U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1999
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ________________
Commission file number 0-11485
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ACCELR8 TECHNOLOGY CORPORATION
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1072256
------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
303 East Seventeenth Avenue, Suite 108,
Denver, Colorado 80203
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(Address of principal executive office)
(303) 863-8088
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(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at October 29, 1999
----- -------------------------------
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
October 31, 1999 and July 31, 1999 1
Statements of Operations
for the three months ended October 31, 1999 and 1998 2
Statements of Cash Flows
for the three months ended October 31, 1999 and 1998 3
Notes to Financial Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 8
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Accelr8 Technology Corporation
Balance Sheets
(Unaudited)
October 31, July 31,
1999 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,558,803 $ 10,257,175
Accounts receivable 674,720 1,108,095
Prepaid expenses 40,331 58,023
Income taxes receivable 13,422 13,422
Deferred tax assets 266,730 221,452
------------ ------------
Total current assets 11,554,006 11,658,167
------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment 387,637 386,274
Furniture and fixtures 111,927 111,927
------------ ------------
Total property and equipment 499,564 498,201
Less accumulated depreciation (258,789) (239,964)
------------ ------------
Net property and equipment 240,775 258,237
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SOFTWARE DEVELOPMENT COSTS, less
accumulated amortization:
October 1999, $1,963,216;
July 1999, $1,762,216 1,541,865 1,638,086
------------ ------------
INVESTMENTS 517,494 453,053
------------ ------------
OTHER ASSETS 35,000 65,000
------------ ------------
Total assets $ 13,889,140 $ 14,072,543
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 233,490 $ 223,398
Accrued liabilities 59,955 61,422
Deferred revenue 155,700 140,000
Deferred maintenance revenue 224,896 265,883
------------ ------------
Total current liabilities 674,041 690,703
------------ ------------
DEFERRED LICENSE FEE REVENUE 35,000 65,000
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DEFERRED TAX LIABILITIES 595,343 627,823
------------ ------------
OTHER LONG-TERM LIABILITIES 536,245 453,053
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SHAREHOLDERS' EQUITY
Common stock, no par value;
11,000,000 shares authorized;
7,794,617 shares issued and
7,764,617 shares outstanding 8,305,389 8,353,117
Contributed capital 315,049 315,049
Retained earnings 3,701,673 3,841,398
Shares held for employee benefit
(1,129,110 shares) (273,600) (273,600)
Shareholders' equity 12,048,511 12,235,964
------------ ------------
Total liabilities and equity $ 13,889,140 $ 14,072,543
============ ============
1
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<TABLE>
<CAPTION>
Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Three Months Ended
October 31, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Consulting fees $ 48,591 $ 83,861
Product license and customer support fees 344,231 558,938
Resale of software purchased 130,575 85,709
Provision for returns and allowances (13,600) --
----------- -----------
Net Revenues 509,797 728,508
Costs and Expenses:
Cost of services 332,182 255,186
Cost of software purchased for resale 37,763 3,550
General and administrative 316,648 226,237
Marketing and sales 234,547 268,081
Total Expenses 921,140 753,054
Income (loss) from operations (411,343) (24,546)
Investment income 193,860 127,352
----------- -----------
Income (loss) before income taxes (217,483) 102,806
Income tax (benefit) provision (77,758) 23,350
----------- -----------
Net Income (Loss) ($ 139,725) $ 79,456
----------- -----------
Weighted average shares outstanding - basic 7,784,813 7,849,889
=========== ===========
Net income (loss) per share - basic $ (.02) $ .01
=========== ===========
Weighted average shares outstanding - diluted 7,925,476 8,053,946
=========== ===========
Net income (loss) per share - diluted $ (.02) $ .01
=========== ===========
2
<PAGE>
Accelr8 Technology Corporation
Statements of Cash Flows
(Unaudited)
Three Months Ended
-------------------------------------
October 31, October 31,
1999 1998
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ($ 139,725) $ 79,456
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 219,825 126,600
Deferred income tax provision (benefit) (77,758) --
Net change in assets and liabilities:
Accounts receivable 463,375 260,002
Prepaid expenses 17,692 2,296
Income tax receivable -- 403,350
Accounts payable 10,092 (153,387)
Accrued liabilities (1,467) (107,707)
Deferred revenue 15,700 20,000
Deferred maintenance revenue (70,987) 5,214
Other long-term liabilities 83,192 14,970
------------ ------------
Net cash provided by operating activities $ 519,939 $ 650,794
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Software development costs (104,779) $ (367,030)
============ ============
Purchase of property and equipment (1,363) (34,677)
============ ============
Increase in investments (64,441) 3,780
Net cash used in investing activities (170,583) (397,927)
============ ============
CASH FLOW FROM FINANCING ACTIVITIES:
Repurchase of common stock (47,728) (105,163)
============ ============
Net increase in cash and cash equivalents 301,628 147,704
============ ============
Cash and equivalents, beginning of period 10,257,175 10,439,233
============ ============
Cash and equivalents, end of period $ 10,558,803 $ 10,586,937
============ ============
3
</TABLE>
<PAGE>
Accelr8 Technology Corporation
Notes to Financial Statements
For the three months ended October 31, 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 statement of the balance sheets, statements of operations, and
statements of cash flows, as of the dates and for the periods presented. The
Notes to Financial Statements included in the Company's 1999 Annual Report on
Form 10-K should be read in conjunction with these financial statements.
