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 January 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
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
303 East Seventeenth Avenue, Suite 108, Denver, Colorado 80203
--------------------------------------------------------------
(Address of principal executive office)
(303) 863-8088
-------------------------
(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 January 31, 1998
-------------------------- -------------------------------
Common Stock, no par value 7,969,500
<PAGE>
Accelr8 Technology Corporation
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - as of
January 31, 1998 and July 31, 1997 1
Statements of Operations
for the three months and six months
ended January 31, 1998 and 1997 2
Statements of Cash Flows
for the six months ended
January 31, 1998 and 1997 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
-ii- FORM 10-QSB
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Accelr8 Technology Corporation
Balance Sheets
January 31, July 31,
1998 1997
ASSETS (Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,285,990 $ 7,877,932
Accounts receivable 2,187,737 910,334
Prepaid expenses and other 135,476 26,800
Deferred tax assets 181,400 181,400
------------ ------------
Total current assets 11,790,603 8,996,466
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 262,987 231,254
Furniture and fixtures 100,600 32,476
------------ ------------
Total property and equipment 363,587 263,730
Less accumulated depreciation (129,833) (96,594)
------------ ------------
Net property and equipment 233,754 167,136
------------ ------------
SOFTWARE DEVELOPMENT COSTS:
Software development cost less accumulated
amortization: 1998 - $1,004,682;
1997 - $875,046 835,777 506,322
------------ ------------
INVESTMENTS 181,580 179,020
------------ ------------
Total assets $ 13,041,714 $ 9,848,944
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 185,176 $ 97,499
Income taxes payable 708,394 47,394
Accrued liabilities 80,489 56,360
Deferred consulting revenue -- 46,252
Deferred maintenance revenue 162,540 103,878
------------ ------------
Total current liabilities 1,136,599 351,383
------------ ------------
LONG TERM LIABILITIES:
Deferred tax liabilities 203,400 203,400
------------ ------------
Other long-term liabilities 181,580 141,520
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par value; 11,000,000 shares
authorized; 7,969,500 shares issued
and outstanding 8,579,477 8,218,677
Contributed capital 315,049 41,449
Retained earnings 2,899,209 892,515
Shares held for employee benefit (273,600) --
------------ ------------
Shareholders' equity - net 11,520,135 9,152,641
------------ ------------
TOTAL $ 13,041,714 $ 9,848,944
============ ============
- 1 - FORM 10-QSB
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
January 31, January 31, January 31, January 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Consulting fees $ 131,986 $ 84,899 $ 285,300 $ 278,602
Product license and customer support fees 2,335,375 96,948 3,672,422 362,578
Resale of software purchased 137,360 77,041 276,887 230,636
----------- ----------- ----------- -----------
Total Revenues 2,604,721 258,888 4,234,609 871,816
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of services 216,084 98,462 351,159 177,936
Cost of software purchased for resale 33,309 25,172 77,541 69,332
General and administrative 203,197 110,180 424,562 225,570
Marketing and advertising 261,500 103,174 397,562 191,658
Research and development 29,268 11,218 64,330 20,529
----------- ----------- ----------- -----------
Total Expenses 743,358 348,206 1,315,154 685,025
----------- ----------- ----------- -----------
Income from operations 1,861,363 (89,318) 2,919,455 186,791
Interest income 116,135 79,024 221,239 98,794
----------- ----------- ----------- -----------
Income (loss) before income taxes 1,977,498 (10,294) 3,140,694 285,585
Income tax (provision) benefit (839,000) 60,000 (1,134,000) 0
----------- ----------- ----------- -----------
Net Income $ 1,138,498 $ 49,706 $ 2,006,694 $ 285,585
=========== =========== =========== ===========
Weighted average shares outstanding - basic 7,833,389 5,970,840 7,849,965 5,731,674
=========== =========== ===========
Net income per share - basic $ .15 $ .01 $ .26 $ .05
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 8,166,213 7,495,582 8,212,191 8,292,247
=========== =========== =========== ===========
Net income per share - diluted $ .14 $ .01 $ .24 $ .03
=========== =========== =========== ===========
- 2 - FORM 10-QSB
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Six Months Ended
-------------------------------------
January 31, January 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 2,006,694 $ 285,585
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 162,875 54,746
Net change in assets and liabilities:
Accounts receivable (1,277,403) 99,158
Prepaid expenses and other (108,676) (86,155)
Accounts payable 87,677 61,752
Income taxes payable 661,000 (18,000)
Accrued liabilities 24,129 101,974
Deferred consulting revenue (46,253) (48,642)
Deferred maintenance revenue 58,663 7,221
Other long-term liabilities 40,060 --
----------- -----------
Net cash provided by operating activities 1,608,766 457,639
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (459,090) (94,577)
Purchase of computer equipment (31,733) (21,879)
Purchase of office furniture and equipment (68,124) --
Increase in investments (2,561) (2,448)
----------- -----------
Net cash used in investing activities (561,508) (118,904)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds provided from sale of common stock 360,800 6,234,707
----------- -----------
Net increase in cash and cash equivalents 1,408,058 6,573,442
Cash and equivalents, beginning of period 7,877,932 1,407,026
----------- -----------
Cash and equivalents, ending of period $ 9,285,990 $ 7,980,468
=========== ===========
- 3 - FORM 10-QSB
</TABLE>
<PAGE>
Accelr8 Technology Corporation
Notes to Financial Statements
For the six months ended January 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 presentation 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 1997 Annual Report on
Form 10-K should be read in conjunction with these financial statements.
