U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1998
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ____________________
Commission file number 0-11485
ACCELR8 TECHNOLOGY CORPORATION
------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1072256
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
303 East Seventeenth Avenue, Suite 108,
Denver, Colorado 80203
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(Address of principal executive office)
(303) 863-8088
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(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No_____
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at October 31, 1998
- -------------------------- -------------------------------
Common Stock, no par value 7,823,117
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Accelr8 Technology Corporation
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - as of
October 31, 1998 and July 31, 1998 1
Statements of Operations
for the three months ended October 31, 1998 and 1997 2
Statements of Cash Flows
for the three months ended October 31, 1998 and 1997 3
Notes to Financial Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 8
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<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Accelr8 Technology Corporation
Balance Sheets
(Unaudited)
October 31, July 31,
1998 1998
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,586,937 $ 10,439,233
Accounts receivable 684,690 944,692
Prepaid expenses 97,081 99,377
Income taxes receivable 67,270 470,620
Deferred tax assets 71,898 71,898
------------ ------------
Total current assets 11,507,876 12,025,820
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PROPERTY AND EQUIPMENT:
Computer equipment 378,395 344,258
Furniture and fixtures 111,927 111,387
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Total property and equipment 490,322 455,645
Less accumulated depreciation (183,924) (162,324)
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Net property and equipment 306,398 293,321
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SOFTWARE DEVELOPMENT COSTS, less accumulated
amortization: October 1998, $1,242,325;
July 1998, $1,137,325 1,612,577 1,350,547
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INVESTMENTS 301,309 305,089
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Total assets $ 13,728,160 $ 13,974,777
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 248,786 $ 402,173
Accrued liabilities 84,380 192,087
Deferred consulting revenue 20,000 --
Deferred maintenance revenue 200,809 195,595
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Total current liabilities 553,975 789,855
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DEFERRED TAX LIABILITIES 523,941 523,941
------------ ------------
OTHER LONG-TERM LIABILITIES 320,059 305,089
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SHAREHOLDERS' EQUITY
Common stock, no par value; 11,000,000 shares authorized;
7,858,617 shares issued and 7,823,117 shares outstanding 8,438,314 8,543,477
Contributed capital 315,049 315,049
Retained earnings 3,850,422 3,770,966
Shares held for employee benefit (1,129,110 shares) (273,600) (273,600)
------------ ------------
Shareholders' equity 12,330,185 12,355,892
------------ ------------
Total liabilities and equity $ 13,728,160 $ 13,974,777
============ ============
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Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Three Months Ended
--------------------------
October 31, October 31,
1998 1997
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Revenues:
Consulting fees $ 83,861 $ 153,314
Product license and customer support fees 558,938 1,337,047
Resale of software purchased 85,709 139,528
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Total Revenues 728,508 1,629,889
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Costs and Expenses:
Cost of services 255,186 170,137
Cost of software purchased for resale 3,550 44,232
General and administrative 226,237 221,365
Marketing and sales 268,081 136,063
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Total Expenses 753,054 571,797
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Income from operations (24,546) 1,058,092
Interest income 127,352 105,104
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Income before income taxes 102,806 1,163,196
Income tax provision 23,350 295,000
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Net Income $ 79,456 $ 868,196
=========== ===========
Weighted average shares outstanding - basic 7,849,889 6,893,231
=========== ===========
Net income per share - basic $ .01 $ .13
=========== ===========
Weighted average shares outstanding - diluted 8,053,946 8,087,537
=========== ===========
Net income per share - diluted $ .01 $ .11
=========== ===========
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Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Three Months Ended
----------------------------
October 31, October 31,
1998 1997
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CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 79,456 $ 868,196
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 126,600 48,000
Net change in assets and liabilities:
Accounts receivable 260,002 (1,035,555)
Prepaid expenses 2,296 (104,565)
Income tax receivable 403,350 --
Accounts payable (153,387) 148,775
Income taxes payable -- 247,000
Accrued liabilities (107,707) (14,389)
Deferred consulting revenue 20,000 (46,252)
Deferred maintenance revenue 5,214 339,443
Other long-term liabilities 14,970 37,500
------------ ------------
Net cash provided by operating activities $ 650,794 $ 488,153
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CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs $ (367,030) $ (197,513)
Purchase of equipment (34,677) (20,993)
Increase in investments 3,780 --
------------ ------------
Net cash used in investing activities (397,927) (218,506)
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CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of common stock (105,163) --
------------ ------------
Net increase in cash and cash equivalents 147,704 269,647
Cash and equivalents, beginning of period 10,439,233 7,877,932
------------ ------------
Cash and equivalents, end of period $ 10,586,937 $ 8,147,579
============ ============
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Accelr8 Technology Corporation
Notes to Financial Statements
For the three months ended October 31, 1998 and 1997
Note 1. Accounting Policies
The financial information provided herein was prepared from the books and
records of the Company without audit. The information furnished reflects all
normal recurring adjustments which, in the opinion of the Company, are necessary
for a fair statement of the balance sheets, statements of operations, and
statements of cash flows, as of the dates and for the periods presented. The
Notes to Financial Statements included in the Company's 1998 Annual Report on
Form 10-K should be read in conjunction with these consolidated financial
statements.
