.
Options include Conveyor Tracking and Tool Sensor Calibration.
CIMAppObjects(TM): A set of object oriented packages that solve
basic needs in customer's applications. This includes an
implementation of COM for the communication of data between
software components, a recipe handler, a diagnostics engine, and a
logging package. These packages allow faster development of OEM's
software applications, but still allow machine design
differentiation.
-8-
CIMBuilder(TM): An Integrated Development Environment (IDE) that
can be used to build customer applications instead of C++, VB or
Delphi. CIMBuilder includes technology from the Siemens Energy and
Automation Group and provides a graphical programming technique
complying with IEC-61131-3, a standard developed to program
programmable logic controllers. CIMBuilder enhances the standard
by allowing customers to program both motion and logic without
being computer programmers.
The Connect Family
CIMConnect(TM): A second generation communications product was
designed to provide protocol and message format neutral object
oriented solutions that allow communication between equipment on
the factory floor and host level systems. GEM is the current
standard for communications between manufacturing equipment and
the factory's host computer. Equipment builders have been
reluctant to provide GEM-compliant technology because of the
difficulty and cost associated with obtaining GEM compliance.
CIMConnect allows rapid implementation of GEM with a clear
migration to new emerging Internet based standards. Without
CIMConnect, it takes equipment builders between six months to one
year to add GEM compliance to their equipment. Cimetrix acquired
technology from SDI, in Vancouver, Washington in December 1999 to
broaden the communication line to solve semiconductor
communications in addition to those in the SMT industry. This
technology has been successfully integrated into CIMConnect and
sold to semiconductor accounts.
GEM Host Manager(TM) and Host Developer(TM): Products that allow a
host computer to receive data from GEM enabled equipment and
format the data for use by host computer applications to monitor
and control factories. GEM Host Manager has been designed
specifically for use in printed circuit board facilities. Host
Developer is specifically designed for wafer fabs.
TESTConnect(TM): A product to test and configure SECS/GEM inter-
faces.
The CIM300 Family
CIM300(TM): A new family of products that allows 300mm
semiconductor tools to comply with the SEMI 300mm connectivity
standards. Individual products have been developed for SEMI
standards E39, E40, E87, E90, and E94. There are currently eight
new customers using these products on their new 300mm tools. In
2001, Cimetrix will introduce an additional three new products for
that comply with SEMI standards E41, E42, and E58. As the
semiconductor industry rapidly moves to 300mm production, CIM300
will lead the way for our motion and SECS/GEM products.
Competition
The manufacture and sale of automation technology is a highly
competitive industry. Cimetrix believes that its competition is divided into two
groups: in-house developed controllers and open controller suppliers.
-9-
In-house developed controllers are potentially competition, but more
importantly, they are potential customers. Robot manufacturers, CNC suppliers,
and electronics equipment suppliers all develop their own controllers, some on
PC platforms and some on proprietary hardware. They have problems hiring top
software talent that have experience with the latest Microsoft technologies.
Cimetrix offers a distinct advantage to them by increasing software quality
through our re-use techniques, decreasing the time to market for a new open
architecture controller, and assisting the transition of their engineering staff
to the latest technologies such as COM, UML and object oriented analysis and
design techniques. The Company's CODE and equipment communications software
products offer these advantages.
Open controller suppliers are currently a small segment of the overall
controls market. They are mostly small undercapitalized companies. Steeplechase,
Nematron, and ASAP all market PC-based controllers aimed primarily at sequence
control (I/O). Larger proprietary controller companies have recently purchased
several of them. They typically do not have robust motion solutions and target
different markets than Cimetrix. Management expects to see additional
competitors emerge in this group. None of these competitors offer equipment
communications software products.
In the 300mm connectivity market, Cimetrix has two main competitors, GW
Associates and Yokogawa. Both have considerable expertise in semiconductor fabs
and will be formidable competitors.
Management believes that most, if not all, of the Company's competitors
currently have greater financial resources and market presence than Cimetrix.
Accordingly, these competitors may be able to compete very effectively on
pricing and to develop technology to increase the flexibility of their products.
Further, each of these competitors has already established a share of the market
for their products, and may find it easier to limit market penetration by the
Company because of the natural tie-in of their controllers and software to their
mechanisms. Management is uninformed as to whether any of these competitors are
presently developing additional technology that will directly compete with the
Company's product offerings.
Sales and Marketing
The sales and marketing team is responsible for identifying key
end-user customers and the top-tier OEM machine suppliers in each primary
market. The Company's direct sales force is coordinated by an Executive Vice
President of Sales, the President of the semiconductor division and three
regional sales managers. Each salesperson is responsible for pursuing potential
customer leads in his or her territory and for qualifying customer
relationships. The Company's sales offices are located in Salt Lake City, Utah,
Boston, Massachusetts, San Jose, California and Chicago, Illinois. In addition,
we have distributors or resellers located in Vancouver, Washington, Europe,
Taiwan, Korea and Japan.
Operations
The Company's software operations are conducted through four principal
teams: Software Development, Quality Assurance, Applications and Customer
Support. These teams are responsible for defining and developing new products,
testing such products, performing initial product integration with key OEMs and
all aspects of customer support and manufacturing. The Company's strategy is to
develop standard software products that have been thoroughly tested and
deliver/support these products using major OEMs as the key channel to market. A
comprehensive Software Quality Program and rigid coding standards are keys to
the development process.
-10-
Intellectual Property Rights
The open architecture controller technology upon which the Company's
CODE software is based was developed from 1984 to 1989 by a team of Brigham
Young University engineers led by Dr. W. Edward Red. Effective July 5, 1995,
Cimetrix purchased from Brigham Young University all the rights, title, interest
and benefit from this intellectual property.
In December of 1999, the Company purchased the software products of
Plug n' Work, Inc., formerly known as Object Factory, Inc. of Greenville, South
Carolina. Plug n' Work's software products, which were marketed under the name
AART(TM), provide a graphical programming technique similar to programming a
programmable logic controller. Due to licensing problems, the Company will not
market AART to new customers, but will continue to support existing AART
customers. In addition, key AART technologies are being incorporated into the
Company's new motion control products.
In December of 1999, the Company also purchased the software products
of Systematic Designs International, Inc. ("SDI"), of Vancouver, Washington.
These newly acquired products have broadened the Company's communication product
line to include semiconductor industry communications solutions.
The technology purchased from Brigham Young University, Plug n' Work,
Inc, and SDI, along with other technology developed internally, is proprietary
in nature. The Company has obtained two patents on certain aspects of the
technology, issued in May 1989 and March 1994, respectively. In addition, the
Company has registered its entire CODE software system with the US Copyright
Office, and will continue to timely register any updates to current products or
any new products acquired through acquisitions. For the most part, other than
the two patents and the copyright registrations, the Company relies on
confidentiality and non-disclosure agreements with its employees and customers,
appropriate security measures, and the encoding of its software to protect the
proprietary nature of its technology. No cost has been capitalized with respect
to the patents.
Major Customers and Foreign Sales
In 2000, three customers accounted for 18%, 16% and 15% of the
Company's revenues respectively, while sales to affiliates accounted for 5% of
revenues. No other single customer accounted for more than 10% of Company
revenues in 2000. In 1999, two customers accounted for 34% and 12% of the
Company's revenues, respectively, with sales to affiliates accounting for 17% of
revenues. No other single customer accounted for more than 10% of the Company's
revenues in 1999. In 1998, three customers accounted for 37%, 11% and 10% of the
Company's revenues respectively, with sales to affiliates accounting for 8% of
revenues. No other single customer accounted for more than 10% of revenues in
1998.
The Company continued its ownership of Aries, Inc., a private Japanese
corporation and currently holds approximately 12% of its outstanding shares of
stock. Aries, Inc. is the Company's distributor in Japan. Sales to Aries
represented 5%, 17% and 8% of the Company's total sales in 2000, 1999 and 1998,
respectively.
For the year ended December 31, 2000, revenues from export sales were
40%, of which 5% were to affiliates.
-11-
The following table summarizes domestic and export sales, as a percent of total
sales, for the three years ended 2000, 1999 and 1998:
Year Ended December 31,
2000 1999 1998
---- ---- ----
Domestic sales 60 33 46
Export sales 40 67 54
Personnel
As of March 29, 2001, the Company had 38 employees, 27 of whom are involved
in the technical development and support of customers and products, six in sales
and marketing, with the remainder in finance and administrative positions. None
of the employees of the Company are represented by a union or subject to a
collective bargaining agreement, and the Company considers its relations with
its employees to be favorable.
Executive Officers
David P. Faulkner, Office of the President, Executive Vice President of
Marketing, age 45, joined the Company in August 1996. Mr. Faulkner was
previously employed as the Manager of PLC Marketing, Manager of Automotive
Operations and District Sales Manager for GE Fanuc Automation, a global supplier
of factory automation computer equipment specializing in programmable logic
controllers, factory software and computer numerical controls from 1986 to 1996.
Mr. Faulkner has a B.S. Degree in Electrical Engineering and a Masters Degree in
Business Administration from Rensselaer Polytechnic Institute.
Robert H. Reback, Office of the President, Executive Vice President of
Sales, age 41, joined Cimetrix as Vice President of Sales in January 1996 and
was promoted to Executive Vice President of Sales in January, 1997. Mr. Reback
was the District Manager of Fanuc Robotics' West Coast business unit from 1994
to 1995. From 1985 to 1993 he was Director of Sales/Account Executives for
Thesis, Inc., a privately-owned supplier of factory automation software and was
previously a Senior Automation Engineer for Texas Instruments. Mr. Reback has a
B.S. Degree in Mechanical Engineering and a M.S. Degree in Industrial
Engineering from Purdue University.
