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 April 30, 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
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1072256
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(State or other jurisdiction (IRS Employer Identification No.)
of 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)
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(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
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Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at April 30, 1998
- -------------------------- -------------------------------
Common Stock, no par value 7,969,500
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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
Condensed Balance Sheets as of
April 30, 1998 and July 31, 1997 1
Condensed Statements of Operations
for the three months and nine months ended
April 30, 1998 and 1997 2
Condensed Statements of Cash Flows
for the nine months ended April 30, 1998 and 1997 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
-ii-
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
Accelr8 Technology Corporation
Condensed Balance Sheets
(Unaudited)
April 30, July 31,
1998 1997
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,283,350 $ 7,877,932
Accounts receivable 2,762,808 910,334
Prepaid expenses and other 120,091 26,800
Deferred tax assets 181,400 181,400
------------ ------------
Total current assets 13,347,649 8,996,466
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 285,951 231,254
Furniture and fixtures 103,809 32,476
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Total property and equipment 389,760 263,730
Less accumulated depreciation (141,113) (96,594)
------------ ------------
Net property and equipment 248,647 167,136
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SOFTWARE DEVELOPMENT COSTS:
Software development cost less accumulated
amortization: 1998 - $1,064,718; 1997 - $875,046 972,691 506,322
------------ ------------
INVESTMENTS 280,821 179,020
------------ ------------
Total assets $ 14,849,808 $ 9,848,944
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 196,101 $ 97,499
Incomes taxes payable 1,166,894 47,394
Accrued liabilities 182,278 56,360
Deferred consulting revenue -- 46,252
Deferred maintenance revenue 180,107 103,878
------------ ------------
Total current liabilities 1,725,380 351,383
------------ ------------
LONG TERM LIABILITIES:
Deferred tax liabilities 203,400 203,400
------------ ------------
Other long-term liabilities 243,321 141,520
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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 4,056,781 892,515
Shares held for employee benefit (273,600) --
------------ ------------
Shareholders' equity - net 12,677,707 9,152,641
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 14,849,808 $ 9,848,944
============ ============
- 1 - 3rd Quarter Filing
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Accelr8 Technology Corporation
Condensed Statements of Operations
(Unaudited)
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Nine Months Three Months
Ended April 30 Ended April 30
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Consulting fees $ 613,910 $ 508,719 $ 328,610 $ 230,117
Product license and customer support fees 5,988,867 769,766 2,316,445 407,188
Resale of software purchased 385,783 309,513 108,895 78,877
---------- ---------- ---------- ----------
Total revenues 6,988,560 1,587,998 2,753,950 716,182
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of services 707,682 267,408 356,524 89,472
Cost of software purchased for resale 124,551 93,405 47,010 24,074
General and administrative 675,544 325,013 250,981 99,442
Marketing and advertising 807,364 362,330 409,802 170,671
Research and development 64,330 39,493 -- 18,964
---------- ---------- ---------- ----------
Total Costs and Expenses 2,379,471 1,087,649 1,064,317 402,623
---------- ---------- ---------- ----------
Income from operations 4,609,089 500,349 1,689,633 313,559
Interest income 347,677 197,365 126,439 98,570
---------- ---------- ---------- ----------
Income before income taxes 4,956,766 697,714 1,816,072 412,129
Income tax provision 1,792,500 25,000 658,500 25,000
---------- ---------- ---------- ----------
Net income $3,164,266 $ 672,714 $1,157,572 $ 387,129
========== ========== ========== ==========
Weighted average shares outstanding - basic 7,889,806 6,038,981 7,969,500 6,653,611
========== ========== ========== ==========
Net Income per share - basic $ .40 $ .11 $ .15 $ .06
========== ========== ========== ==========
Weighted average shares outstanding - diluted 8,198,550 7,473,769 8,284,325 8,098,862
========== ========== ========== ==========
Net Income per share - diluted $ .39 $ .09 $ .14 $ .05
========== ========== ========== ==========
- 2 - 3rd Quarter Filing
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Accelr8 Technology Corporation
Condensed Statements of Cash Flows
(Unaudited)
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Nine Months
Ended April 30
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1998 1997
