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, 1999
[ ] 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 (IRS Employer Identification No.)
of incorporation or organization)
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 April 30, 1999
----- -----------------------------
Common Stock, no par value 7,808,617
<PAGE>
Accelr8 Technology Corporation
INDEX
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Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - as of
April 30, 1999 and July 31, 1998 1
Condensed Statements of Operations
for the three months and nine months ended
April 30, 1999 and 1998 2
Condensed Statements of Cash Flows
for the nine months ended April 30, 1999 and 1998 3
Notes to Condensed 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
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
Accelr8 Technology Corporation
Condensed Balance Sheets
(Unaudited)
April 30, July 31
1999 1998
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,292,585 $ 10,439,233
Accounts receivable 1,017,296 944,692
Income tax receivable 115,120 470,620
Prepaid expenses 154,982 99,377
Deferred tax assets 71,898 71,898
------------ ------------
Total current assets 11,651,881 12,025,820
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 385,349 344,258
Furniture and fixtures 111,927 111,387
------------ ------------
Total property and equipment 497,276 455,645
Less accumulated depreciation (225,924) (162,324)
------------ ------------
Net property and equipment 271,352 293,321
------------ ------------
SOFTWARE DEVELOPMENT COSTS:
Software development cost less accumulated
amortization: 1999 - $1,452,325; 1998 - $1,064,718 1,811,324 1,350,547
------------ ------------
INVESTMENTS 365,514 305,089
------------ ------------
Total assets $ 14,100,071 $ 13,974,777
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 201,654 $ 402,173
Accrued liabilities 71,861 192,087
Deferred revenue 221,000 --
Deferred maintenance revenue 347,112 195,595
------------ ------------
Total current liabilities 841,627 789,855
------------ ------------
LONG TERM LIABILITIES:
Deferred tax liabilities 523,941 523,941
------------ ------------
Other long-term liabilities 471,764 305,089
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par value; 11,000,000 shares authorized;
7,858,617 shares issued and 7,808,617 shares outstanding 8,387,540 8,543,477
Contributed capital 315,049 315,049
Retained earnings 3,833,750 3,770,966
Shares held for employee benefit (273,600) (273,600)
------------ ------------
Shareholders' equity 12,262,739 12,355,892
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 14,100,071 $ 13,974,777
============ ============
1
</TABLE>
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<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Nine Months Three Months
Ended April 30 Ended April 30
-------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Consulting fees $ 100,591 $ 613,910 $ 8,741 $ 328,610
Product license and customer support fees 1,569,226 5,988,867 357,244 2,316,445
Resale of software purchased 254,807 385,783 124,940 108,895
----------- ----------- ----------- -----------
Total Revenues 1,924,624 6,988,560 490,925 2,753,950
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of services 721,277 772,012 222,552 356,524
Cost of software purchased for resale 26,324 124,551 20,054 47,010
General and administrative 742,114 675,544 218,467 250,981
Marketing and sales 832,065 807,364 282,006 409,802
----------- ----------- ----------- -----------
Total Expenses 2,321,780 2,379,471 743,079 1,064,317
----------- ----------- ----------- -----------
Income (loss) from operations (397,156) 4,609,089 (252,154) 1,689,633
Interest income 435,440 347,677 105,709 126,439
----------- ----------- ----------- -----------
Income (loss) before income taxes 38,284 4,956,766 (146,445) 1,816,072
Income tax provision (benefit) (24,500) 1,792,500 (60,000) 658,500
----------- ----------- ----------- -----------
Net Income (loss) $ 62,784 $ 3,164,266 ($ 86,445) $ 1,157,572
=========== =========== =========== ===========
Weighted average shares outstanding - basic 7,829,048 7,889,806 7,814,139 7,969,500
=========== =========== =========== ===========
Net income (loss) per share - basic $ .01 $ .40 $ .(01) $ .15
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 8,111,186 8,198,550 8,086,009 8,284,325
=========== =========== =========== ===========
Net income (loss) per share - diluted $ .01 $ .39 $ .(01) $ .14
=========== =========== =========== ===========
2
</TABLE>
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<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Nine Months
Ended April 30
----------------------------
1999 1998
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 62,784 $ 3,164,266
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 378,600 234,190
Net change in assets and liabilities:
Accounts receivable (72,604) (1,852,474)
Prepaid expenses (55,605) (93,291)
Income tax receivable 355,500 --
Accounts payable (200,519) 98,603
Income taxes payable -- 1,119,500
Accrued salaries and other liabilities (120,226) 125,917
Deferred revenue 221,000 (46,253)
Deferred maintenance revenue 151,517 76,229
Other long-term liabilities 166,675 101,801
------------ ------------
Net cash provided by operating activities 887,122 2,928,488
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (775,777) (656,039)
Purchase of computer equipment (41,091) (54,696)
Purchase of office furniture and equipment (540) (71,334)
Increase in investments (60,425) (101,801)
------------ ------------
Net cash used in investing activities (877,833) (883,870)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Sale (purchase) of common stock (155,937) 360,800
------------ ------------
Net increase (decrease) in cash and cash equivalents (146,648) 2,405,418
Cash and cash equivalents, beginning of period 10,439,233 7,877,932
------------ ------------
Cash and cash equivalents, ending of period $ 10,292,585 $ 10,283,350
============ ============
3
</TABLE>
<PAGE>
Accelr8 Technology Corporation
Notes to Financial Statements
For the nine months ended April 30, 1999 and 1998
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 1998 Annual Report on
Form 10-K should be read in conjunction with these financial statements.