Steven D. Hausle, President Semiconductor Division, age 50, joined
Cimetrix in May 2000. Prior to coming to Cimetrix Mr. Hausle was Executive Vice
President for GW Associates from 1998-2000, which is a privately owned software
developer. As President of the sales and marketing firm Bridgetek, Inc. from
1988 to 1998 he brought leading edge technology start-up firms to market. From
1986 to 1988 Mr. Hausle was Vice President Sales and Marketing for Flexible
Manufacturing Systems, a very early adopter of Automated Material handling and
CIM software. And in 1983 to 1986 he was a key member of the management team
that started Prometrix Inc., which is now part of KLA-Tencor. Mr. Hausle holds a
B.S. Degree from Santa Clara University.
Michael D. Feaster, Vice President of Software Development, age 30,
joined the Company in April 1998, as Director of Customer Services. In December
1998, Mr. Feaster was promoted to Vice President of Software Development. From
1994 to 1998, Mr. Feaster was employed at Century Software, Inc., as the Vice
President of Software Development, directing 25 engineers. During that time,
Century Software, Inc., was a global supplier of PC to UNIX connectivity
software, specializing in internet access of Windows to legacy mission critical
applications. From 1988 to 1994 he served as a software engineer
contractor/subcontractor for such companies as Fidelity Investments, IAT, Inc.,
NASA, and Mexico's Border Inspection Division.
-12-
Riley G. Astill, Vice President of Finance, Chief Financial Officer,
age 40, originally joined Cimetrix as Controller, in July, 1994. He remained
Controller until October, 1996, when he left the Company prior to its moving to
Tampa, Florida. Mr. Astill rejoined Cimetrix as Vice President of Finance in
December, 1997. Mr. Astill was Controller of a privately held Salt Lake City
publisher from 1991 to 1994. From 1990 to 1991, he was a Senior Accountant for
Oryx Energy Company. From 1988 to 1990 he was an Accountant for Ernst & Young in
Dallas Texas. He has a B.S. Degree in Accounting from the University of Utah and
a Masters Degree in Accounting from Utah State University.
Dr. Steven K. Sorensen, Vice President and Chief Engineer, age 42, joined
the Company in 1990. Prior to joining Cimetrix, Dr. Sorensen was an Associate
Professor at Brigham Young University, where he received his Ph.D. in Mechanical
Engineering. Dr. Sorensen has been working to develop the Cimetrix technology
for the past thirteen years and is one of the principal architects of many of
the Company's most important products.
FORWARD LOOKING STATEMENTS CAUTIONARY STATEMENT
Statements regarding the future prospects of the Company must be
evaluated in the context of a number of factors that may materially affect its
financial condition and results of operations. Disclosure of these factors is
intended to permit the Company to take advantage of the safe harbor provisions
of the PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Most of these factors
have been discussed in prior filings by the Company with the Securities and
Exchange Commission. Although the Company has attempted to list the factors that
it is currently aware may have an impact on its operations, other factors may in
the future prove to be important and the following list should not necessarily
be considered comprehensive.
1. EMPHASIS OF MATTER IN AUDITOR'S REPORT. The opinion rendered by Tanner +
Co., the Company's independent auditors, on the financial statements of the
Company states as of December 31, 2000 the Company earned a net income of
$513,000. The Company had an accumulated deficit of $18,488,000 at December 31,
2000.
2 LIMITED WORKING CAPITAL; Limited Operating History; Accumulated Deficit;
Anticipated Losses. As of December 31, 2000, the Company had working capital of
$5,261,000. The Company also has an accumulated deficit of $18,488,000 as of
December 31, 2000. Such losses have resulted principally from costs incurred in
connection with research and development and marketing of the Company's motion
control and communications software product suites. CODE motion control software
was introduced commercially in October 1995. The Company's communications
products, GEM, CIMConnect and CIM300 were introduced during 1997, 2000, and 2000
respectively. The likelihood of success of the Company must be considered in
light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the development of new products and
the competitive environments in the industry in which the Company operates.
There can be no assurance that the Company will not encounter substantial delays
and unexpected expenses related to research, development, production, marketing
or other unforeseen difficulties.
3. INCOME TAXES. The Company had available at December 31, 2000, unused tax
operating loss carry forwards of approximately $14,000,000 that may be applied
against future taxable income, which begin to expire in 2004. Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (FASB 109)
requires the Company to provide a net deferred tax asset or liability equal to
the expected future tax benefit or expense of temporary reporting differences
between book and tax accounting and any available operating loss or tax credit
carry forwards. At December 31, 2000, the total of all deferred tax assets was
approximately $6,500,000. Because of the uncertainty about whether the Company
will generate sufficient future taxable income to realize the deferred tax
assets, the Company has established a valuation allowance of approximately
$6,500,000 to offset all of its deferred tax assets.
-13-
4. DEPENDENCE ON SIGNIFICANT CUSTOMERS. Customer "A", "B" and "C" accounted
for approximately 18%, 16% and 15% of the Company's revenues, respectively, in
2000. Customer "D" accounted for approximately 34% and 37% of the Company's
revenues in 1999 and 1998, respectively. Customer "E" accounted for
approximately 12% of the Company's revenues in 1999. Customers "F" and "G"
accounted for approximately 11% and 10% of the Company's revenues in 1998. The
loss of any customer's business could have a material adverse effect on the
Company. Additionally, the quantity of each customer's business with the Company
depends substantially on market acceptance of their products that utilizes the
Company's software products and the development cycle of the customer's
products. The Company could be materially adversely affected by a downturn in
either customer's sales or their failure to meet sales expectations. The Company
will likely from time to time have other customers that account for a
significant portion of its business.
5. DEPENDENCE ON RELATIVELY NEW PRODUCTS. The Company has only recently
begun to install and implement its products with customers. CODE motion control
software was introduced commercially in October 1995. The Company's
communications products, GEM, CIMConnect and CIM300 were introduced during 1997,
2000, and 2000 respectively. In addition, the Company only began to introduce
commercially in 2000, its new software products recently purchased from SDI and
Plug n' Work. As a result, the Company has only limited history with these
products, and there can be little assurance that they will achieve market
acceptance. The Company's future success will depend on sales of these products,
and the failure of these products to achieve market acceptance would have a
materially adverse effect on the Company. In addition, the Company has limited
experience with the installation, implementation and operation of its products
at customer sites. There is no assurance that the Company's products will not
require substantial modifications to satisfy performance requirements or to fix
previously undetected errors. If customers were to experience significant
problems with the Company's products, or if the Company's customers were
dissatisfied with the products' functionality, performance, or support, the
Company would be materially adversely affected.
6. PRODUCT LIFE CYCLE; NEED TO DEVELOP NEW PRODUCTS AND ENHANCEMENTS.
The markets for the Company's products are new and emerging. As such, these
markets are characterized by rapid technological change, evolving requirements,
developing industry standards, and new product introductions. The dynamic nature
of these markets can render existing products obsolete and unmarketable within a
short period of time. Accordingly, the life cycle of the Company's products is
difficult to estimate. The Company's future success will depend in large part on
its ability to enhance its products and develop and introduce, on a timely
basis, new products that keep pace with technological developments and emerging
industry standards. The success of the Company's software development efforts
will depend on various factors, including its ability to integrate these
products with third-party products. If a competitor succeeds in duplicating or
surpassing the Company's technological advances, the Company's prospects might
be materially adversely affected.
7. COMPETITION. The automation technology market is extremely competitive.
Management believes that most, if not all, of the Company's competitors
currently have greater financial resources and market presence than it does.
Accordingly, these competitors may be able to compete very effectively on
pricing and to develop technology to increase the flexibility of their products.
Further, manufacturers of industrial robots, machine tools, and other automation
equipment which use their own proprietary controllers and software have already
established a share of the market for their products and may find it easier to
limit market penetration by the Company because of the natural tie-in of their
controllers and software to their mechanisms. Management is uninformed as to
whether any of these competitors are presently developing additional technology
that will directly compete with the Company's product offerings.
-14-
8. EXPORT SALES. Export sales accounted for approximately 40%, 67% and 54%
of the Company's business in 2000, 1999 and 1998, respectively. To service the
needs of these customers, the Company must provide worldwide sales and product
support services. There are a number of risks inherent in international
expansion, including language barriers, increased risk of software piracy,
unexpected changes in regulatory requirements, tariffs and other trade barriers,
costs and risks of localizing products for foreign companies, longer account
receivable cycles and increased collection risks, potentially adverse tax
consequences, difficulty in repatriating earnings, and the burdens of complying
with a wide variety of foreign laws. Thus far, all the Company's export sales
have been payable in United States dollars.
9. DEPENDENCE ON CERTAIN INDIVIDUALS. The Company is highly dependent on
the services of its key managerial and engineering personnel, including, David
P. Faulkner, Office of the President and Executive Vice President of Marketing,
Robert H. Reback, Office of the President and Executive Vice President of Sales,
Steven D. Hausle, President Semiconductor Division, Michael D. Feaster, Vice
President of Software Development and Steven K. Sorensen, Vice President and
Chief Engineer. Any material change in the Company's senior management team
could adversely affect the Company's profitability and business prospects. The
Company does not maintain key man insurance for any of its key management and
engineering personnel.
10. COPYRIGHT PROTECTION AND PROPRIETARY INFORMATION. The Company's
software innovations are proprietary in nature, and the Company has obtained
copyright protection for them. It is possible, however, for infringement to
occur. Although the Company intends to prosecute diligently any infringement of
its proprietary technology, copyright litigation can be extremely expensive and
time-consuming, and the results of litigation are generally uncertain. Further,
the use by a competitor of the Company's proprietary software to create similar
software through "reverse engineering" may not constitute an infringing use. The
Company relies on confidentiality and nondisclosure agreements with employees
and customers for additional protection against infringements, and the Company's
software is encoded to further protect it from unauthorized use.
11. CONTROL. Investors in the Common Stock (through exercise of the Options
or Warrants) will be entitled to vote in the election of the Company's
directors, but will not be entitled to separate board representation. The
executive officers and directors of the Company have direct or may be deemed to
have direct ownership of approximately 29.14% of the outstanding shares of
Common Stock of the Company. The voting power represented by these shares,
though not an absolute majority, is probably sufficient to provide effective
control over most affairs of the Company.
