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, 2000
[ ] 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 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)
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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 ________
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at April 30, 200
-------------------------- -----------------------------
Common Stock, no par value 7,764,617
<PAGE>
Accelr8 Technology Corporation
INDEX
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Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - as of
April 30, 2000 and July 31, 1999 1
Statements of Operations
for the three months and nine months ended
April 30, 2000 and 1999 2
Statements of Cash Flows
for the nine months ended April 30, 2000 and 1999 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
-ii-
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------
Accelr8 Technology Corporation
Balance Sheets
(Unaudited)
April 30, July 31
2000 1999
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,311,474 $ 10,257,175
Accounts receivable, net 173,317 1,108,095
Prepaid expenses 90,353 58,023
Income taxes receivable 126,476 13,422
Deferred tax assets 336,409 221,452
------------ ------------
Total current assets 11,038,029 11,658,167
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 392,289 386,274
Furniture and fixtures 96,966 111,927
------------ ------------
Total property and equipment 489,255 498,201
Less accumulated depreciation (291,773) (239,964)
------------ ------------
Net property and equipment 197,482 258,237
------------ ------------
SOFTWARE DEVELOPMENT COSTS:
Software development cost less accumulated
amortization: 2000 - $2,470,381; 1999 - $1,762,216 1,199,834 1,638,086
------------ ------------
INVESTMENTS 691,294 453,053
------------ ------------
OTHER ASSETS -- 65,000
------------ ------------
Total assets $ 13,126,639 $ 14,072,543
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 210,353 $ 223,398
Accrued liabilities 48,288 61,422
Deferred revenue 113,750 140,000
Deferred maintenance revenue 139,825 265,883
------------ ------------
Total current liabilities 512,216 690,703
------------ ------------
LONG TERM LIABILITIES:
Deferred tax liabilities 465,416 627,823
------------ ------------
Other long-term liabilities 747,544 453,053
------------ ------------
Deferred license revenue -- 65,000
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par value; 11,000,000 shares authorized;
7,764,617 shares issued and outstanding 8,305,389 8,353,117
Contributed capital 315,049 315,049
Retained earnings 3,054,625 3,841,398
Shares held for employee benefit (273,600) (273,600)
------------ ------------
Shareholders' equity 11,401,463 12,235,964
------------ ------------
TOTAL LIABILITIES AND EQUITY $13,126,639 $ 14,072,543
============ ============
Accelr8 Technology Corporation -1- Form 10-QSB April 30, 2000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Nine Months Three Months
Ended April 30 Ended April 30
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Consulting fees $ 109,363 $ 100,591 $ 2,000 $ 8,741
Product license and customer support fees 790,747 1,569,226 171,526 357,244
Resale of software purchased 354,087 254,807 62,640 124,940
Provision for sales returns and allowances (29,000) -- (3,600) --
----------- ----------- ----------- -----------
Net Revenues 1,225,197 1,924,624 232,566 490,925
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of services 1,112,281 721,277 476,728 222,552
Cost of software purchased for resale 82,747 26,324 2,943 20,054
General and administrative 1,006,893 681,688 459,782 230,243
Marketing and sales 605,384 832,065 190,678 282,006
----------- ----------- ----------- -----------
Total Costs and Expenses 2,807,305 2,261,354 1,130,131 754,855
----------- ----------- ----------- -----------
Income (loss) from operations (1,582,108) (336,730) (897,565) (263,930)
----------- ----------- ----------- -----------
Other income (expense)
Interest income 415,653 375,014 140,403 117,485
Tax refund - NOL carryback 113,054 -- 113,054 --
Gain (loss) on asset disposal (10,735) -- (10,735) --
----------- ----------- ----------- -----------
Total other income (expense) 517,972 375,014 242,722 117,485
----------- ----------- ----------- -----------
Income (loss) before income taxes (1,064,136) 38,284 (654,843) (146,445)
Income tax (provision) benefit 277,363 24,500 95,437 60,000
----------- ----------- ----------- -----------
Net Income (loss) $ (786,773) $ 62,784 $ (559,406) ($ 86,445)
=========== =========== =========== ===========
Weighted average shares outstanding - basic 7,763,041 7,829,048 7,764,617 7,814,139
