Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CIMETRIX INC (786620) 10-Q published on Oct 29, 2014 at 2:01 pm
Reporting Period: Sep 29, 2014
Revolving Bank Line of Credit - The Company and Silicon Valley Bank (the “Bank”) entered into a Loan and Security Agreement (“Agreement”), effective as of September 27, 2011. On September 26, 2012, the Company and the Bank entered into a First Amendment to the Loan and Security Agreement. The First Amendment extended the maturity date of the Agreement to September 25, 2013. On October 1, 2013, the Company and the Bank entered into a Second Amendment to the Agreement, effective September 25, 2013. The Second Amendment extended the maturity date of the Agreement to September 24, 2014, reduced the applicable interest rate and certain other fees associated with Agreement and increased the level of tangible net worth required to be maintained. On September 24, 2014, the Company and the Bank entered into a Third Amendment to the Loan and Security Agreement. The Third Amendment extended the maturity date of the Agreement to December 24, 2014 with no other changes to the Agreement.
As part of the process of preparing consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating the Company’s actual current income tax exposure together with assessing temporary differences resulting from differing treatment of items for income tax and financial accounting purposes. These temporary differences result in deferred tax assets and liabilities, the net amount of which is included in the Company’s Condensed Consolidated Balance Sheets. When appropriate, the Company records a valuation allowance to reduce its deferred tax assets to the amount that the Company believes is more likely than not to be realized. Key assumptions used in estimating a valuation allowance include potential future taxable income, projected income tax rates, expiration dates of net operating loss and tax credit carry forwards, and ongoing prudent and feasible tax planning strategies.
On October 1, 2014, the Company filed with the Securities and Exchange Commission (the “SEC”) under Section 13(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 13e-3 promulgated thereunder a Schedule 13E-3 Transaction Statement (the “Schedule 13E-3”), in connection with a proposed “going private” transaction. The primary purpose of the going private transaction is to reduce the number of record holders of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), to fewer than 300, thereby allowing the Company to terminate the registration of the Common Stock under Section 12(g) of the Exchange Act defined above and suspend its reporting obligations under Section 15(d) of the Exchange Act. The Reverse Stock Split may not be consummated until 20 days after the date on which the Company first mails the related Disclosure Statement to its stockholders.
Cimetrix recently announced its proposal to reverse split its outstanding common stock on the basis of 1:20,000, so shareholders would hold one share post-split for every 20,000 shares they held pre-split. Any fractional shares resulting from the split will be converted to the right to receive $0.15 per pre-split share. The purpose of the transaction is to reduce the number of shareholders to permit the Company to deregister the common stock and suspend its SEC reporting obligations. The Company anticipates that this will result in ongoing annual savings, including management time, of approximately $250,000.
The Company's cost of revenues for the three months ended September 30, 2014 increased by $83,000, or 17% to $578,000 from $495,000 for three months ended September 30, 2013. For the nine-month periods ended September 30, 2014 and September 30, 2013, the Company’s cost of revenues decreased by $7,000, or less than 1% to $1,629,000 from $1,636,000. The increase in cost of revenues for the three month period ended September 30, 2014 was attributed to a short term focus to assist customers that were in the process of shipping new tools to new customers. The decrease in cost of revenues for the nine month period was a reflection of our success in increasing our efficiencies to maintain our current software products. The Company invested significantly over the past several years in the technology, tools and quality assurance of our current products, which allows us to more quickly respond to customers and implement new features at lower costs. The Company continues to provide a very high level of customer support and issue new releases for its current products in a more cost effective manner. As part of our corporate strategy and as a result of those reduced costs, we were able to redeploy our engineering efforts to research and development activities as discussed in the Research and Development section below. Cost of revenues as a percentage of total revenues will vary from period to period depending on the mix of software and professional service revenues, the type of service projects completed, the level of customer support activities, the pricing strategy for the projects, the extent of utilization of outside resources, and other factors.