12. MARKETABILITY OF COMMON STOCK. The Company's Common Stock is currently
traded through only a few market makers, but is not listed on any securities
exchange or quoted on an automated interdealer quotation system, which would
provide automated quotations of the stock's price. Trading through market makers
tends to limit the volume of sales and can cause wide fluctuations in a stock's
price, based on the available supply and demand for the stock at any particular
time.
13. ANTI-TAKEOVER PROVISIONS. Certain provisions of the Nevada General
Corporation Law have anti-takeover effects and may inhibit a non-negotiated
merger or other business combination. These provisions are intended to encourage
any person interested in acquiring the Company to negotiate with, and to obtain
the approval of, the Company's Board of Directors in connection with such a
transaction. However, certain of these provisions may discourage a future
acquisition of the Company, including an acquisition in which the shareholders
might otherwise receive a premium for their shares. As a result, shareholders
who might desire to participate in such a transaction may not have the
opportunity to do so. See "Description of Securities -- Certain Provisions of
Nevada Law."
-15-
14. QUARTERLY FLUCTUATIONS. The Company has experienced quarterly
fluctuations in operating results and anticipates that these fluctuations will
continue. These fluctuations have been caused by various factors, including the
capital procurement practices of its customers and the electronics industry in
general, the timing and acceptance of new product introductions and
enhancements, and the timing of product shipments and marketing. Future
operating results may fluctuate as a result of these and other factors,
including the Company's ability to continue to develop innovative products, the
introduction of new products by the Company's competitors, the Company's product
and customer mix, the level of competition and overall trends in the economy.
15. POSSIBLE VOLATILITY OF STOCK PRICE. The Company believes that factors
such as the announcement of new products by the Company or its competitors,
market conditions in the electronics industry in general, and quarterly
fluctuations in financial results, could cause the market price of the Common
Stock to vary substantially. In recent years, the stock market has experienced
price and volume fluctuations that have particularly affected the market prices
for many high technology companies and which often have been unrelated to the
operating performance of such companies. The market volatility may adversely
affect the market price of the Company's Common Stock.
ITEM 2. PROPERTIES
The Company operates in a leased facility located at 6979 South High
Tech Drive, Midvale, Utah (about six miles south of Salt Lake City). The Company
signed a five year lease beginning in March of 1997. The facility consists of
32,000 square feet, of which 20,000 square feet is office and engineering space
and 12,000 square feet is warehouse and storage space.
In December 1999, the Company entered into a six month lease, for
$2,350 per month, for a residential property, which was provided rent-free to
the President and other employees and visiting customers as temporary
accommodations. The lease term on this property was extended through June 30,
2001, and is now used primarily by visiting customers and traveling employees.
The Company does not intend to renew the lease beyond June.
ITEM 3. LEGAL PROCEEDINGS
Manley Litigation
An action was brought against the Company in August 1998 by Peter and
Jana Manley in the Third District Court of Salt Lake County, State of Utah. The
thrust of the claims by the Manleys relate to rights pertaining to approximately
180,000 shares of stock in the Company. In the complaint, declaratory relief is
sought to have all restrictions removed from the stock of the Manleys and that
the Company not hinder in any way the transfer or sale of the stock. Other
claims include conversion, refusal to allow transfer of stock, lost profits
because of an asserted inability to have restrictions removed and the Manleys
being able to transfer their stock, breach of Stock Option Agreement and Stock
Option Plan, intentional interference with economic relations,
quantum-meruit-contract implied in fact, promissory estoppel/detrimental
reliance, civil conspiracy and breach of good faith and fair dealing.
In the prayer for relief, the Manleys seek a declaration that all
restrictions including the Rule 144 restrictive legend be removed from the
stock, stop transfer orders be removed, that the Company cease and desist from
preventing the Manleys from selling their stock, judgment for direct and
consequential damages, punitive damages, costs, attorney's fees and a demand for
a jury trial.
-16-
On or about February 9, 2001, the Manleys filed a Motion for Partial
Summary Judgment, seeking a declaration that they are the sole owners of the
Cimetrix shares of stock, that the shares be held free of any restrictions and a
judgment for damages based on the difference in the value of the stock on the
date the Rule 144 restrictions should have been lifted and the date on which
they were actually lifted- $5.50 per share for the 180,722 shares of Cimetrix
stock, totaling $993,971.
Although Management believes that there is a reasonable likelihood that
the Company will prevail and that its claims are meritorious, the Company is
unable to predict the outcome of the litigation. Should plaintiffs prevail, this
would have a material adverse effect on the Company's financial condition.
The Company answered the complaint and filed a counterclaim. The
counterclaims asserts material misrepresentations concerning technology. Claims
against Mr. Manley include fraud in the inducement, common law fraud,
declaration and return of shares of stock against both of the Manleys, breach of
contract against both of the Manleys, fraud in the inducement against Mr.
Manley, breach of covenant of good faith and fair dealing against Mr. Manley.
Plug n' Work Litigation
On April 5, 2000, the Company filed suit in Utah State Court against
Plug n' Work, Scott McCrary and John Fisher (the "Plug n' Work Shareholders").
The Company brought this action alleging that the Plug n' Work Shareholders
failed to disclose significant material liabilities with respect to the
intellectual property purchased from Plug n' Work in December 1999.
On September 19, 2000, the Company also filed suit in Utah State Court
against Advanced Automation. The Company brought this action alleging that
Advanced Automation failed to disclose significant material liabilities with
respect to the intellectual property purchased from Plug n' Work in December
1999.
In both cases the defendants filed counterclaims; however, both were
settled on February 2, 2001. As part of the settlement, 400,000 shares of the
original 1,200,000 shares issued for the purchase, were returned to the Company.
The Company is satisfied with the settlement and the return of the shares.
The Company is not a party to any other material pending legal
proceedings and, to the best of its knowledge, no such proceedings by or against
the Company have been threatened. To the knowledge of management, there are no
material proceedings pending or threatened against any director or executive
officer of the Company, whose position in any such proceeding would be adverse
to that of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders
during the quarter ended December 31, 2000.
-17-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of the Company is being quoted on the NASDAQ Bulletin
Board under the symbol "CMXX". The table below sets forth the high and low bid
prices of the Company's common stock for each quarter during the past three
fiscal years. The quotations presented reflect inter-dealer prices, without
retail markup, markdown, or commissions, and may not necessarily represent
actual transactions in the common stock.
Common Stock
Period (Calendar Year) Price Range
1998 High Bid Low Bid
-------------- -------- -------
First quarter $ 2.13 $ 1.44
Second quarter $ 1.97 $ 1.25
Third quarter $ 2.56 $ 1.19
Fourth quarter $ 1.50 $ .56
1999
--------------
First quarter $ 1.19 $ .31
Second quarter $ 1.03 $ .45
Third quarter $ 4.06 $ .56
Fourth quarter $ 3.50 $ 1.88
2000
--------------
First quarter $ 7.00 $ 2.25
Second quarter $ 5.31 $ 3.00
Third quarter $ 3.50 $ 1.88
Fourth quarter $ 2.38 $ 1.13
2001
--------------
First quarter (as of 3/29/01) $ 3.31 $ 1.25
On March 29, 2001, the closing quotation for the Company's common stock
on the NASDAQ Bulletin Board was $1.44 per share. Potential investors should be
aware that the price of the common stock in the trading market can change
dramatically over short periods as a result of factors unrelated to the earnings
and business activities of the Company.
On March 29, 2001, there were 24,057,690 shares of common stock issued
and outstanding, held by approximately 3,000 beneficial shareholders.
To date, the Company has not paid dividends with respect to its common
stock. There are no restrictions on the declaration or payment of dividends set
forth in the Articles of Incorporation of Cimetrix or any other agreement with
its shareholders. Management anticipates retaining any potential earnings for
working capital and investment in growth and expansion of the business of the
Company and does not anticipate paying dividends on the common stock in the
foreseeable future.
-18-
Treasury stock of the Company is recorded at cost and is disclosed in
the Stockholders' Equity section of the Company's financial statements. The
Company has no plan to resell its treasury shares or issue additional shares of
stock unless it has a need for additional working capital.
Options
As of March 29, 2001, there were issued and outstanding, options for
the purchase of 1,455,000 shares of the Company's common stock, under the
Company's 1998 Stock Option Plan. A total of 2,000,000 shares of common stock
have been reserved for issuance under this plan. The following table summarizes
the quantity and exercise price of the options.
Option Price Quantity
------------ --------
$2.50 820,000
$3.00 365,000
$3.50 270,000
-------
Total Options 1,455,000
Approximately 452,000 of these outstanding options are registered for
resale, pursuant to a Form S-3 Registration Statement, which became effective
December 9, 1998. These options will begin to expire in December 2002, and
continue to expire through February 2005.
As of March 29, 2001, there were issued and outstanding , options for
the purchase of 354,000 shares of the Company's common stock, under the
Company's Director Stock Option Plan. Of these options, 258,000 are exercisable
at $2.50 per share, and 96,000 are exercisable at $3.50 per share. Approximately
162,000 of these options are registered for resale, pursuant to the Form S-3
Registration Statement discussed earlier in this section. These options will
begin to expire in January 2003, and continue to expire through July 2004.
Senior Notes and Common Stock Warrants
As of March 29, 2001, there were $2,681,000 of the Company's Senior
Notes issued and outstanding, held by approximately 50 bondholders. The Senior
Notes are due and payable September 30, 2002. There were also 3,306 warrants
issued with the Senior Notes, issued and outstanding, held by approximately 50
warrant holders. The number of potential shares represented by these outstanding
warrants is 826,500, or 250 shares for each warrant. The exercise price for the
warrants is $2.50 per share, with the warrants expiring October 1, 2002. The
underlying shares from the outstanding warrants were registered for resale
pursuant to the Form S-3 Registration Statement discussed earlier in this
section.
Subsequent Events
Significant events which occurred subsequent to the close of the
Company's fiscal year ended December 31, 2000 are discussed below.