=========== =========== =========== ===========
Net income (loss) per share - basic $ .(10) $ .01 $ (.07) $ .(01)
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 7,763,041 8,111,186 7,764,617 8,086,009
=========== =========== =========== ===========
Net income (loss) per share - diluted $ (.10) $ .01 $ (.07) $ .(01)
=========== =========== =========== ===========
Accelr8 Technology Corporation -2- Form 10-QSB April 30, 2000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Nine Months
Ended April 30
--------------
2000 1999
----------- ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ (786,773) $ 62,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 764,640 378,600
Deferred income tax provision (benefit) (277,364) --
Loss on disposal of assets 10,735 --
Net change in assets and liabilities:
Accounts receivable 934,778 (72,604)
Prepaid expenses (32,330) (55,605)
Income taxes receivable (113,054) 355,500
Accounts payable (13,045) (200,519)
Accrued salaries and other liabilities (13,134) (120,226)
Deferred revenue (26,250) 221,000
Deferred maintenance revenue (126,058) 151,517
Other long-term liabilities 294,491 166,675
------------ ------------
Net cash provided by operating activities 616,636 887,122
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (269,913) (775,777)
Purchase of property and equipment (6,996) (41,631)
Disposal of assets, net of depreciation 11,276 --
Increase in investments (238,241) (60,425)
Loss on disposal of assets (10,735) --
------------ ------------
Net cash used in investing activities (514,609) (877,833)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Sale (repurchase) of common stock (47,728) (155,937)
------------ ------------
Net increase (decrease) in cash and cash equivalents 54,299 (146,648)
Cash and cash equivalents, beginning of period 10,257,175 10,439,233
------------ ------------
Cash and cash equivalents, ending of period $ 10,311,474 $ 10,292,585
============ ============
Accelr8 Technology Corporation -3- Form 10-QSB April 30, 2000
</TABLE>
<PAGE>
Accelr8 Technology Corporation
Notes to Financial Statements
For the nine months ended April 30, 2000 and 1999
Note 1. Financial Statements
The financial statements included herein have been prepared by Accelr8
Technology Corporation (the "Company") without audit, pursuant to the rules and
regulations of the United States Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as allowed by such rules and regulations. The
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the Company's annual audited financial statements dated
July 31, 1999, included in the Company's annual report on Form 10-KSB as filed
with the SEC. While management believes the procedures followed in preparing
these financial statements are reasonable, the accuracy of the amounts are, in
some respects, dependent upon the facts that will exist later in the year.
The management of the Company believes that the accompanying unaudited
financial statements are prepared in conformity with generally accepted
accounting principles, which require the use of management estimates, and
contain all adjustments (including normal recurring adjustments) necessary to
present fairly the operations and cash flows for the periods presented.
Note 2. Reclassification
Certain reclassifications have been made in the 1999 financial statements
to conform to the classifications used in 2000.
Note 3. Income Taxes
The components of the net deferred tax assets and net deferred tax
liabilities recognized in the accompanying balance sheet as of April 30, 2000
are as follows:
Current Long Term
------- ---------
Deferred tax assets $336,409 $ --
Deferred tax liabilities -- 465,416
-------- --------
$336,409 $465,416
======== ========
The types of temporary differences between the tax bases of assets and
liabilities and the financial reporting amounts that give rise to a significant
portion of the net deferred tax liabilities and their appropriate tax effects at
April 30, 2000 are as follows:
Tax Effect
Difference Current Long Term
---------- ------- ---------
Accumulated depreciation $ 92,988 -- $ 33,476
Software development costs
capitalized 1,199,834 -- 431,940
Deferred maintenance 139,825 50,337 --
Net operating loss carryback 734,927 264,574 --
Tax credits 21,498 --
---------- ----------
$ 336,409 $ 465,416
========== ==========
Accelr8 Technology Corporation -4- Form 10-QSB April 30, 2000
<PAGE>
The components of income tax expenses are as follows:
Continuing operations:
Current:
Federal $ --
State --
---------
--
=========
Deferred:
Federal (238,841)
State (38,523)
---------
(277,364)
=========
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 and nine months ended January 31, 2000 and 1999.