Note 2. Reclassifications
Certain reclassifications have been made in the 1997 financial statements
to conform to the classification used in 1998.
Note 3. Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The Company adopted SFAS 130 on August 1, 1998. The Company does not have any
items of other comprehensive income for the three month periods ended October
31, 1998 and 1997. Therefore, total comprehensive income was the same as net
income for those periods.
Note 4. Earnings Per Share
During February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 requires companies to present basic earnings per share
and diluted earnings per share, instead of the previously reported primary and
fully diluted earnings per share. The Company adopted this Statement in fiscal
year 1998 and all earnings per share have been restated to reflect the new
standard. The following table is a reconciliation of basic and diluted earnings
per share for the quarters ended October 1998 and 1997.
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<TABLE>
<CAPTION>
October 31, 1998 October 31, 1997
---------------------------------------- -------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 79,456 $ 868,196
Basic earnings per share:
Income available to
common shareholders 79,456 7,849,889 $.01 868,196 6,893,231 $.13
==== ====
Effect of dilutive securites:
Stock options and warrants 204,057 1,194,306
--------- ------- ---------
Diluted earnings per share $ 79,456 8,053,946 $.01 $ 868,196 8,087,537 $.11
========= ========= ==== ========== ========= ====
Note 5. Treasury Stock
The board of directors has authorized the repurchase of shares of the
Company's common stock. At October 31, 1998, the Company had repurchased 35,500
shares of its common stock in open market purchases. In accordance with Colorado
State law, the Company's repurchases of shares of common stock shall constitute
authorized but unissued shares. See 7-106-302 CRS.
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Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
- --------------------------------------------------------------------------------
Information contained in the following discussion of results of operations
and financial condition of the Company contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of words such as "may," "will," "expect,"
"anticipate," "estimate," or "continue," or variations thereon or comparable
terminology. In addition, all statements other than statements of historical
facts that address activities, events or developments that the company expects,
believes or anticipates, will or may occur in the future, and other such
matters, are forward-looking statements. The following discussion should be read
in conjunction with the Company's consolidated financial statements and related
notes included elsewhere herein. The Company's future operating results may be
affected by various tends and factors which are beyond the Company's control.
These include, among other factors, general public perception of year 2000
issues and solutions, and other uncertain business conditions that may affect
the Company's business. The Company cautions the reader that a number of
important factors discussed herein, and in other reports filed with the
Securities and Exchange Commission, could affect the company's actual results
and cause actual results to differ materially from those discussed in
forward-looking statements.
Results of Operations: October 31, 1998 compared to October 31, 1997
Total revenues for the quarter ended October 31, 1998 were $728,508 a
decrease of $901,381 or 55.3%, as compared to the quarter ended October 31,
1997. Consulting fees for the quarter ended October 31, 1998, were $83,861, a
decrease of $69,453 or 45.3% as compared to the quarter ended October 31, 1997,
and represented 11.5% of total revenues. Product license and customer support
fees for the quarter ended October 31, 1998, were $558,938 a decrease of
$778,109 or 58.2%, as compared to the quarter ended October 31, 1997 and
represented 76.7% of total revenues. Revenues from the resale of purchased
software for the quarter ended October 31, 1998, were $85,709, a decrease of
$53,819 or 38.6%, as compared to the quarter ended October 31, 1997 and
represented 11.8% of total revenue. The decrease in revenues from consulting
fees and product licenses and customer support fees was largely the result of a
general decline in market demand for year 2000 tools and training. The Company
believes that demand for year 2000 tools will resume as companies realize the
true extent of the problem beginning in January 1999. Migration revenue as a
percent of total revenues increased to 28% during the quarter ended October
31, 1998, as compared to 21% for the quarter ended October 31, 1997.
