Earnings were cited as a driving force this week on Wall Street with the Dow Jones Industrial Average now having recovered nearly every bit of steep losses from the first two weeks of October to the tune of roughly 1,100 points in gains in ten days. Of course, microcap stocks don’t figure into that equation in any way, shape or form, but we’re always keeping our eyes peeled for profitable companies in the space to make sure that they get their due.
Taking a look at the earnings report by Cimetrix Inc. (OTCQB:CMXX) released after Tuesday’s closing bell which not only shows a regularly profitable microcap company, but also provides some color to investors about how much it costs a small company to maintain a compliant listing on the OTC market.
Cimetrix develops and supports factory automation software products for the semiconductor, photovoltaic, LED and other electronics industries. Amongst other things, the Salt Lake City-based company’s products help equipment manufacturer companies with Semiconductor Equipment and Materials International (SEMI) equipment communication standards.
The company has been profitable for the past five years and is on track to operate in the black in 2014. In the third quarter, Cimetrix reported revenue of $1.62 million, compared to 1.09 million in the year prior quarter. Net income for the quarter was $87,000, versus a net loss of $90,000 in the year prior quarter. The number of basic outstanding shares remained the same at 45.23 million, equating to earnings/loss of nil per share in the comparable quarters.
Through the first nine months of 2014, Cimetrix logged revenue of $4.68 million, up 23% from $3.81 million in the third quarter of 2013. Net income declined to $173,000, compared to $1.33 million in the year prior quarter, although the net profit last year was aided by a $1.43 million income benefit from a deferred tax asset.
Cimetrix is a pretty illiquid stock, mostly trading less than 50,000 shares a day, with a big day being in the area of 300,000 shares, which has only happened about five times in four years.
That volume is not that uncommon in the OTC space, especially for a company with relatively high insider holdings tightening the number of tradable shares to 28.5 million and the fact that the company is pretty quiet - only releasing press of quarterly reports for the most part.
All things being equal, Cimetrix said earlier this month it can better reward its stakeholders by no longer being public. The company filed a 13E-3 with the Securities and Exchange Commission, announcing its intent to go private as soon as all approvals are in place, which it expects will happen by the end of the year. In order to reduce its number of shareholders to less than 300 so it may terminate the registration of its common stock and suspend reporting to the SEC, Cimetrix is performing a 20,000-to-1 reverse split. Anyone who owns less than 20,000 shares at the time of the split will get a cash payout of 15 cents per share and no longer have any equity in the company.
Cimetrix cited the high costs associated with being a fully reporting company does not justify the benefits. Further, the company noted that expenses for being public will be rising again in 2015, due, in part at least to new fees being set in motion by OTC Markets (OTCQX:OTCM) in a bid to further separate the wheat from the chaff in OTC-listed equities and encourage companies to uplist to the OTCQX (a step above the OTCQB) . Of course, there’s a wide array of expenses involved with being a fully reporting, Sarbanes-Oxley-compliant public company. Cimetrix estimates that it will save the company $250,000 annually in expenses directly related to being
public.
How shareholders perceive the reverse split and going private transaction is obviously dependent on entry points. Since January 2010, the stock has ranged from about six cents to as high as 52 cents (November 2010), although it has spent most of its time bouncing back and forth around the 15 cent area (give or take a nickel) since the start of 2013.