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
April 30, 2000 April 30, 1999
------------------------------------- -------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) $(786,773) $62,784
Basic earnings (loss) per share:
Income (loss) available to
common shareholders (786,773) 7,763,041 $(.10) 62,784 7,829,048 $.01
====== ====
Effect of dilutive securities:
Stock options 282,138
----------- --------- --------- ---------
Diluted earnings
(loss) per share ($786,773) 7,763,041 $(.10) $62,784 8,111,186 $.01
========== ========= ====== ======= ========= ====
Accelr8 Technology Corporation -5- Form 10-QSB April 30, 2000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Note 4. (continued)
Three Months Ended Three Months Ended
April 30, 2000 April 30, 1999
--------------------------------------- -------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) $(559,406) $(86,445)
Basic earnings (loss) per share:
Income (loss) available to
common shareholders (559,406) 7,764,617 $(.07) (86,445) 7,814,139 $(.01)
====== ======
Effect of dilutive securities:
Stock options 271,870
----------- --------- --------- ---------
Diluted earnings (loss)
per share $(559,406) 7,764,617 $(.07) $(86,445) 8,086,009 $.(01)
=========== ========= ====== ========= ========= ======
</TABLE>
Note 5. Repurchase of Common Stock
On July 30, 1998 the Board of Directors authorized the repurchase of up to
500,000 shares of the Company's common stock. The Repurchase of the Company's
common stock was based upon the Board of Directors' belief that the Company's
common stock was undervalued considering the Company's potential earnings and
prospects for future operations. Repurchases may be made periodically in the
open market, block purchases or in privately negotiated transactions, depending
on market conditions and other factors. The Company has no commitment or
obligation to repurchase all or any portion of the shares.
From September 1998 through April 30, 2000 the Company repurchased a total
of 94,000 shares of its common stock at a cost of $238,087. During the nine
month period ended April 30, 2000 the Company repurchased a total of 30,000
shares of its common stock at a cost of $47,728.
Note 6. Common Stock Options
At April 30, 2000 there were 1,063,000 option shares outstanding at prices
ranging from $.36 to $12.00 with expiration dates between June 26, 2000 and
August 27, 2009 Included in the 1,063,000 options are 335,000 options that do
not expire as long as the recipient remains an employee of the Company. The
remaining number of option shares available for issuance under the Company's
stock option plans were 412,000.
No options were exercised during the nine months ended April 30, 2000.
Note 7. Legal Proceedings
The Company is a party to certain legal proceedings, the outcome of which
management believes will not have a significant impact upon the financial
position of the Company. At the time of filing this report, the Company is
involved with five law suits, excluding those involving former employees. On
November 16, 1999, the United States Securities and Exchange Commission ("SEC")
filed a complaint in the United States District Court for the District of
Colorado. More complete information relating to this action may be found in the
Company's Form 10-KSB for the fiscal year ended July 31, 1999. In addition,
three other civil lawsuits have been filed by persons claiming to be
shareholders that are based upon the allegations contained in the SEC's
Accelr8 Technology Corporation -6- Form 10-QSB April 30, 2000
<PAGE>
Note 7. (continued)
complaint. A fourth law suit has been filed as a derivative action naming the
Company's directors and alleging among other matters breaches of fiduciary duty.