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CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,164,266 $ 672,714
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 234,190 103,090
Net change in assets and liabilities:
Accounts receivable (1,852,474) (157,788)
Prepaid expenses and other (93,291) (74,493)
Accounts payable 98,603 34,801
Income taxes payable 1,119,500 (18,000)
Accrued salaries and other liabilities 125,917 61,283
Deferred consulting revenue (46,253) (89,953)
Deferred maintenance revenue 76,229 13,301
Other long term liabilities 101,801 --
------------ ------------
Net cash provided by operating activities 2,928,488 544,955
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CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (656,039) (255,642)
Purchase of computer equipment (54,696) (59,754)
Purchase of office furniture and equipment (71,334) (15,834)
Increase in investments (101,801) --
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Net cash used in investing activities (883,870) (331,231)
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CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds provided from sale of common stock 360,800 6,257,707
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Net increase in cash and cash equivalents 2,405,418 6,471,431
Cash and equivalents, beginning of year 7,877,932 1,407,026
------------ ------------
Cash and equivalents, end of year $ 10,283,350 $ 7,878,457
============ ============
- 3 - 3rd Quarter Filing
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Accelr8 Technology Corporation
Notes to Condensed Financial Statements
For the nine months ended April 30, 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 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 condensed 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 (stock options and warrants). All prior-period EPS
data have been restated.
Note 2. Shareholders' Equity
During the nine month period ended April 30, 1998, the Company issued
137,000 shares of common stock resulting from the exercise of options for
$360,800.
In August, 1997, the Chairman of the Board, entered into an agreement to
place certain shares of the Company's common stock that he was to acquire upon
the exercise of warrants and options (the "Warrants") at an exercise price of
$0.24 per share into the "Rabbi" Trust discussed in Notes 6 and 8 to the
Company's fiscal 1997 financial statements. The Warrants to acquire 1,040,000
shares of the Company's common stock were exercised, and 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. The Rabbi Trust provides that upon the Chairman's death, disability,
or termination of his employment the shares will be released ratably over the
subsequent ten (10) years, unless the Board of Directors determines otherwise.
Note 3. New Accounting Pronouncements
In October, 1997 the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 97-2 "Software Revenue Recognition"
which has not changed the basic rules of revenue recognition but does provide
additional guidance, particularly with respect to multiple deliverables and
"when and if" available products. In March 1998, the AICPA issued SOP 98-4
"Deferral of the Effective Date of a Provision of SOP 97-2 and SOP 98-4 will be
effective for the Company's fiscal year ending July 31, 1999. The Company has
not determined the effect of adoption of SOP 97-2 and SOP 98-4 on its financial
position or results of operations.
- 4 - 3rd Quarter Filing
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Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
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Changes in Results of Operations: Nine months ended April 30, 1998 compared to
Nine months ended April 30, 1997
Total revenues for the nine months ended April 30, 1998 were $6,988,560 an
increase of $5,400,562 or 340%, as compared to the nine months ended April 30,
1997. Consulting fees for the nine months ended April 30, 1998, were $613,910 an
increase of $105,191 or 21% as compared to the nine months ended April 30, 1997,
and represented 9% of total revenues. Product license and customer support fees
for the nine months ended April 30, 1998, were $5,988,867 an increase of
$5,219,101 or 678%, as compared to the nine months ended April 30, 1997, and
represented 86% of total revenues. Revenues from the resale of purchased
software for the nine months ended April 30, 1998, were $385,783, an increase of
$76,270 or 25%, as compared to the nine months ended April 30, 1997, and
represented 5% of total revenues. The nearly seven times increase in product
license and customer support fees is the result of the growing number of major
corporations in a variety of industries plus governmental agencies that are now
aggressively addressing their Year 2000 problems. The worldwide licensing
agreement with Digital Equipment Company effectively provides the Company with a
qualified worldwide sales force and has contributed significantly to revenues
during the period. The strong increase in both consulting fees and resale of
purchased software is the result of an increased sales force resulting in new
customers plus repeat business.