On January 30, 2001, Paul A. Bilzerian resigned as President of the
Company. The Board of Directors appointed Robert H. Reback, the Company's
Executive Vice President of Sales, and David P. Faulkner, the Company's
Executive Vice President of Marketing, to the Office of the President. The Board
of Directors believes that Messrs. Reback and Faulkner have the experience and
capabilities to effectively run the Company and to achieve the Company's
objectives.
-19-
On February 2, 2001, the Company agreed to settle all outstanding
litigation with Plug n' Work, with respect to the intellectual property
purchased from Plug n' Work in December 1999. As part of the settlement, 400,000
shares of the original 1,200,000 shares issued for the purchase, were returned
to the Company. The Company is satisfied with the settlement and the return of
the shares. This legal action is discussed above in Item 3. Legal Proceedings.
On February 9, 2001, Peter H. Manley and Jana Kay Manley, plaintiffs,
filed a Motion for partial Summary Judgment with respect to litigation they
initiated against Cimetrix August 6, 1998. In their motion, plaintiffs seek a
declaration that they are the sole owners of approximately 180,000 shares of
Cimetrix common stock, that the shares may be held free of any restrictions and
a judgment for damages totaling $993,971. This legal action is discussed above
in Item 3. Legal Proceedings.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from the Company's
audited financial statements, and should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of this Form 10-K and the financial statements and
notes thereto included in Item 8 of this Form 10-K.
Statements of Operations Data
Years ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(in thousands, except per share data)
Revenues $ 5,900 $ 3,853 $ 4,161 $ 2,195 $ 2,396
Operating Expenses:
Cost of revenues 647 103 454 1,057 1,342
Selling, marketing and
customer support 1,128 734 713 1,066 1,494
Research and development 1,595 1,508 1,479 2,008 1,179
General and administrative 1,995 1,281 1,854 2,288 1,577
Impairment loss - - 3,526 - -
Compensation - stock options - 12 20 234 685
----------- ---------- ----------- ---------- -----------
Total operating expenses 5,365 3,638 8,046 6,653 6,277
----------- ---------- ----------- ---------- -----------
Income (loss) from operations 535 215 (3,885) (4,458) (3,881)
----------- ---------- ----------- ---------- -----------
Net Income (loss) $ 513 $ 102 $ (4,070) $ (4,490) $ (3,455)
=========== ========== =========== ========== ===========
Income (Loss) per
common share $ .02 $ .01 $ (.17) $ (.20) $ (.19)
=== === ===== ===== =====
Dividends per common share - - - - -
=== === === === ===
Balance Sheet Data
Current assets $ 6,040 $ 2,590 $ 2,839 $ 2,802 $ 4,220
Current liabilities 779 883 398 623 1,344
Working capital 5,261 1,707 2,441 2,179 2,876
Total assets 13,126 9,374 3,762 8,019 9,227
Total long-term debt 2,704 2,681 2,691 3,546 296
Stockholders' equity 9,643 5,810 673 3,850 7,631
-20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Following is a brief discussion and explanation of significant
financial data, which is presented to help the reader better understand the
results of the Company's financial performance for 2000. The information
includes discussions of revenues, expenses, capital resources and other
significant items. Generally the information is presented in a three year
comparison format using 2000, 1999 and 1998 data.
Statements of Operations Summary
The following table sets forth the percentage of costs and expenses to
net revenues derived from the Company's Statements of Operations for each of the
three preceding fiscal years.
Year Ended December 31,
2000 1999 1998
Net revenues 100.0% 100.0% 100.0%
------ ------ ------
Operating expenses:
Cost of revenues 11 3 11
Selling, marketing and
customer support 19 19 17
Research and development 27 39 36
General and administrative 34 33 45
Compensation - stock options 0 0 1
Impairment Loss 0 0 85
---- ---- ----
Total operating expenses 91 94 193
---- ---- ----
Income (loss) from operations 9 6 (93)
Interest income, net of expense (1) (5) (5)
Other income (expenses) 1 2 1
---- ---- ----
Net Income (loss) 9% 3% (98)%
==== ==== ====
Net Revenues
Net revenues for the three fiscal years ended December 31, 2000, 1999,
and 1998 were $5,900,000, $3,853,000, and $4,161,000 respectively. Net revenues
for 2000 increased $2,047,000, or 53%, from the same period in 1999. The
increase in revenues was primarily due to the addition of new software products
that the Company began selling in 2000.
Net revenues for 2000 included approximately $4.87 million of software
revenue, $571,000 of application engineering revenue, and the remainder from
support agreements and training. Net revenues for 1999 included approximately
$3.1 million of software revenue, $265,000 of application engineering revenue
and the remainder from support agreements and training. Net revenues for 1998
included approximately $3 million of software revenue, $685,000 of application
engineering revenue and the remainder from support agreements and training.
-21-
The following table summarizes net revenues by categories, as a percent
of total net revenues:
Year Ended December 31,
2000 1999 1998
---- ---- ----
Software revenues 83 81 73
Application revenues 10 7 17
Support/training revenue 7 12 10
The above results from 2000 reflect the Company's efforts to focus on
its OEM software sales channels and cultivate new OEM software customers.
Cost of Revenues
The Company's cost of revenues as a percentage of net revenues for the
years ended December 31, 2000, 1999, and 1998 were approximately 11%, 3%, and
11%, respectively. The cost of revenues increased $544,000, or 528%, to $647,000
in 2000, from $103,000 in 1999. This increase is attributable to commissions
expense on sales made by a third party and payment of application and software
integration services provided by a third party.
The cost of revenues from software revenue was approximately 7% while
the cost of revenues from applications engineering and support was approximately
22%. The increase in cost of revenues for software sales is attributable to
commission sales made in 2000, which were not present in prior years.
Selling, Marketing and Customer Support
Selling, marketing and customer support expenses increased $394,000, or
54%, to $1,128,000 in 2000, from $734,000 in 1999. This substantial increase is
attributable to the costs the Company incurred to establish its semiconductor
division, which markets and sells the Company's newly released semiconductor
products. As this is a relatively new market segment for the Company, related
sales and marketing expenses are expected to rise modestly through 2001in order
to meet anticipated demand for the Company's products.
Selling, marketing and customer support expenses in 2000, 1999 and 1998
reflected the payroll and related travel expenses of full-time sales, marketing
and customer support personnel, the development of product brochures and other
marketing material, and the costs related to the Company's representation at
trade shows.
Research and Development
Research and development expenses increased by $87,000, or 6%, to
$1,595,000 in 2000, from $1,508,000 in 1999. These costs remained fairly
constant due to the Company's efforts to better allocate and control software
development expenditures. The small increases from year to year are due to the
addition of technical personnel.
The Company's continued efforts to develop its motion control and
communications products for Microsoft WindowsNT/2000, represented the majority
of the research and development expenditures during 2000.
Research and development expenses include only direct costs for wages,
benefits, materials, and education of technical personnel. All indirect costs
such as rents, utilities, depreciation and amortization are reflected in general
and administrative expenses, discussed below.
-22-
General and Administrative
General and administrative expenses increased $714,000, or 56%, to
$1,995,000 in 2000, from $1,281,000 in 1999. The majority of this increase is
due to the to the increase in amortization expense of software technologies,
acquired in 1999 through stock transactions. The acquired software technologies,
valued at approximately $6,000,000, are being amortized over a period of 12
years, resulting in approximately $500,000 of amortization expense annually. As
a result of the return of 400,000 shares of common stock from the settlement of
the Plug n' Work litigation with the Plug n' Work Shareholders, future
amortization will be reduced accordingly. Increases in legal and rent expense
attributed for the balance of the increase in general and administrative costs
for the year.
General and administrative costs include all direct costs for
administrative and accounting personnel, all rents and utilities for maintaining
Company offices. These costs also include all indirect costs such as
depreciation of fixed assets and amortization of intangible assets. Depreciation
and amortization expense for 2000 increased $489,000 or 160%, to $795,000, from
$306,000 in 1999. In 2000 depreciation and amortization expenses represented 40%
of all general and administrative expenses, compared to 24% in 1999.
Other Income (Expenses)
Interest income increased by $157,000, or 242%, to $222,000 for 2000,
from $65,000 for 1999. Improved operating results have allowed the Company to
maintain a cash reserve. In addition, in the first quarter of 2000, the Company
raised an additional $4,250,000 in a private placement for operating capital.
All cash reserves are invested in conservative money market and bond mutual fund
accounts.
Interest expense decreased by $2,000, or 1%, to $268,000 for 2000, from
$270,000 for 1999. This decrease was primarily attributable to the retirement of
interest bearing notes, other than the Company's 10% Senior Notes. The balance
outstanding on the Senior Notes as of December 31, 2000 was $2,681,000, the same
as in 1999. Interest expense on the Senior Notes is accrued monthly and paid
semi-annually on April 1, and October 1.
Compensation - Stock Options
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 Accounting for Stock-Based Compensation (FAS 123).
FAS 123 encourages, but does not require, companies to recognize compensation
expense based on the fair value of grants of stock options and other equity
investments to employees. Although expense recognition for employee stock-based
compensation is not mandatory, FAS 123 requires that companies not adopting must
disclose the pro forma effect on net income and earnings per share. The Company
will continue to apply prior accounting rules and make pro forma disclosures for
stock option grants to employees.
During 2000, no options were granted for non-employee services and,
accordingly, the Company was not required to record any compensation cost
related to such options.
Liquidity and Capital Resources
The Company had $5,261,000 in working capital at December 31, 2000,
compared with $1,707,000 at December 31, 1999. This increase is a result of the
sale of 1,700,000 shares of the Company's common stock in a Private Placement in
the first quarter of 2000 and profitable operating results for the year.
-23-
Cash provided by operating activities increased by $142,000, or 165%,
to $228,000 in 2000, from $86,000 in 1999. This increase is due to the
profitable operating results for the year.
The Company's future liquidity will continue to be dependent on the
Company's operating results. Management believes that the Company's working
capital is sufficient to maintain its current and immediately foreseeable levels
of operations. The Company anticipates that capital expenditures for fiscal year
2001, primarily for computer equipment and software, will be approximately
$110,000. Management believes that the Company has sufficient funds to meet its
capital expenditure requirements for 2001.