Although the outcome of the legal proceedings cannot be predicted with any
degree of certainty, management does not believe that the allegations contained
in these law suits have merit and intends to vigorously contest them. Further,
none of the Company's assets have been misappropriated or were otherwise
misapplied for the personal benefit of any member of the management team or the
Board of Directors. For additional information, please see Part II-Other
Information, Item 1. Legal Proceedings.
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 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, the length of time it takes companies to
return to modernization of their legacy systems after making certain any Year
2000 problems are behind them, the extent to which new products and services
developed and offered by the Company are accepted in the marketplace, 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 the Company's forward-looking statements.
Changes in Results of Operations: Nine months ended April 30, 2000 compared to
Nine months ended April 30, 1999
Net revenues for the nine months ended April 30, 2000, were $1,225,197
after a provision of $29,000 or 2.3% of net revenues for possible sales returns
and allowances, a decrease of $699,427 or 36.3% as compared to the nine months
ended April 30, 1999. Consulting fees for the nine months ended April 30, 2000,
were $109,363 an increase of $8,772 or 8.7% as compared to the nine months ended
April 30, 1999, and represented 8.9% of net revenues. Product license and
customer support fees for the nine months ended April 30, 2000, were $790,747 a
decrease of $778,479 or 49.6% as compared to the nine months ended April 30,
1999, and represented 64.5% of net revenues. Revenues from the resale of
purchased software for the nine months ended April 30, 2000, were $354,087 an
increase of $99,280 or 39.0% as compared to the nine months ended April 30,
1999, and represented 28.9% of net 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 at
1999 calendar year end. Management believes many companies had already purchased
the tools necessary to help remediate any Year 2000 problems prior to August 1,
1999. In addition, management believes that revenues from the sale of migration
tools and services were negatively impacted by a "lockdown" by most Information
Technology environments in preparation for Year 2000 change over of software
applications which continued into 2000 until companies were certain that all
Year 2000 problems were in fact corrected. Management believes companies are now
beginning to have an interest in software modernization and new products being
offered for legacy integration with E-business strategies. Also, the previous
period included a substantial one-time maintenance income item related to a Year
Accelr8 Technology Corporation -7- Form 10-QSB April 30, 2000
<PAGE>
2000 license. The increase in resale of purchased software results from an
increased demand by several key customers during the previous two quarters as
they deployed new warehouse management systems.
During the nine months ended April 30, 2000 sales to a single customer were
$129,763 representing 10.6% of the Company's revenues. During the nine months
ended April 30, 1999 the Company did not have sales to a single customer that
exceeded 10% of total sales. The loss of a major customer could have a
significant impact on the Company's financial performance in any given period.
Cost of services for the nine months ended January 31, 2000 was $1,112,281
an increase of $391,004 or 54.2% as compared to the nine months ended January
31, 1999. Cost of services as a percentage of revenues from both consulting fees
and product license and customer support fees increased from 43.2% for the nine
months ended January 31, 1999 to 123.6% for the nine months ended January 31,
2000. The increase occurred mainly because of decreased revenue while the
company simultaneously increased amortization of software development costs
capitalized that were associated with Year 2000 tools.
Cost of software purchased for resale for the nine months ended April 30,
2000, was $82,747 an increase of $56,423 or 214.3% as compared to the nine
months ended April 30,1999. The increase in software purchased for resale
results from increased revenue from resale of purchased software, variations in
the product mix of items sold, and a reduction of cost in the previous period
due to accumulated overcharges in the past.
General and administrative expenses for the nine months ended April 30,
2000, were $1,006,893 an increase of $325,205 or 47.7% as compared to the nine
months ended April 30, 1999. This increase was largely due to an increase in
legal and accounting fees as a result of the action by the Securities and
Exchange Commission.