During the nine months ended April 30, 1998, the Company had sales in
excess of 10% to one customer in the amount of $1,663,000 or 24% of total sales.
During the nine months ended April 30, 1997, sales to a single customer did not
exceed 10% of total sales. 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 nine months ended April 30, 1998, was $707,682, an
increase of $440,274 or 165%, as compared to the nine months ended April 30,
1997. Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees decreased from 21% for the nine months
ended April 30, 1997, to 11% for the nine months ended April 30, 1998. This
decrease is the result of a greater proportion of sales being product license
and support which are less costly to provide as compared to consulting.
Cost of software purchased for resale for the nine months ended April 30,
1998, was $124,551 an increase of $31,146 or 33%, as compared to the nine months
ended April 30, 1997. This increase was directly related to the increased resale
of purchased software.
General and administrative expenses for the nine months ended April 30,
1998, were $675,544, an increase of $350,531 or 108%, as compared to the nine
months ended April 30, 1997. This increase was due to an expanded infrastructure
made necessary by increasing sales and is due to additional salaries expense and
related costs such as employee benefits, payroll taxes, rent and supplies.
Marketing and advertising expenses for the nine months ended April 30,
1998, were $807,364, an increase of $445,034 or 123%, as compared to the nine
months ended April 30, 1997. This increase was principally due to increased
employee costs, attendance at several major Year 2000 trade shows, advertising
in trade magazines, production of marketing materials, and direct mailing costs.
- 5 - 3rd Quarter Filing
<PAGE>
Research and development expenses for the nine months ended April 30, 1998,
were $64,330, an increase of $24,837 or 63%, as compared to the nine months
ended April 30, 1997. This increase resulted from increased computer costs and
depreciation relating to research and development activities.
Interest income for the nine months ended April 30, 1998, was $347,677, an
increase of $150,312 or 76%, as compared to the nine months ended April 30,
1997. This increase resulted from a greater amount of cash earning interest
during this period.
As a result of these factors, income before income taxes for the nine
months ended April 30, 1998, was $4,956,766, an increase of $4,259,052 or 610%,
as compared to the nine months ended April 30, 1997. Net income for the nine
months ended April 30, 1998, was $3,164,266, an increase of $2,491,552 or 370%,
as compared to the nine months ended April 30, 1997.
Capital Resources and Liquidity
At April 30, 1998 as compared to July 31, 1997, the Company's current
assets increased 48% from $8,996,466 to $13,347,649 and the Company's liquidity
as measured by cash and cash equivalents, increased by 31% from $7,877,932 to
$10,283,350. During the same period, shareholders' equity increased 39% from
$9,152,641 to $12,677,707 as a result of the Company's profitability plus
exercise of stock options. Management believes its current cash balances plus
anticipated increases from operations will be adequate to cover its future
financial needs.
Changes in Results of Operations: Three months ended April 30, 1998 compared to
April 30, 1997
Total revenues for the three months ended April 30, 1998 were $2,753,950,
an increase of $2,037,768 or 285%, as compared to the three months ended April
30, 1997. Consulting fees for the three months ended April 30, 1998, were
$328,610, an increase of $98,493 or 43% as compared to the three months ended
April 30, 1997, and represented 12% of total revenues. Product license and
customer support fees for the three months ended April 30, 1998, were
$2,316,445, an increase of $1,909,257 or 469%, as compared to the three months
ended April 30, 1997, and represented 84% of total revenues. Revenues from the
resale of purchased software for the three months ended April 30, 1998, were
$108,895, an increase of $30,018 or 38%, as compared to the three months ended
April 30, 1997, and represented 4% of total revenues. The nearly five times
increase in product license and customer support fees is the result of the
growing number of major corporations in a variety of industries plus
governmental agencies that are now aggressively addressing their Year 2000
problems. The worldwide licensing agreement with Digital Equipment Company
effectively provides the Company with a qualified worldwide sales force and has
contributed significantly to revenues during the period. The strong increase in
both consulting fees and resale of purchased software is the result of an
increased sales force resulting in new customers plus repeat business.