Effective for the Company's financial statements for the period ended
January 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS No. 128"), which replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common shareholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS assumes the issuance of common stock for potentially dilutive
equivalent shares outstanding. All prior-period EPS data have been restated.
Note 2. Shareholders' Equity
During the period ended January 31, 1998, the Company issued 137,000 shares
of common stock resulting from the exercise of options for $360,800.
In August 1997, the options and warrants held by the Chairman of the Board
were exercised and placed into the "Rabbi" Trust discussed in Note 6 to the
Company's fiscal 1997 financial statements. Such shares are issuable upon the
occurrence of retirement, death or termination of the Chairman over a ten-year
period after such occurrence. Because the Company owns the assets of the "Rabbi"
Trust, the shares of the Company stock in the "Rabbi" Trust have been treated as
treasury stock for financial reporting purposes.
- 4 - FORM 10-QSB
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
- --------------------------------------------------------------------------------
Changes in Results of Operations: Six months ended January 31, 1998 compared to
Six months ended January 31, 1997
Total revenues for the six months ended January 31, 1998, were $4,234,609,
an increase of $3,362,793 or 386%, as compared to the six months ended January
31, 1997. Consulting fees for the six months ended January 31, 1998, were
$285,300, an increase of $6,698 or 2.4%, as compared to the six months ended
January 31, 1997, and represented 6.7% of total revenues. Product license and
customer support fees for the six months ended January 31, 1998, were
$3,672,422, an increase of $3,309,844 or 913%, as compared to the six months
ended January 31, 1997, and represented 86.7% of total revenues. Revenues from
the resale of purchased software for the six months ended January 31, 1998, were
$276,887, an increase of $46,251 or 20.0%, as compared to the six months ended
January 31, 1997, and represented 6.5% of total revenues. The small increase in
consulting fees is the result of the Company's emphasis on marketing of software
tools for the Year 2000 solution. The substantial increase in product license
and support fees results from the market's increasing acceptance of the
Company's Year 2000 tools and services as well as a three-year worldwide license
agreement for the Company's Year 2000 tools with Digital Equipment Company.
During the six months ended January 31, 1998, sales to the Company's four
largest customers were $1,000,000; $604,840; $465,000; and $454,055 representing
23.6%; 14.3%; 11.0%; and 10.7%, respectively, of the Company's revenues. In
comparison, sales to the Company's two largest customers were $91,550 and
$87,868, representing 10.5% and 10.1% of total revenues for the six months ended
January 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 six months ended January 31, 1998, was $351,159,
an increase of $173,223 or 97.4%, as compared to the six months ended January
31, 1997. Cost of services as a percentage of revenues from both consulting fees
and product license and customer support fees decreased from 27.8% for the six
months ended January 31, 1997, to 8.9% for the six months ended January 31,
1998. This decrease is the result of most sales being in product license and
support which are less costly to provide.
Cost of software purchased for resale for the six months ended January 31,
1998, was $77,541 an increase of $8,209 or 11.8%, as compared to the six months
ended January 31, 1997. This increase was directly related to the increased
resale of purchased software.
General and administrative expenses for the six months ended January 31,
1998, were $424,562, an increase of $198,992 or 88.2%, as compared to the six
months ended January 31, 1997. This increase was principally due to increased
employee benefit costs which resulted from new hires, additional office space
and costs associated with building infrastructure.
Marketing and advertising expenses for the six months ended January 31,
1998, were $397,562, an increase of $205,904 or 107.4%, as compared to the six
months ended January 31, 1997. This increase was principally due to increased
employee costs and advertising the Company's Year 2000 tools in several trade
publications as well as new product literature and web site expense.
Research and development expenses for the six months ended January 31,
1998, were $64,330, an increase of $43,801 or 213.4%, as compared to the six
months ended January 31, 1997. This increase resulted from increased activities
to develop new products.
- 5 - FORM 10-QSB
<PAGE>
Interest income for the six months ended January 31, 1998, was $221,239, an
increase of $122,445, as compared to the six months ended January 31, 1997. This
increase resulted from a greater amount of cash earning interest during the
period.
As a result of these factors, net income for the six months ended January
31, 1998, was $2,006,694, an increase of $1,721,109 or 603%, as compared to the
six months ended January 31, 1997.