Marketing and sales expenses for the nine months ended April 30, 2000, were
$605,384 a decrease of $226,681 or 27.2% as compared to the nine months ended
April 30, 1999. This decrease was due to decreased costs of personnel and
related employee costs, advertising, promotional material, and trade shows that
were related to the Company's Year 2000 tools and services in the prior period
partially offset by an increase in commissions paid non-employees.
Interest income for the nine months ended April 30, 2000, was $415,653 an
increase of $40,639 or 10.8% as compared to the nine months ended April 30,
1999. This increase resulted mainly due to a higher average interest rate during
the current period.
A tax refund which resulted from net operating loss carryback and available
tax credits during the nine months ended April 30, 2000 was $113,054.
Loss from disposal of fixed assets amounted to $10,735 for the nine months
ended April 30, 2000.
Income tax benefit for the nine months ended April 30, 2000 was $277,363 an
increase of $252,863 or 1032% as compared to the nine months ended April 30,
1999. This increase results from a taxable loss in the current period plus tax
credits.
As a result of these factors, net loss for the nine months ended April 30,
2000, was $(786,773) a decrease of $849,557 or 1353% as compared to the nine
months ended April 30, 1999.
Accelr8 Technology Corporation -8- Form 10-QSB April 30, 2000
<PAGE>
Capital Resources and Liquidity
At April 30, 2000, as compared to at July 31, 1999, the Company's current
assets decreased 5.3% from $11,658,167 to $11,038,029 and the Company's
liquidity, as measured by cash and cash equivalents, increased by 0.5% from
$10,257,175 to $10,311,474. During the same period, shareholders' equity
decreased 6.8% from $12,235,964 to $11,401,463 as a result of the Company's net
loss plus 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, 2000 compared to
three months ended April 30, 1999
Total revenues for the three months ended April 30, 2000 were $232,566
after a provision of $3,600 or 1.5% of net revenues for possible sales returns
and allowances, a decrease of $258,359 or 52.6% as compared to the three months
ended April 30, 1999. Consulting fees for the three months ended April 30, 2000,
were $2,000 a decrease of $6,741 or 77.1% as compared to the three months ended
April 30, 1999, and represented 0.9% of net revenues. Product license and
customer support fees for the three months ended April 30, 2000, were $171,526 a
decrease of $185,718 or 52.0% as compared to the three months ended April 30,
1999, and represented 73.7% of net revenue. Revenues from the resale of
purchased software for the three months ended April 30, 2000 were $62,640 a
decrease of $62,300 or 49.9% as compared to the three months ended April 30,
1999, and represented 26.9% of total revenue These decreases were due to a
continued "lockdown" of many Information Technology environments until companies
were certain that all Year 2000 problems were in fact corrected. Management
believes, however, that companies are now beginning to have an interest in
software modernization and new products being offered.
During the three months ended April 30, 2000, the Company had sales in
excess of 10% of net revenues to two customers in the amount of $51,770 and
$37,300 representing 22.3% and 16.0% of the Company revenues respectively. In
comparison, the Company had sales in excess of 10% of total revenues to four
customers of $78,228; $64,284; $59,800; and $53,826 representing 15.9%; 13.1%;
12.2%; and 11.0% respectively of the total revenues for the three months ended
April 30, 1999. 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, 2000 was $476,728 an
increase of $254,176 or 114% as compared to the three months ended April 30,
1999. Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 60.8% for the three
months ended April 30, 1999 to 274% for the three months ended April 30, 2000.
This increase is the result of decreased revenues plus increased amortization of
software development costs capitalized that were associated with Year 2000
tools.
Cost of software purchased for resale for the three months ended April 30,
2000, was $2,943 a decrease of $17,111 or 85.3% as compared to the three months
ended April 30, 1999. The decrease in software purchased for resale results from
decreased revenue from resale of purchased software, variations in the product
mix of items sold, and a reduction of cost in the previous period due to
accumulated overcharges in the past.