During the three months ended April 30, 1998, sales to the Company's two
largest customers were $663,000 and $649,275, representing 24% and 24% of the
Company's revenues respectively. In comparison, sales to the Company's two
largest customers were $147,160 and $100,000 representing 21% and 14% of the
total revenues respectively for the three months ended April 30, 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 April 30, 1998, was $356,524 an
increase of $267,052 or 298%, as compared to the three months ended April 30,
1997. Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees decreased from 14% for the three
months ended April 30, 1997 to 13% for the three months ended April 30, 1998.
This decrease is the result of a greater proportion of sales being product
license and support which are less costly to provide as compared to consulting.
- 6 - 3rd Quarter Filing
<PAGE>
Cost of software purchased for resale for the three months ended April 30,
1998, was $47,010, an increase of $22,936 or 95%, as compared to the three
months ended April 30, 1997. This increase was directly related to the increased
resale of purchased software.
General and administrative expenses for the three months ended April 30,
1998, were $250,981, an increase of $151,539 or 152%, as compared to the three
months ended April 30, 1997. This increase was principally due to an expanded
infrastructure made necessary by increasing sales and results primarily from
additional salaries and related costs such as employee benefits, payroll taxes,
rent and supplies.
Marketing and advertising expenses for the three months ended April 30,
1998, were $409,802, an increase of $239,131 or 140%, as compared to the three
months ended April 30, 1997. This increase was principally due to increased
employee costs, attendance at Year 2000 trade shows, advertising in trade
magazines and production of marketing materials.
There were no research and development expenses for the quarter ended April
30, 1998, Research and development expenses were $18,964 for the three months
ended April 30, 1997. During the current period all resources were expended on
servicing customers and therefor charged to cost of sales.
Interest income for the quarter ended April 30, 1998, was $126,439, an
increase of 28%, as compared to the three months ended April 30, 1997. This
increase resulted from a greater amount of cash earning interest during the
period, largely due to the Company's profitability.
As a result of these factors, the Company had a net income before taxes for
the three months ended April 30, 1998, of $1,816,072, an increase of $1,403,943
or 341%, as compared to the three months ended April 30, 1997. Net income for
the three months ended April 30, 1998, was $1,157,572, an increase of $770,443
or 199%, as compared to the three months ended April 30, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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a) Exhibits: There are no exhibits for the nine months ended April 30, 1998.
b) Reports on Form 8-K: No reports on Form 8-K were filed for the nine months
ended April 30, 1998.
- 7 - 3rd Quarter Filing
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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: June 13, 1998
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ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
---------------------------------
Thomas V. Geimer, Principal
Financial Officer
- 8 - 3rd Quarter Filing
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-Q FOR THE QUARTER ENDED 10/31/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH HINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1997
<PERIOD-START> FEB-01-1998 FEB-01-1998
<PERIOD-END> APR-30-1998 APR-30-1998
<CASH> 10,283,350 0
<SECURITIES> 0 0
<RECEIVABLES> 2,762,808 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 13,347,649 0
<PP&E> 389,760 0
<DEPRECIATION> 141,113 0
<TOTAL-ASSETS> 14,849,808 0
<CURRENT-LIABILITIES> 1,725,380 0
<BONDS> 446,721 0
0 0
0 0
<COMMON> 8,894,526 0
<OTHER-SE> 3,783,181 0
<TOTAL-LIABILITY-AND-EQUITY> 14,849,808 0
<SALES> 6,988,560 2,753,950
<TOTAL-REVENUES> 6,988,560 2,753,950
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,379,471 1,064,317
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (347,677) (126,439)
<INCOME-PRETAX> 4,956,766 1,816,072
<INCOME-TAX> 1,792,500 658,500
<INCOME-CONTINUING> 4,609,089 1,689,633
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,164,266 1,157,572
<EPS-PRIMARY> .40 .15
<EPS-DILUTED> .39 .14
</TABLE>