The Company has not been adversely 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. The
Company's software represents a small portion of our customers product costs and
therefore management remains optimistic that demand for the Company's products
will continue. However, there are continued economic risks inherent in foreign
trade, because sales to foreign customers account for a significant portion of
the Company's revenues.
Contacting Cimetrix
In an effort to make information available to shareholders and
customers, the Company has established its World Wide Web site www.cimetrix.com.
All shareholders or other interested parties are encouraged to access the
Company's web site before contacting the Company directly. We are committed to
keep the information on this site up to date. The Company's web site contains
the Company's public filings with the SEC, press releases, letters from the
president, detailed product information, customer information, and employment
opportunities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no activities in derivative financial or commodity
instruments. The Company's exposure to market risks, (i.e. interest rate risk,
foreign currency exchange rate risk, equity price risk) through other financial
instruments, including cash equivalents, accounts receivable, lines of credit,
is not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of the Company called for by this item are
contained in a separate section of this report. See "Index to Financial
Statements" on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None
-24-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the information in the Company's Proxy
Statement for the 2001 Annual Meeting of Stockholders which the Company will
file with the Securities and Exchange Commission within 120 days of the end of
the fiscal year to which this report relates.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information in the Company's Proxy
Statement for the 2001 Annual Meeting of Stockholders which the Company will
file with the Securities and Exchange Commission within 120 days of the end of
the fiscal year to which this report relates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information in the Company's Proxy
Statement for the 2001 Annual Meeting of Stockholders which the Company will
file with the Securities and Exchange Commission within 120 days of the end of
the fiscal year to which this report relates.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information in the Company's Proxy
Statement for the 2001 Annual Meeting of Stockholders which the Company will
file with the Securities and Exchange Commission within 120 days of the end of
the fiscal year to which this report relates.
-25-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements and Schedules
The independent auditors' report with respect to the above-listed
financial statements appears on page F2 of this report.
The financial statements of Cimetrix as set forth under Item 8 are
filed as part of this report and appear on page F3 of this report.
Financial statement schedules have been omitted since they are
either not required, not applicable, or the information is
otherwise included in the financial statements and notes thereto.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended
December 31, 2000.
(c) Exhibit Listing
Exhibit No. Description
3.1 Articles of Incorporation (1)
3.2 Articles of Merger of Cimetrix (USA)
Incorporated with Cimetrix Incorporated (6)
3.3 Bylaws (1)
10.1 Proxy Agreement between Keith Seolas and
his family, and Paul Bilzerian, transferring
voting rights to Mr. Bilzerian (4)
10.2 Consulting and option agreement between
Cimetrix and Paul A. Bilzerian to resolve
management difficulties (4)
10.3 Indemnity agreement between Cimetrix and
former officers and directors of Cimetrix
for return of shares and release from
related payables/receivables (5)
10.4 Technology Sale and Purchase Agreement
between Cimetrix and Brigham Young
University (6)
10.5 Stock Option Plan of Cimetrix Incorporated(2)
10.6 Supplementary Consulting Agreement between
Cimetrix and Bicoastal Holding Company for
services of Paul Bilzerian (3)
10.7 Security Agreement with Michael and
Barbara Feaster
(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 Annual Report on Form 10-K For The Fiscal Year
Ended December 31, 1995.
(4) Incorporated by reference to the Quarterly Report on Form 10-QSB For The
Quarter Ended March 31, 1994.
(5) Incorporated by reference to the Quarterly Report on Form 10-QSB For The
Quarter Ended June 30, 1994.
(6) Incorporated by reference to the Quarterly Report on Form 10-QSB For The
Quarter Ended September 30, 1995.
-26-
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on April 2,
2001.
CIMETRIX INCORPORATED
By: /S/ RILEY G. ASTILL
-----------------------
RILEY G. ASTILL
Vice President of Finance and Chief Financial
Officer (Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on April 2, 2001.
SIGNATURE CAPACITY
- --------- --------
/S/ DAVID P. FAULKNER Office of the President (As Principal
- --------------------- Executive Officer)
DAVID P. FAULKNER
/S/ ROBERT H. REBACK Office of the President (As Principal
- -------------------- Executive Officer)
ROBERT H. REBACK
/S/ BILL VAN DRUNEN Director
- -------------------
BILL VAN DRUNEN
/S/ DR. RON LUMIA Director
- -----------------
DR. RON LUMIA
/S/ RANDALL A. MACKEY Director
- ---------------------
RANDALL A. MACKEY
/S/ DR. LOWELL K. ANDERSON Director
- --------------------------
DR. LOWELL K. ANDERSON
-27-
Exhibit 10.7
PURCHASE AND SECURITY AGREEMENT
This Purchase and Security Agreement (hereinafter the "Agreement") is
made, entered into and is effective as of the 31st of May, 2000, between Michael
D. Feaster and Barbara Feaster Husband and Wife as Joint Tenants, Utah
Residents, (hereinafter the "Feasters") whose principle residence is located at
12262 South Graystone Lane, Sandy, UT 84092, and Cimetrix, Incorporated, a
Nevada corporation, with its principal place of business located at 6979 South
High Tech Drive, Salt Lake City, Utah 84047-3757 (hereinafter "Cimetrix").
RECITALS
WHEREAS, Michael Feaster is a Vice President, presently employed at
Cimetrix, who is the beneficiary of options to acquire 200,000 shares of
Cimetrix common stock, a portion of which have vested (the "Options"); and
WHEREAS, Cimetrix is presently the owner of that certain property
located at 12262 South Graystone Lane, Sandy, UT (the "Property"); and
WHEREAS, Cimetrix presently owns certain household furniture (the
"Furniture"); and
WHEREAS, the Feasters desire to purchase the Property and the
Furniture; and
WHEREAS, the Feasters owe approximately $38,000 to several parties and
wish to borrow that amount from Cimetrix in order to consolidate their debts
and reduce their monthly payments; and
WHEREAS, Cimetrix deems Michael Feaster to be a critical and essential
employee and, therefore, to further induce him to continue his employment
with Cimetrix, is willing to enter into this Agreement on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and promises
of the parties, the sufficiency of which consideration is hereby acknowledged,
the Feasters and Cimetrix agree as follows:
1. Cimetrix agrees to loan the Feasters $37,775 in order to pay certain
consumer debts.
2. The Feasters agree to purchase and Cimetrix agrees to sell the Furniture.
an itemized list of which is attached, for $8,766, the total amount of which
shall be loaned to the Feasters by Cimetrix.
-28-
3. The Feasters agree to purchase and Cimetrix agrees to sell the Property
for $380,179, the total amount of which shall be loaned to the Feasters by
Cimetrix.
4. The total amount of the loans set forth in paragraphs 1 through 3 of
this Agreement is $426,720 (the "Loan"),which shall be repaid by the Feasters
not later than May 31, 2002, or upon the resignation by Michael D. Feaster of
his position of employment with Cimetrix. The Loan shall bear interest in the
amount of 10% per annum, which shall be paid on the first and the six- teenth
days of every month, beginning on June 16, 2000. Each payment shall be
$1,778,for a total payment of $3,556 per month, and shall be made through
payroll deductions of Michael D. Feaster's payroll at Cimetrix. The entire
amount of the Loan shall be secured by a Deed of Trust with respect to the
Property and by the Options. The Feasters agree that they will not exercise the
Options without the written consent of Cimetrix until the Note is paid in full.
5. The Feasters also agree that all future Cimetrix employee stock options,
which are granted to Michael D. Feaster, shall also be pledged as collateral for
the Loan, and may not be exercised, sold, or otherwise transferred during the
term of this Agreement without the written consent of Cimetrix.
6. The rights and obligations of the parties under this Agreement shall be
governed by and construed under the laws of the State of Utah, without reference
to conflict of law principles. In the event of any such litigation, the
prevailing party shall be entitled to recover its costs and reasonable attorneys
fees, including such costs and fees on appeal.
7. This Agreement, the Warranty Deed for the Property, the Trust Note and
the Deed of Trust set forth the entire agreement and understanding of the
parties relating to the subject matter herein and merges all prior discussions
between them. No modification of or amendment to the Agreement, nor any waiver
of any rights under the Agreement, shall be effective unless it is in writing
and signed by both parties. No delay, omission, or failure to exercise any right
or remedy provided for in this Agreement shall be deemed to be a waiver of the
event giving rise to such remedy, but every such right or remedy may be
exercised, from time to time, as may be deemed expedient by the party exercising
such right or remedy.
8. If any provision contained in this Agreement is determined to be
invalid, the remaining provisions shall constitute the entire Agreement and the
invalid provision shall be deemed to have never been a part of the Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement,
effective May 31, 2000.
MICHAEL D. FEASTER CIMETRIX, INCORPORATED:
- ------------------ -----------------------
By: Riley G. Astill
Vice President of Finance
BARBARA FEASTER
- ---------------
-29-
CIMETRIX INCORPORATED
Index to Financial Statements
- --------------------------------------------------------------------------------
Page
Independent auditors' report F-2
Balance sheet F-3
Statement of operations F-4
Statement of stockholders' equity F-5
Statement of cash flows F-7
Notes to financial statements F-8
- --------------------------------------------------------------------------------
-30- F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Cimetrix Incorporated
We have audited the balance sheet of Cimetrix Incorporated as of December 31,
2000 and 1999, and the related statements of operations, stockholders' equity,
and cash flows for the years ended December 31, 2000, 1999 and 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cimetrix Incorporated as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years ended December 31, 2000, 1999 and 1998 in conformity with
generally accepted accounting principles.
TANNER + CO.