Note 2. Reclassifications
Certain reclassifications have been made in the 1998 financial statements
to conform to the classification used in 1999.
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 nine month periods ended April 30,
1999 and 1998. Therefore, total comprehensive income was the same as net income
for those periods.
Note 4. Treasury Stock
The board of directors has authorized the repurchase of shares of the
Company's common stock. At April 30, 1999, the Company had repurchased 50,000
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.
Note 5. Amortization
An Agreement dated January 30, 1998 with a major company provided for
licensing of tools and providing support for a three year period. Lacking any
historical data on this contract, the Company began amortizing support income
ratably over the thirty-six month term. At the end of the first year of the
contract this amortization period was reviewed in light of the costs of
servicing the contract in the initial year compared to expected costs in future
years. This review indicated nearly eighty-five percent of the expected costs
were incurred in the first contract year and accordingly amortization was
increased by an additional $310,000 during the nine months ended April 30, 1999.
4
<PAGE>
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 trends 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.
Changes in Results of Operations: Nine months ended April 30, 1999 compared to
Nine months ended April 30, 1998
- --------------------------------------------------------------------------------
Total revenues for the nine months ended April 30, 1999, were $1,924,624 a
decrease of $5,063,936 or 72.5%, as compared to the nine months ended April 30,
1998. Consulting fees for the nine months ended April 30, 1999, were $100,591 a
decrease of $513,319 or 83.6% as compared to the nine months ended April 30,
1998, and represented 5.2% of total revenues. Product license and customer
support fees for the nine months ended April 30, 1999, were $1,569,226 a
decrease of $4,419,641 or 73.8%, as compared to the nine months ended April 30,
1998, and represented 81.5% of total revenues. Revenues from the resale of
purchased software for the nine months ended April 30, 1999, were $254,807 a
decrease of $130,976 or 34.0%, as compared to the nine months ended April 30,
1998, and represented 13.2% of total revenues. 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.
Although management believes that demand for year 2000 tools will increase as
companies realize the true extent of the problem, there can be no assurance that
demand will in fact increase. If demand increases, management believes that due
to shortage of technical personnel, companies will purchase tools in order to
become Y2K compliant by year end. The decrease in resale of purchased software
results from a decreased emphasis on modernization of certain functions until
after the Year 2000 solutions are completed.
During the nine months ended April 30, 1999, the Company did not have sales
to a single customer that exceeded 10% of total sales. During the nine months
ended April 30, 1998, the Company had sales in excess of 10% of total sales to
one customer in the amount of $1,663,000 or 23.8%. The loss of a major customer
could have a significant impact on the Company's financial performance in any
given period.
During the period the Company consummated a sale to a major computer
services company, with which the company had a long-standing and substantial
business relationship for a master license for migration tools in the amount of
$225,000 payable monthly over a 23-month period beginning April 1, 1999. Revenue
is recognized in the period that payments are due. During the current period
$10,000 was included in revenue and the remaining amount recorded as deferred
revenue to be recognized in future periods.
Cost of services for the nine months ended April 30, 1999, was $721,277 a
decrease of $50,735 or 6.6% as compared to the nine months ended April 30, 1998.
Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 11.7% for the nine
months ended April 30, 1998, to 43.2% for the nine months ended April 30, 1999.
This increase is the result of sales decreasing at a rate greater than the
decrease in cost of sales.
5
<PAGE>
Cost of software purchased for resale for the nine months ended April 30,
1999, was $26,324 a decrease of $98,227 or 78.9%, as compared to the nine months
ended April 30,1998. This decrease was directly related to the decreased resale
of purchased software and product mix.
General and administrative expenses for the nine months ended April 30,
1999, were $742,114 an increase of $66,570 or 9.9%, as compared to the nine
months ended April 30, 1998. This increase was largely due to the increased
costs of insurance plus employee benefits.
Marketing and sales expenses for the nine months ended April 30, 1999, were
$832,065 an increase of $24,701 or 3.1%, as compared to the nine months ended
April 30, 1998. This increase was principally due to increased promotional costs
and communications expense.
Interest income for the nine months ended April 30, 1999, was $435,440 an
increase of $87,763 or 25.2% as compared to the nine months ended April 30,
1998. This increase resulted from a greater amount of cash earning interest
during the period plus the increase in market value of securities held in the
"Rabbi" Trust.
Income tax benefit for the nine months ended April 30, 1999 was $24,500 a
decrease of $1,817,000 or 101.4% as compared to the nine months ended April 30,
1998. This decrease results from decreased taxable income in the current period
plus tax credits.
As a result of these factors, net income for the nine months ended April
30, 1999, was $62,784 a decrease of $3,101,482 or 98.0%, as compared to the nine
months ended April 30, 1998.