Accelr8 Technology Corporation -9- Form 10-QSB April 30, 2000
<PAGE>
General and administrative expenses for the three months ended April 30,
2000, were $459,782 an increase of $229,539 or 99.7% as compared to the three
months ended April 30, 1999. This increase results from increased accounting and
legal fees as a result of the action by the Securities and Exchange Commission
Marketing and sales expenses for the three months ended April 30, 2000,
were $190,678 a decrease of $91,328 or 32.4% as compared to the three months
ended April 30, 1999. This decrease was due to decreased costs of personnel and
related employee costs, advertising, promotional material, and trade shows that
were related to the Company's Year 2000 tools and services in the prior period
partially offset by an increase in commissions paid non-employees.
Interest income for the three months ended April 30, 2000, was $140,403 an
increase of $22,918 or 19.5% as compared to the three months ended April 30,
1999. This increase resulted mainly from a higher interest rate during the
period.
A tax refund which resulted from net operating loss carryback and available
tax credits during the three months ended April 30, 2000 was $113,054.
Loss from disposal of fixed assets amounted to $10,735 for the three months
ended April 30, 2000
An income tax benefit for the three months ended April 30, 2000, was
$95,437 an increase of $35,437 or 59.1% as compared to the three month period
ended April 30, 1999. This increase results from a taxable loss 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, 2000, of $559,406 an increased loss of $472,961 or 547%
as compared to the three months ended April 30, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
--------------------------
The Company is a party to certain legal proceedings, the outcome of which
management believes will not have a significant impact upon the financial
position of the Company.
On November 16, 1999, the SEC filed a complaint in the United States
District Court for the District of Colorado (Civil Action No. 99-D-2203) against
the Company, Thomas V. Geimer, Harry J. Fleury, and James Godkin. The SEC
alleges that: (i) the Company made fraudulent misrepresentations concerning the
Company's Year 2000 software capabilities and financial condition and that these
misrepresentations were the responsibility of Messrs. Geimer, Fleury, and Godkin
(collectively "the Senior Officers"); (ii) from 1997 to the present, the Company
made numerous fraudulent misrepresentations regarding the capabilities of the
Company's Year 2000 products in filings with the SEC, press releases, and
marketing materials distributed to investors; (iii) from October 1998 through
April 1999, the Company filed annual and quarterly reports with the SEC
containing materially false financial statements that artificially inflated the
Company's revenues, (iv) the Company has violated Sections 10(b) and 13(b)(2) of
the 1934 Act, and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder; (v) Messrs.
Geimer and Godkin have violated Sections 10(b), and 13(b)(5) of the 1934 Act,
Accelr8 Technology Corporation -10- Form 10-QSB April 30, 2000
<PAGE>
and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and Messrs. Geimer and Godkin
have aided and abetted the Company's violation of 13(a) and 13(b)(2) of the 1934
Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; and (vi) Harry J. Fleury
has violated Section 10(b) of the 1934 Act and Rule 10b-5 thereunder, and Mr.
Fleury has aided and abetted the Company's violations of Section 13(a) of the
1934 Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder. The SEC's complaint
seeks an injunction to restrain and enjoin the Company and the Senior Officers
from violations of the federal securities laws, and seeks civil penalties
against the Senior Officers in an amount to be determined by the Court. Although
the outcome of the legal proceeding cannot be predicted with any degree of
certainty, management does not believe that the allegations of the SEC have
merit and intends to vigorously contest this legal proceeding. Further, none of
the Company's assets have been misappropriated or were otherwise misapplied for
the personal benefit of any member of the management team or the Board of
Directors.