Salt Lake City, Utah
February 9, 2001
-31- F-2
CIMETRIX INCORPORATED
Balance Sheet
(In thousands, except share amounts)
December 31,
- --------------------------------------------------------------------------------
Assets 2000 1999
- ------
-----------------------------------
Current assets:
Cash and cash equivalents $ 3,525 $ 1,042
Receivables, net 2,365 1,440
Inventories 121 102
Prepaid expenses and other current assets 29 6
-----------------------------------
Total current assets 6,040 2,590
Property and equipment, net 359 459
Note receivable - related party 416 -
Technology, net 5,675 6,149
Other assets 636 176
-----------------------------------
$ 13,126 $ 9,374
-----------------------------------
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 200 $ 170
Accrued expenses 532 643
Deferred support revenue 43 70
Current portion of notes payable 4 -
-----------------------------------
Total current liabilities 779 883
Notes payable 23 -
Senior notes payable 2,681 2,681
-----------------------------------
Total liabilities 3,483 3,564
-----------------------------------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.0001 par value, 100,000,000 shares
authorized; 24,456,690 and 23,125,690 shares
issued and outstanding, respectively 2 2
Additional paid-in capital 28,130 24,810
Treasury stock 6,722 shares, at cost (1) (1)
Accumulated deficit (18,488) (19,001)
-----------------------------------
Total stockholders' equity 9,643 5,810
-----------------------------------
$ 13,126 $ 9,374
-----------------------------------
-32- F-3
CIMETRIX INCORPORATED
Statement of Operations
(In thousands, except share amounts)
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------
2000 1999 1998
-----------------------------------------------------
Net sales $ 5,900 $ 3,853 $ 4,161
-----------------------------------------------------
Operating expenses:
Cost of sales 647 103 454
General and administrative 1,995 1,281 1,854
Selling, marketing and customer support 1,128 734 713
Research and development 1,595 1,508 1,479
Compensation expense - stock options - 12 20
Impairment loss - - 3,526
-----------------------------------------------------
5,365 3,638 8,046
-----------------------------------------------------
Income (loss) from operations 535 215 (3,885)
-----------------------------------------------------
Other income (expense):
Interest income 222 65 63
Interest expense (268) (270) (277)
Other income 29 92 29
-----------------------------------------------------
(17) (113) (185)
-----------------------------------------------------
Income (loss) before income taxes 518 102 (4,070)
Provision for income taxes (5) - -
-----------------------------------------------------
Net income (loss) $ 513 $ 102 $ (4,070)
-----------------------------------------------------
Income (loss) per common share -
basic and diluted $ .02 $ .01 $ (.17)
-----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-33- F-4
CIMETRIX INCORPORATED
Statement of Stockholders' Equity
(In thousands, except share amounts)
Years Ended December 31, 2000, 1999 and 1998
- -------------------------------------------------------------------------------------------------------------------
Unearned
Compen-
Additional sation on Stock
Treasury Stock Common Stock Paid-In Stock Subscription Accumulated
Shares Amount Shares Amount Capital Options Receivable Deficit Total
------------------------------------------------------------------------------------------------
Balance at
January 1, 1998 200,000 (1,000) 24,343,928 2 19,881 - - (15,033) 3,850
Purchase of
treasury stock 192,722 (125) - - - - - - (125)
Treasury stock issued for:
Cash (353,091) 990 - - (617) - - - 373
Senior notes
payable (18,182) 91 - - (66) - - 25
Receivable (8,727) 43 - - (31) - (12) - -
Common stock issued
for senior notes
payable - - 400,000 - 600 - - - 600
Stock compensation - - - - 20 - - - 20
Net loss - - - - - - - (4,070) (4,070)
------------------------------------------------------------------------------------------------
Balance at
December 31, 1998 12,722 (1) 24,743,928 2 19,787 - (12) (19,103) 673
Treasury stock issued
as compensation (6,000) - - - 4 - - - 4
Retirement of
common - - (3,528,238) - (351) - - - (351)
stock
Collection of stock
subscription
receivable - - - - - - 12 - 12
Common stock issued
for technology - - 1,910,000 - 5,358 - - - 5,358
Stock option
compensation - - - - 12 - - - 12
Net income - - - - - - - 102 102
------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-34- F-5
CIMETRIX INCORPORATED
Statement of Stockholders' Equity
(In thousands, except share amounts)
Continued
Years Ended December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------------------------------------------
Unearned
Compen-
Additional sation on Stock
Treasury Stock Common Stock Paid-In Stock Subscription Accumulated
-----------------------------------------
Shares Amount Shares Amount Capital Options Receivable Deficit Total
------------------------------------------------------------------------------------------------
Balance at
December 31, 1999 6,722 (1) 23,125,690 2 24,810 - - (19,001) 5,810
Common stock issued
for cash - - 1,300,000 - 3,244 - - - 3,244
Common stock
options exercised - - 31,000 - 76 - - - 76
Net income - - - - - - - 513 513
------------------------------------------------------------------------------------------------
Balance at
December 31, 2000 6,722 $ (1) 24,456,690 $ 2 $ 28,130 $ - $ - $(18,488) $ 9,643
------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-35- F-6
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- -------------------------------------------------------------------------------------------------------------------
Statement of Cash Flows
(In thousands)
Years Ended December 31,
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------
Cash flows from operating activities:
Net income (loss) $ 513 $ 102 $ (4,070)
Adjustments to reconcile net income(loss) to net
cash provided by (used in) operating activities:
Amortization and depreciation 795 306 798
Provision for losses on receivables 97 (145) 94
Loss (gain) on disposition of assets 8 - (6)
Stock compensation expense - 16 20
Impairment loss - - 3,526
Other - - (247)
(Increase) decrease in:
Receivables (1,022) (120) (568)
Inventories (19) (102) 53
Prepaid expenses and other current assets (23) 13 62
Other assets (13) 31 23
Increase (decrease) in:
Accounts payable 30 11 (196)
Accrued expenses (111) (12) (28)
Deferred support revenue (27) (14) 35
------------------------------------------
Net cash (used in) provided by
operating activities 228 86 (504)
------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (117) (13) (42)
Issuance of note receivable - related party (416) - -
Increase in other assets (478) - -
Purchase of technology (56) (327) -
Proceeds from disposal of property 2 - 21
------------------------------------------
Net cash used in
investing activities (1,065) (340) (21)
------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,320 - 373
Payments on long-term debt - (10) (5)
Collection of stock subscription receivable - 12 -
Retirement of common stock - (351) -
Purchase of treasury stock - - (125)
------------------------------------------
Net cash provided by (used in)
financing activities 3,320 (349) 243
------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,483 (603) (282)
Cash and cash equivalents at beginning of year 1,042 1,645 1,927
------------------------------------------
Cash and cash equivalents at end of year $ 3,525 $ 1,042 $ 1,645
------------------------------------------
-36- F-7
Notes to Financial Statements
(In thousands, except share amounts)
December 31, 2000, 1999 and 1998
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Organization
Cimetrix Incorporated (Cimetrix or the Company) is primarily engaged in the
development and sale of open architecture, standards-based, personal computer
software for controlling machine tools, robots, and electronic equipment.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of trade receivables. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within the range
of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents
For purposes of the statement of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or less.
Inventories
Inventories consist of finished goods and are recorded at the lower of cost or
market, cost being determined on a first-in, first-out (FIFO) method.
- --------------------------------------------------------------------------------
-37- F-8
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies - Continued
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation and amortization on property and equipment is determined using the
straight-line method over the estimated useful lives of the assets or terms of
the lease. Expenditures for maintenance and repairs are expensed when incurred
and betterments are capitalized. Gains and losses on sale of property and
equipment are reflected in operations.
Software Development Costs
Certain software development costs are capitalized when incurred. Capitalization
of software development costs begins upon the establishment of technological
feasibility. Costs incurred prior to the establishment of technological
feasibility are expensed as incurred. The Company also expenses hardware design
and prototype expenses as incurred as research and development costs. The
establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs requires considerable
judgement by management with respect to certain external factors, including, but
not limited to, technological feasibility, anticipated future gross revenues,
estimated economic life and changes in software and hardware technologies.
Amortization of capitalized software development costs is provided on a
product-by-product basis at the greater of the amount computed using (a) the
ratio of current gross revenues for a product to the total of current and
anticipated future gross revenues or (b) the straight-line method over the
remaining estimated economic life of the product. Software costs are carried at
the unamortized cost or net realizable value. Net realizable value is reviewed
on an annual basis after assessing potential sales of the product in that the
unamortized capitalized cost relating to each product is compared to the net
realizable value of that product and any excess is written off.
Technology
Technology consists of the costs to obtain the Company's AART and SDI SECS/GEM
technology (see Note 5). The technology is being amortized on the straight-line
method over twelve years.
- --------------------------------------------------------------------------------
-38- F-9
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies - Continued
Goodwill
Goodwill reflects the excess of the costs of purchasing the minority interest of
Cimetrix (USA) Incorporated over the fair value of the related net assets at the
date of acquisition, and is being amortized on the straight line basis over 15
years. During the year ended December 31, 1998 the unamortized portion of the
goodwill was written off (see note 9). Amortization expense charged to
operations for 1998 and 1997 was approximately $217 and $218, respectively.
Patents and Copyrights
The Company has obtained two patents related to certain technology. In addition,
the Company has registered its entire software system products with the
Copyright Office of the United States, and will continue to timely register any
updates to current products or any new products. For the most part, other than
the two patents and the copyright registrations, the Company relies on
confidentiality and nondisclosure agreements with its employees and customers,
appropriate security measures, and the encoding of its software in order to
protect the proprietary nature of its technology. No cost has been capitalized
with respect to the patents.
Revenue Recognition
Revenue is recognized upon shipment of product or performance of services.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting, principally related
to depreciation, asset impairment, and accrued liabilities.
Earnings per Share
The computation of basic earnings per common share is based on the weighted
average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the year plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the year. Common stock equivalents are not included in the diluted
per share calculation when their effect is antidilutive.