Capital Resources and Liquidity
- -------------------------------
At April 30, 1999, as compared to at July 31, 1998, the Company's current
assets decreased 3.1% from $12,025,820 to $11,651,881 and the Company's
liquidity, as measured by cash and cash equivalents, decreased by 1.4% from
$10,439,233 to $10,292,585. During the same period, shareholders' equity
decreased 0.8% from $12,355,892 to $12,262,739 as a result of the Company's
profitability less repurchase of Company stock. 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, 1999 compared to
three months ended April 30, 1998
- --------------------------------------------------------------------------------
Total revenues for the three months ended April 30, 1999 were $490,925, a
decrease of $2,263,025 or 82.2%, as compared to the three months ended April 30,
1998. Consulting fees for the three months ended April 30, 1999, were $8,741, a
decrease of $319,869 or 97.3%, as compared to the three months ended April 30,
1998, and represented 1.8% of total revenues. Product license and customer
support fees for the three months ended April 30, 1999, were $357,244, a
decrease of $1,959,201 or 84.6%, as compared to the three months ended April 30,
1998, and represented 72.8% of total revenue. Revenues from the resale of
purchased software for the three months ended April 30, 1999, were $124,940, an
increase of $16,045 or 14.7%, as compared to the three months ended April 30,
1998, and represented 25.5% 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.
Although management believes that demand for Year 2000 tools will increase as
companies realize the true extent of the problem, there can be no assurance that
demand will in fact increase. If demand increases, management believes that due
to a shortage of technical personnel, companies will purchase tools in order to
become Y2K compliant by year end.
6
<PAGE>
During the three months ended April 30, 1999, the Company had sales in
excess of 10% of total revenues to four customers in the amount of $78,228;
$64,284; $59,800 and $53,826 representing 15.9%, 13.1%, 12.2% and 11.0% of the
Company revenues respectively. In comparison, the Company had sales in excess of
10% of total revenues to two customers of $663,000 and $649,275 representing
24.1% and 23.6% respectively of the total revenues for the three months ended
April 30, 1998. The loss of a major customer could have a significant impact on
the Company's financial performance in any given year.
During the period the Company consummated a sale to a major computer
services company, with which the company had a long-standing and substantial
business relationship for a master license for migration tools in the amount of
$225,000 payable monthly over a 23-month period beginning April 1, 1999. Revenue
is recognized in the period that payments are due. During the current period
$10,000 was included in revenue and the remaining amount recorded as deferred
revenue to be recognized in future periods.
Cost of services for the three months ended April 30, 1999, was $222,552 a
decrease of $133,972 or 37.6%, as compared to the three months ended April 30,
1998. Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 13.5% for the three
months ended April 30 , 1998 to 60.8% for the three months ended April 30, 1999.
This increase is the result of sales decreasing at a rate greater than the
decrease in cost of sales.
Cost of software purchased for resale for the three months ended April 30,
1999, was $20,054, a decrease of $26,956 or 57.3%, as compared to the three
months ended April 30, 1998. This decrease primarily resulted from change in
product mix.
General and administrative expenses for the three months ended April 30,
1999, were $218,467 a decrease of $32,514 or 13.0%, as compared to the three
months ended April 30, 1998.
Marketing and sales expenses for the three months ended April 30, 1999,
were $282,006 a decrease of $127,796 or 31.2%, as compared to the three months
ended April 30, 1998. This decrease was principally due to decreased advertising
in trade publications and commissions paid on sales.
Interest income for the three months ended April 30, 1999, was $105,709, a
decrease of $20,730 or 16.4% as compared to the three months ended April 30,
1998. This decrease resulted mainly from a lesser amount of cash earning
interest during the period.
An income tax benefit for the three months ended April 30, 1999 was $60,000
a decrease of $718,500 or 109.1% as compared to the three month period ended
April 30, 1998. This decrease results from decreased taxable income in the
current period plus tax credits.
As a result of these factors, the Company had a net loss for the three
months ended April 30, 1999 of $86,445 a decrease of $1,244,017 or 107.5% as
compared to the three months ended April 30, 1998.
7
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibits: There are no exhibits for the nine months ended April 30, 1999.
b) Reports on Form 8-K: There were no reports on Form 8-K filed for the nine
months ended April 30, 1999.
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: ___________________
ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
---------------------------------------------
Thomas V. Geimer, Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 10,292,585
<SECURITIES> 0
<RECEIVABLES> 1,017,296
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,651,881
<PP&E> 497,276
<DEPRECIATION> 225,924
<TOTAL-ASSETS> 14,100,071
<CURRENT-LIABILITIES> 841,627
<BONDS> 995,705
0
0
<COMMON> 8,387,340
<OTHER-SE> 3,875,199
<TOTAL-LIABILITY-AND-EQUITY> 14,100,071
<SALES> 100,591
<TOTAL-REVENUES> 1,924,624
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,321,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (435,440)
<INCOME-PRETAX> 38,284
<INCOME-TAX> (24,500)
<INCOME-CONTINUING> 62,784
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,784
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