Capital Resources and Liquidity
At January 31, 1998, as compared to at July 31, 1997, the Company's current
assets increased 31.1% from $8,996,466 to $11,790,603 and the Company's
liquidity, as measured by cash and cash equivalents, increased by 17.9% from
$7,877,932 to $9,285,990. During the same period, shareholders' equity increased
25.9% from $9,152,641 to $11,520,135 primarily as a result of net income for the
period.
Changes in Results of Operations: Three months ended January 31, 1998 compared
to three monts ended January 31, 1997
Total revenues for the three months ended January 31, 1998 were $2,604,721,
an increase of $2,345,833 or 906%, as compared to the three months ended January
31, 1997. Consulting fees for the three months ended January 31, 1998, were
$131,986, an increase of $47,087 or 55.5%, as compared to the three months ended
January 31, 1997, and represented 5.1% of total revenues. Product license and
customer support fees for the three months ended January 31, 1998, were
$2,335,375, an increase of $2,238,427 or 2,309%, as compared to the three months
ended January 31, 1997, and represented 89.7% of total revenue. Revenues from
the resale of purchased software for the three months ended January 31, 1998,
were $137,360, an increase of $60,319 or 78.3%, as compared to the three months
ended January 31, 1997, and represented 5.3% of total revenue. The increase in
consulting fees is the result of assisting customers with analyzing and
correcting their Year 2000 problem. The substantial increase in product and
license support fees results from the market's increasing acceptance of the
Company's Year 2000 tools and services as well as a three-year worldwide license
agreement for the Company's Year 2000 tools with Digital Equipment Company.
During the three months ended January 31, 1998, sales to the Company's
largest customers were $1,000,000 and $465,000, representing 38.4% and 17.9% of
the Company's revenues, respectively. In comparison, sales to a single customer
represented 16.5% of total revenues for the three months ended January 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 three months ended January 31, 1998, was $216,084,
an increase of $117,622 or 120%, as compared to the three months ended January
31, 1997. Cost of services as a percentage of revenues from both consulting fees
and product license and customer support fees decreased from 54.1% for the three
months ended January 31, 1997 to 8.8% for the three months ended January 31,
1998. This decrease is the result of most sales being in product licenses and
support which are less costly to provide.
Cost of software purchased for resale for the three months ended January
31, 1998, was $33,309, an increase of $8,137 or 32.3%, as compared to the three
months ended January 31, 1997. This increase was directly related to the
increased resale of purchased software.
General and administrative expenses for the three months ended January 31,
1998, were $203,197, an increase of $93,017 or 84.4%, as compared to the three
months ended January 31, 1997. This increase was principally due to increased
employee benefit costs which resulted from new hires, additional office space,
and costs associated with building infrastructure.
- 6 - FORM 10-QSB
<PAGE>
Marketing and advertising expenses for the three months ended January 31,
1998, were $261,500, an increase of $158,326 or 154%, as compared to the three
months ended January 31, 1997. This increase was principally due to increased
employee costs and advertising the Company's Year 2000 tools in several trade
publications, as well as new product literature and web site expense.
Research and development expenses for the quarter ended January 31, 1998,
were $29,268, an increase of $18,050 or 161%, as compared to the three months
ended January 31, 1997. This increase resulted from increased activities to
develop new products.
Interest income for the quarter ended January 31, 1998, was $116,135, an
increase of 47.0%, as compared to the three months ended January 31, 1997. This
increase resulted from a greater amount of cash earning interest during the
period.
As a result of these factors, the Company had net income for the three
months ended January 31, 1998, of $1,138,498, an increase of $1,088,792 or
2,191%, as compared to the three months ended January 31, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits: There are no exhibits for the six months ended January 31, 1998.
b) Reports on Form 8-K: There were no reports on Form 8-K filed for the six
months ended January 31, 1998.
- 7 - FORM 10-QSB
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 12, 1998
--------------
ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
---------------------------------------------
Thomas V. Geimer, Principal Financial Officer
- 8 - FORM 10-QSB
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR PERIOD ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1996
<PERIOD-START> NOV-01-1997 NOV-01-1996
<PERIOD-END> JAN-31-1998 JAN-31-1997
<CASH> 9,285,990 0
<SECURITIES> 0 0
<RECEIVABLES> 2,187,737 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,790,603 0
<PP&E> 363,587 0
<DEPRECIATION> 129,833 0
<TOTAL-ASSETS> 13,041,714 0
<CURRENT-LIABILITIES> 1,136,599 0
<BONDS> 384,980 0
0 0
0 0
<COMMON> 8,894,526 0
<OTHER-SE> 2,625,609 0
<TOTAL-LIABILITY-AND-EQUITY> 13,041,714 0
<SALES> 0 0
<TOTAL-REVENUES> 2,604,721 258,888
<CGS> 0 0
<TOTAL-COSTS> 743,358 348,206
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (116,135) (79,024)
<INCOME-PRETAX> 1,977,498 (10,294)
<INCOME-TAX> 839,000 (60,000)
<INCOME-CONTINUING> 1,138,498 49,706
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,138,498 49,706
<EPS-PRIMARY> .15 .01
<EPS-DILUTED> .14 .01
</TABLE>