- --------------------------------------------------------------------------------
-39- F-10
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
2. Receivables
December 31,
------------------------------------
2000 1999
------------------------------------
Receivables:
Trade receivables $ 2,516 $ 1,505
Employee receivables 11 -
------------------------------------
2,527 1,505
Less allowance for doubtful
accounts (162) (65)
------------------------------------
$ 2,365 $ 1,440
------------------------------------
3. Property and Equipment
Property and equipment consists of the following:
December 31,
-----------------------------------
2000 1999
-----------------------------------
Software development costs $ 464 $ 464
Equipment 439 362
Office equipment and software 324 306
Furniture and fixtures 225 214
Leasehold improvements 83 83
Vehicle 27 -
-----------------------------------
1,562 1,429
Accumulated depreciation and
amortization (1,203) (970)
-----------------------------------
$ 359 $ 459
-----------------------------------
4. Note Receivable
At December 31, 2000 the Company has a note receivable from an officer of the
Company. Interest payments at 10% are due twice a month. The principal balance
of $416 is due May 31, 2002.
- --------------------------------------------------------------------------------
-40- F-11
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
5. Technology
AART
During the year ended December 31, 1999, the Company purchased technology that
is referred to as AART(TM). This technology uses a component-based approach to
control machines using industry standard languages. When combined with the
Company's other products, the combined product line offers an integrated
complete solution for building component-based workcells using open software
standards. The Company purchased all rights, title, interest, and benefit in and
to the technology for 1,200,000 shares of restricted common stock of the Company
valued at $3,450 plus cash of $327.
Due to certain disputes regarding the technology acquired, the Company entered
into litigation regarding the purchase price of such technology. In February
2001, the Company settled all litigation related to the acquisition of the
technology by adjusting the purchase price from 1,200,000 shares to 800,000
shares of restricted common stock. This settlement resulted in a net reduction
of approximately $438 to technology and additional paid-in capital.
SDI SECS/GEM
During the year ended December 31, 1999, the Company purchased technology that
is referred to as the sdiStationTM. This technology is used in the semiconductor
and electronics industries. The Company purchased all rights, titles, interest,
and benefit in and to the technology for 710,000 shares of restricted common
stock of the Company as well as a payable for $500. The shares were valued at
$1,908.
Amortization expense of technology costs for 2000 and 1999 was approximately
$530 and $36, respectively. Accumulated amortization was $566 and $36 as of
December 31, 2000 and 1999, respectively.
- --------------------------------------------------------------------------------
-41- F-12
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
5. Technology - Continued
Robcal and Robline
The Company purchased technology that is referred to as ROBLINE and ROBCAL.
ROBLINE and ROBCAL, together with other technology developed by the Company, has
enabled the Company to develop the Cimetrix Open Development Environment
("CODE") which includes "open architecture" standards-based, operating systems
software and controller hardware that allow manufacturing engineers to replace
cumbersome proprietary systems with open systems when designing automated
workcells. During the year ended December 31, 1998 the unamortized portion of
the technology was written off (see note 9). Amortization expense charged to
operations for 1998 was approximately $53.
6. Lease Obligations
The Company leases certain office space and vehicles under noncancellable
operating lease agreements. Future minimum lease payments required under
operating leases are as follows:
Year Ending December 31: Amount
------------------
2001 $ 246
2002 63
------------------
$ 309
------------------
Rental expense for the years ended December 31, 2000 and 1999 and 1998 on
operating leases was $291, $244 and $273, respectively.
The Company subleases certain office space under a noncancellable operating
lease arrangement. Future minimum rentals to be received under the sublease are
as follows:
Year Ending December 31:
2001 $ 27
2002 7
------------------
$ 34
------------------
Rental income for the years ended December 31, 2000, 1999 and 1998 on subleases
was $27, $16 and $0 respectively.
- --------------------------------------------------------------------------------
-42- F-13
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
7. Senior Notes Payable
The Company has 10% unsecured Senior Notes Due 2002 (Senior Notes) with interest
payable semiannually on April 1 and October 1 of each year and the principal
maturing on September 30, 2002.
Each purchaser of a Senior Note also received, for no additional consideration,
one common stock purchase warrant (a Warrant) for each $1,000 principal amount
of Senior Notes purchased. Each Warrant entitles the holder to purchase 250
shares of the Company's common stock for $2.50 per share. The Warrants are
exercisable any time before September 30, 2002, as a whole, in part, or
increments, but only if the shares of common stock issuable upon exercise of the
Warrants are registered with the Securities and Exchange Commission pursuant to
a current and effective registration statement and qualified for sale under the
securities laws of the various states where the Warrant holders reside. During
the year ended December 31, 1998, the Company registered the common stock
issuable upon exercise of the warrants. The exercise price of the Warrants is
payable at the holder's option, either in cash or by the surrender of Senior
Notes at their face amount plus accrued interest. The Warrants are transferable
separately from the Senior Notes.
The Senior Notes were not redeemable by the Company prior to October 1, 1999.
Beginning October 1, 1999, the Senior Notes are redeemable at the Company's
option, as a whole or in part, in increments of $1,000, at any time or from time
to time, at the redemption prices stated below plus accrued interest, upon not
fewer than 30 or more than 60 days advance notice. The redemption prices
(expressed in percentages of principal amount) for the 12-month period
commencing on October 1 of each year indicated are as follows:
Redemption
Period Price
------------------
2000 103%
2001 101%
Under certain circumstances related to a change in ownership control, the
Company may be required to repurchase the Senior Notes prior to the maturity
date.
- --------------------------------------------------------------------------------
-43- F-14
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
7. Senior Notes Payable - Continued
The balance due to senior note holders at December 31, 2000 and 1999 was $2,681.
8. Notes Payable
The Company entered into a note payable for $27 to a financial institution. The
note is collateralized by a vehicle with principal payable in monthly
installments of $1 including interest at 9.9%. The future maturities of the note
is as follows:
2001 $ 4
2002 5
2003 5
2004 6
2005 6
2006 1
---------
$ 27
---------
9. Income Taxes
The (provision) benefit for income taxes is different than amounts which would
be provided by applying the statutory federal income tax rate to income (loss)
before income taxes for the following reasons:
Years Ended
December 31,
------------------------------------
2000 1999 1998
------------------------------------
Federal income tax (provision)
benefit at statutory rate $ 191 $ (34 $ 1,384
Life insurance and meals (8) (6) (3)
Change in valuation allowance 194 40 (1,381)
------------------------------------
$ (5) $ - $ -
------------------------------------
- --------------------------------------------------------------------------------
-44- F-15
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
9. Income Taxes - Continued
Deferred tax assets (liabilities) are comprised of the following:
December 31,
-----------------------------------
2000 1999
-----------------------------------
Net operating loss carryforwards $ 5,240 $ 5,513
Asset impairment 874 975
Depreciation and amortization 8 (120)
Allowance for doubtful accounts 60 22
Accrued vacation and bonus 43 21
Deferred income 16 24
Inventory reserve 18 18
Capital loss carryover 99 99
Research & development credit 199 199
-----------------------------------
6,557 6,751
Less valuation allowance - -
-----------------------------------
$ (6,557$ (6,751)
-----------------------------------
At December 31, 2000, the Company has a net operating loss carryforward
available to offset future taxable income of approximately $14,000 which will
begin to expire in 2004. If substantial changes in the Company's ownership
should occur, there would also be an annual limitation of the amount of NOL
carryforward which could be utilized.
- --------------------------------------------------------------------------------
-45- F-16
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
10. Impairment Loss
During 1998, the Company settled ongoing litigation associated with the purchase
of technology and a related subsidiary. Management also determined that the
related assets (i.e. goodwill, software development costs, and technology) had
been impaired. Consequently, the following adjustments were recorded to write
down these assets to their estimated realizable values:
Goodwill $ 2,536
Technology 608
Software development costs 104
Fixed assets 278
-----------------
$ 3,526
-----------------
11. Supplemental Cash Flow Information
During the year ended December 31, 2000 the Company financed the purchase of a
vehicle with debt in the amount of $27.
During the year ended December 31, 1999 the Company issued common stock in
exchange for technology of $5,358 and a payable of $500.
During the year ended December 31, 1998:
o The Company retired $625 senior notes payable through the issuance of
common stock.
o The Company satisfied a capital lease obligation through decreasing
property and equipment and long-term debt by $14.
o The Company issued common stock in exchange for a stock subscription
receivable of $12.
- --------------------------------------------------------------------------------
-46- F-17
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
11. Supplemental
Cash Flow
Information
Continued
Actual amounts paid for interest and income taxes are as follows:
Years Ended December 31,
--------------------------------------------
2000 1999 1998
--------------------------------------------
Interest $ 271 $ 269 $ 274
--------------------------------------------
Income taxes $ - $ - $ -
--------------------------------------------
12. Major Customers
Sales to major customers which exceeded 10 percent of net sales are
approximately as follows:
Years Ended
December 31,
--------------------------------------------
2000 1999 1998
--------------------------------------------
Company A $ 1,041 $ - $ -
Company B $ 960 $ - $ -
Company C $ 885 $ - $ -
Company D $ $ 1,317 $ 1,530
Company E $ $ 446 $ -
Company F $ $ - $ 438
Company G $ $ - $ 429
Export sales to unaffiliated customers were approximately $2,048, $1,908 and
$1,913, in 2000, 1999 and 1998, respectively. All major export sales were made
to Germany, Japan, and Switzerland.
13. Employee Benefit Plan
The Company has a defined contribution retirement savings plan, which is
qualified under Section 401(K) of the Internal Revenue Code. The plan provides
retirement benefits for employees meeting minimum age and service requirements.
Participants may contribute up to 20% of their gross wages.
The Company will match 50% of the employees' contribution up to a maximum of 2%
of the employees' annual pay. Participants vest in the employers' contribution
over a five year period. For the years ended December 31, 2000, 1999 and 1998,
the Company contributed approximately $31, $25 and $25, respectively, to the
plan.
- --------------------------------------------------------------------------------
-47- F-18
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
14. Related Party Transactions
During the years ended December 31, 2000, 1999 and 1998, the Company incurred
fees of approximately $128, $120, and $120, respectively, to a corporation
managed by the former President of the Company. The fees were paid for the
individual to act as President of the Company. In addition the Company leased a
home and vehicle for the President. Lease expense paid during the years ended
December 31, 2000, 1999 and 1998 was approximately $34, $20 and $20,
respectively.