During the quarter ended October 31, 1998, sales to the Company's two
largest customers were $129,344 and $102,989, representing 17.8% and 14.1% of
the Company's revenues, respectively. In comparison, sales to the Company's two
largest customers were $575,000 and $425,440, representing 35.3% and 26.1% of
the Company's revenues respectively for the quarter ended October 31, 1997. The
loss of a major customer could have a significant impact on the Company's
financial performance in any given year.
Cost of services for the quarter ended October 31, 1998, was $255,186, an
increase of $85,049 or 50.0%, as compared to the quarter ended October 31, 1997.
Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 11.5% for the quarter
ended October 31, 1997 to 39.6% for the quarter ended October 31, 1998. This
increase occurred because of decreased revenue while cost of services increased
largely due to amortization of software costs capitalized and depreciation and
maintenance of computer equipment.
Cost of software purchased for resale for the quarter ended October 31,
1998, was $3,550 as compared to $44,232 for the quarter ended October 31, 1997.
The decrease in software purchased for resale results from decreased revenue
from resale of purchased software and variations in the product mix of items
sold.
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General and administrative expenses for the quarter ended October 31, 1998,
were $226,237, an increase of $4,872 or 2.2%, as compared to the quarter ended
October 31, 1997.
Marketing and advertising expenses for the quarter ended October 31, 1998,
were $268,081, an increase of $132,018 or 97.0%, as compared to the quarter
ended October 31, 1997. This increase was due to increased costs of personnel
and related employee costs, advertising, promotional material, and trade shows
as related to the Company's year 2000 tools and services.
Interest income for the quarter ended October 31, 1998, was $127,352 an
increase of 21.2%, as compared to the quarter ended October 31, 1997. This
increase resulted from investing additional cash generated from operations in
interest bearing instruments.
Income tax provision for the quarter ended October 31, 1998, was $23,350 a
decrease of $271,650 or 92.1% as compared to the quarter ended October 31, 1997.
This decrease resulted from decreased income before taxes.
As a result of these factors, income before income taxes for the quarter
ended October 31, 1998 was $102,806 a decrease of $1,060,390 or 91.2%, as
compared to the quarter ended October 31, 1997. Net income for the quarter ended
October 31, 1998 was $79,456 a decrease of $788,740 or 90.8%, as compared to the
quarter ended October 31, 1997.
There were no items of comprehensive income during the three months ended
October 31, 1998 and 1997.
Capital Resources and Liquidity
At October 31, 1998 as compared to the Company's most recent fiscal year
end, current assets decreased 4.3% from $12,025,820 to $11,507,876 and the
Company's liquidity as measured by available cash, increased by 1.4% from
$10,439,233 to $10,586,937. During the same period, shareholders' equity
decreased .2% from $12,355,892 to $12,330,185 as a result of net income less
cost of repurchasing company stock in the amount of $105,163 during the quarter
ended October 31, 1998.
The Company has historically funded its operations primarily through equity
financing and cash flow generated from operations. The Company anticipates that
current cash balances and working capital plus future positive cash flow from
operations will be sufficient to fund its capital and liquidity needs in the
foreseeable future.
Year 2000
The Company has established a program to address potential Year 2000
compliance issues. It has modified some portions of its software so that it will
function properly in the year 2000. Some earlier, non-Year 2000 compliant
software has been licensed. Users of the non-Year 2000 compliant software were
notified and upgrades are available. To date, the Company's accounting system
has been updated for Year 2000 compliance, including upgrading of hardware. The
total expected costs in relation to these upgrades are immaterial to the
Company. Management anticipates that all necessary changes to its software will
be completed before December 1, 1999, and that the Company will not experience
any significant impact with respect to Year 2000 compliance with the Company's
non-information technology systems and equipment.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibits: There are no exhibits for the three months ended October 31,
1998.
b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
three months ended October 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 4, 1998
--------------------
ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
---------------------------------------------
Thomas V. Geimer, Principal Financial Officer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 10,586,937
<SECURITIES> 0
<RECEIVABLES> 751,960
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,507,876
<PP&E> 306,398
<DEPRECIATION> 126,600
<TOTAL-ASSETS> 13,728,160
<CURRENT-LIABILITIES> 553,975
<BONDS> 0
0
0
<COMMON> 8,438,314
<OTHER-SE> 3,891,871
<TOTAL-LIABILITY-AND-EQUITY> 13,728,160
<SALES> 728,508
<TOTAL-REVENUES> 728,508
<CGS> 255,186
<TOTAL-COSTS> 753,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,352
<INCOME-PRETAX> 102,806
<INCOME-TAX> 23,350
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,456
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