On May 4, 2000 the Company was named as a defendant, and Thomas V. Geimer,
Chief Executive Officer, Chief Financial Officer, Secretary and a director of
the Company and Harry J. Fleury, President of the Company ("the Individual
Defendants"), were also named as defendants, in a class action lawsuit filed in
the U.S. District Court of Colorado. The action states that the class action
lawsuit was brought by Mr. Harley Meyer on behalf of himself and the Company's
shareholders who purchased the Company's common stock between September 15, 1997
and November 16, 1999. Among other things, the lawsuit alleges that (i) the
Company made fraudulent misrepresentations concerning the Company's Year 2000
software capabilities and its financial condition and that these
misrepresentations were the responsibility of the Company and the Individual
Defendants; (ii) from 1997 to the present, the Company made fraudulent
misrepresentations regarding the capabilities of the Company's Year 2000
products in filings with the SEC, press releases, and marketing materials
distributed to investors; (iii) in fiscal years 1998 and 1999, the Company filed
annual and quarterly reports with the SEC containing materially false financial
statements that artificially inflated the Company's revenues, (iv) the Company
has violated Section 10(b) of the 1934 Act, and Rule 10b-5, thereunder; and (v)
the Individual Defendants violated Sections 20(a) of the 1934 Act.
On June 2, 2000 and June 8, 2000, Mr. Charles Germer and Mr. William Blais,
respectively, filed class action lawsuits in the U.S. District Court of Colorado
which are substantially identical to that filed on behalf of Mr. Meyer and
described above. Further, the allegations made in the complaints against the
Company and the Individual Defendants filed in the U.S. District Court of
Colorado are substantially similar to the allegations made in the SEC's
complaint noted above.
These complaints seek unspecified damages and plaintiff's costs in an
amount to be proven at trial. Although the outcome of these legal proceedings
cannot be predicted with any degree of certainty, management does not believe
that the allegations of the class action plaintiffs have merit and intends to
vigorously contest these legal proceedings.
On May 23, 2000, Mr. Thomas Geimer, and Messrs. Alexander Arnold and David
Wilhelm, directors of the Company, were named as defendants in a class action
lawsuit filed in the District Court, City and County of Denver, Colorado. The
plaintiff in the action is Mr. John W. Dews who filed the derivative action as a
shareholder on behalf of Accelr8 Technology Corporation. While the Company was
not named as defendant in this action, the Company has assumed the cost of
defending this action under the indemnification provisions of Colorado law. The
lawsuit alleges that the named defendants (i) were negligent in their duty to
the Company and its shareholders as directors of the Company; (ii) breached
their fiduciary duty to the Company and its shareholders and (iii) violated
their duties as directors of the Company under Colorado statutory provisions
applicable to corporations.
Accelr8 Technology Corporation -11- Form 10-QSB April 30, 2000
<PAGE>
In the complaint Mr. Dews requested that the named defendants be removed
from the Company's board of directors and an order to appoint new members to the
Company's board of directors be made by the court. Mr. Dews further requested
that the board of directors of the Company provide an accounting of the
corporation's assets expended in defense of the SEC action noted above and for a
full accounting of the Company. The plaintiff also requested that the board of
directors provide an accounting to the Company's shareholders of the Company's
plans to comply with the NASDAQ requirements to resume trading, which had been
halted subsequent to the SEC action. Finally, Mr. Dews requested damages in an
amount to be proven at trial and plaintiff's costs and expenses, including
attorney, accountant and expert fees.
Although the outcome of this proceeding cannot be predicted with any degree
of certainty, management does not believe that the allegations of this class
action litigation have merit and intends to also vigorously contest this legal
proceeding.
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
a) Exhibits: There are no exhibits for the nine months ended April 30,
2000.
b) Reports on Form 8-K:
The Company filed a report on Form 8-K on March 15, 2000, relating to
"Changes in Registrant's Certifying Accountant" as a result of the retention of
Levine Hughes & Mithuen, Inc. as the Company's independent auditors. There were
no other Form 8-K's filed during the quarter ended April 30, 2000.
Accelr8 Technology Corporation -12- Form 10-QSB April 30, 2000
<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: June 13, 2000
ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
--------------------------------
Thomas V. Geimer,
Principal Financial Officer
Accelr8 Technology Corporation -13- Form 10-QSB April 30, 2000