Accounts receivable at December 31, 2000 included advances made to employees
totaling $11.
The Company has an investment in a corporate entity. The investment is accounted
for at the lower of cost or market and is included in other assets. During the
years ended December 31, 2000 and 1999, the Company recognized sales of
approximately $324 and $671 to this entity, respectively. In addition as of
December 31, 2000 and 1999, the Company had receivables from this entity of
approximately $159 and $862, respectively.
During the year ended December 31, 2000 the Company purchased a vehicle for use
by the family of the Company's president in the amount of $27.
15. Stock Options and Warrants
The Company has a stock option plan (Incentive Option Plan), which allows a
maximum of 2,000,000 options which may be granted to purchase common stock at
prices generally not less than the fair market value of common stock at the date
of grant. Under the Incentive Option Plan, grants of options may be made to
selected officers and key employees without regard to any performance measures.
The options may be immediately exercisable or may vest over time as determined
by the Board of Directors. However, the maximum term of an option may not exceed
ten years.
The Company has a stock option plan (Directors Option Plan), which allows a
maximum of 400,000 shares of common stock to be granted to purchase, at a price
of the greater of $2.50 or 100% of the fair market value at the date of grant.
Under the Directors Option Plan, Directors will receive 24,000 shares annually
on each anniversary date during the term of this plan.
- --------------------------------------------------------------------------------
-48- F-19
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
15. Stock Options and Warrants Continued
Information regarding the stock options and warrants is summarized below:
Number of Weighted
Options Average
and Exercise
Warrants Price
----------------------------------
Outstanding at January 1, 1998 2,581,888 $ 4.42
Granted 1,554,500 2.50
Forfeited (1,565,888) 4.48
----------------------------------
Outstanding at December 31, 1998 2,570,500 2.50
Granted 463,000 2.57
Forfeited (869,000) 2.50
----------------------------------
Outstanding at December 31, 1999 2,164,500 2.52
Granted 726,000 2.89
Exercised (31,000) 2.45
Forfeited (224,000) 2.62
----------------------------------
Outstanding at December 31, 2000 2,635,500 $ 2.71
----------------------------------
- ---------------------------------------------------------------------------
-49- F-20
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
15. Stock Options and Warrants - Continued
The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation expense has been recognized for stock options
granted to employees. Had compensation expense for the Company's stock options
been determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's results of operations would have been
reduced to the pro forma amounts indicated below:
Years Ended
December 31,
----------------------------------------------
2000 1999 1998
----------------------------------------------
Net income (loss) - as reported $ 513 $ 102 $ (4,070)
Net income (loss) - pro forma $ 206 $ (342) $ (4,438)
Income (loss) per share -
as reported $ .02 $ .01 $ (.17)
Income (loss) per share -
pro forma $ .01 $ (.02) $ (.18)
----------------------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
December 31,
--------------------------------------------
2000 1999 1998
--------------------------------------------
Expected dividend yield $ - $ - -
Expected stock price volatility 105% 114% 148%
Risk-free interest rate 6.0% 5.5% 5.5%
Expected life of options 5 years 5 years 5 years
--------------------------------------------
The weighted average fair value of options granted during 2000, 1999, and 1998,
was $2.23, $.91, and $1.26, respectively.
- --------------------------------------------------------------------------------
-50- F-21
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
15. Stock Options and Warrants - Continued
The following table summarizes information about stock options and warrants
outstanding at December 31, 2000:
Outstanding Exercisable
- --------------------------------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Exercise Number Life Exercise Number Exercise Price
Price Outstanding (Years) Price Exercisable
- --------------------------------------------------------------------------------
$ 2.50 - 3.50 2,635,500 3.02 $ 2.7 1,422,900 $ 2.50
- --------------------------------------------------------------------------------
16. Earnings Per Share
Financial accounting standards requires companies to present basic earnings per
share (EPS) and diluted earnings per share along with additional informational
disclosures. Information related to earnings per share is as follows:
Years Ended
December 31,
-----------------------------------------
2000 1999 1998
-----------------------------------------
Basic EPS:
Net income (loss) available to
common stockholders $ 513 $ 102 $ (4,070)
-----------------------------------------
Weighted average common
shares 24,160,000 22,080,000 24,433,000
-----------------------------------------
Net income (loss) per share $ .02 $ .01 $ (.17)
-----------------------------------------
Diluted EPS:
Net income (loss) available to
common stockholders $ 513 $ 102 $ (4,070)
-----------------------------------------
Weighted average common
shares 24,621,000 22,161,000 24,433,000
-----------------------------------------
Net income (loss) per share $ .02 $ .01 $ (.17)
-----------------------------------------
- --------------------------------------------------------------------------------
-51- F-22
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
17. Fair Value of Financial Instruments
The Company's financial instruments consist of cash, receivables, payables, and
notes payable. The carrying amount of cash, receivables and payables
approximates fair value because of the short-term nature of these items. The
carrying amount of the notes payable approximates fair value as to the
individual borrowings bear interest at market interest rates.
18. Commitments and Contingencies
Employment Agreements
The Company has entered employment agreements with certain employees which
requires annual aggregate payments of $220 through 2002. In addition, the
Company has agreed to reimburse each employee associated with these agreements
up to $15 to relocate.
Product Warranties
The Company provides certain product warranties to customers including repayment
or replacement for defect in materials and workmanship of hardware products. The
Company also warrants that software and firmware products will conform to
published specifications and not fail to execute the Company's programming
instructions due to defects in materials and workmanship. In addition, if the
Company is unable to repair or replace any product to a condition warranted,
within a reasonable time, the Company will provide a refund to the customer. As
of December 31, 2000, 1999, and 1998, no provision for warranty claims has been
established since the Company has not incurred substantial sales from which to
develop reliable estimates. Also, no refund has been paid to any customer as of
December 31, 2000. Management believes that any allowance for warranty would be
immaterial to the financial condition of the Company.
Litigation
Manley Litigation
An action was brought against the Company in August 1998 by Peter and Jana
Manley in the Third District Court of Salt Lake County, State of Utah. The
thrust of the claims by the Manleys relates to rights pertaining to
approximately 180,000 shares of stock in the Company. In the complaint,
declaratory relief is sought to have all restrictions removed from the stock of
the Manleys and that the Company not hinder in any way the transfer or sale of
the stock. Other claims include conversion, refusal to allow transfer of stock,
lost profits because of an asserted inability to have restrictions removed and
the Manleys being able to transfer their stock, breach of Stock Option Agreement
and Stock Option Plan, intentional interference with economic relations,
quantum-merit-contract implied in fact, promissory estoppel/detrimental
reliance, civil conspiracy and breach of good faith and fair dealing.
-52- F-23
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
18. Commitments and Contingencies - Continued
In the prayer for relief, the Manleys seek a declaration that all restrictions
including the Rule 144 restrictive legend be removed from the stock, stop
transfer orders be removed, that the Company cease and desist from preventing
the Manleys from selling their stock, judgment for direct and consequential
damages, punitive damages, costs, attorney's fees and a demand for a jury trial.
On or about February 9, 2001, the Manleys filed a Motion for Partial Summary
Judgment, seeking a declaration that they are the sole owners of the Cimetrix
shares of stock, that the shares be held free of any restrictions and a judgment
for damages based on the difference in the value of the stock on the date the
Rule 144 restrictions should have been lifted and the date on which they were
actually lifted- $5.50 per share for the 180,722 shares of Cimetrix stock,
totaling $993,971.
Although Management believes that there is a reasonable likelihood that the
Company will prevail and that its claims are meritorious, the Company is unable
to predict the outcome of the litigation. Should plaintiffs prevail, this would
have a material adverse effect on the Company's financial condition.
The Company answered the complaint and filed a counterclaim. The counterclaims
assert material misrepresentations concerning technology. Claims against Mr.
Manley include fraud in the inducement, common law fraud, declaration and return
of shares of stock against both of the Manleys, breach of contract against both
of the Manleys, fraud in the inducement against Mr. Manley, breach of covenant
of good faith and fair dealing against Mr. Manley.
Plug-N-Work Litigation
On April 5, 2000, the Company filed suit in Utah State Court against
Plug-n-Work, Scott McCrary and John Fisher (the Plug-n-Work Shareholders). The
Company brought this action alleging that the Plug-n-Work Shareholders failed to
disclose significant material liabilities with respect to the intellectual
property purchased from Plug-n-Work in December 1999.
-53- F-24
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
18. Commitments and Contingencies - Continued
On September 19, 2000, the Company also filed suit in Utah State Court against
Advanced Automation. The Company brought this action alleging that Advanced
Automation failed to disclose significant material liabilities with respect to
the intellectual property purchased from Plug-n-Work in December 1999.
In both cases the defendants filed counterclaims; however, both were settled on
February 2, 2001. As part of the settlement, 400,000 shares of the original
1,200,000 shares issued for the purchase, were returned to the Company. The
Company is satisfied with the settlement and the return of the shares.
Other
The Company is not a party to any other material pending legal proceedings and,
to the best of its knowledge, no such proceedings by or against the Company have
been threatened. To the knowledge of management, there are no material
proceedings pending or threatened against any director or executive officer of
the Company, whose position in any such proceeding would be adverse to that of
the Company.
The Company may become or is subject to investigations, claims or lawsuits
ensuing out of the conduct of its business, including those related to
environmental safety and health, product liability, commercial transactions etc.
The Company is currently not aware of any such items which it believes could
have a material adverse effect on its financial position.
- --------------------------------------------------------------------------------
-54- F-25
CIMETRIX INCORPORATED
Notes to Financial Statements
(In thousands, except share amounts)
Continued
- --------------------------------------------------------------------------------
19. Recent Accounting Pronouncements
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statement No. 133." SFAS 133 establishes accounting and reporting standards for
derivative instruments and requires recognition of all derivatives as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. The Company believes that the adoption of SFAS 133 will not
have any material effect on the financial statements of the Company.
- --------------------------------------------------------------------------------
-55- F-26