Note 2. Software Revenue Recognition
Effective August 1, 1998 the Company adopted the provisions of the American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
97-2 "Software Revenue Recognition" SOP 97-2 has not changed the basic rules of
revenue recognition previously contained in SOP 91-1, but does provide
additional guidance, particularly with respect to multiple deliverables and
"when and if"available products. The effect of adopting SOP 97-2 was not
significant.
Note 3. Earnings Per Share
During February 1998, 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 1999 and all earnings per share have been restated to reflect the new
standard. The following table is a reconciliation of basic and diluted earnings
per share for the quarters ended October 1999 and 1998.
4
<PAGE>
<TABLE>
<CAPTION>
October 31, 1999 October 31, 1998
---------------------------------------- --------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C>
Net Income $(139,725) $79,456
Basic earnings per share:
Income (loss) available
to common shareholders (138,725) 7,784,813 $(.02) 79,456 7,849,889 $.01
====== ====
Effect of dilutive securities:
Stock options and warrants 140,663 204,057
--------- --------- ------- ---------
Diluted earnings (loss)
per share $(139,721) 7,925,476 $(.02) $79,456 8,053,946 $.01
========== ========= ====== ======= ========= ====
</TABLE>
Note 4. Repurchase of Common Stock:
The board of directors has authorized the repurchase of shares of the
Company's common stock. At October 31, 1999, the Company had repurchased 94,000
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.
5
<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 financial statements and related notes
included elsewhere herein. The Company's future operating results may be
affected by various tends and factors which are beyond the Company's control.
These include, among other factors, general public perception of year 2000
issues and solutions, and other uncertain business conditions that may affect
the Company's business. The Company cautions the reader that a number of
important factors discussed herein, and in other reports filed with the
Securities and Exchange Commission, could affect the company's actual results
and cause actual results to differ materially from those discussed in
forward-looking statements.
Results of Operations: October 31, 1999 compared to October 31, 1998
Total revenues for the quarter ended October 31, 1999 were $509,797 after a
provision of $13,600 or 2.7% of net revenues for possible returns and
allowances, a decrease of $218,711 or 30.0% as compared to the quarter ended
October 31, 1998. Consulting fees for the quarter ended October 31, 1999, were
$48,591 a decrease of $35,270 or 42.1% as compared to the quarter ended October
31, 1998, and represented 9.5% of net revenues. Product license and customer
support fees for the quarter ended October 31, 1999, were $344,231 a decrease of
$214,707 or 38.4% as compared to the quarter ended October 31, 1998 and
represented 67.5% of net revenues. Revenues from the resale of purchased
software for the quarter ended October 31, 1999, were $130,575 a decrease of
$44,866 or 52.4%. as compared to the quarter ended October 31, 1998 and
represented 25.6% of net revenue. Management believes that this decrease in
revenue is primarily due to the lack of Year 2000 tool sales, declining Y2K
factory royalties and declining sales of related services. In addition, revenues
from the sale of migration tools and services were negatively impacted by a
"lockdown" of most Information Technology environments in preparation for Year
2000 change over of software applications.
During the quarter ended October 31, 1999, sales to the Company's four
largest customers were $86,063; $63,700; $60,000; and $53,836 representing
16.9%, 12.5%, 11.8%, and 10.6% of the Company's revenues, respectively. In
comparison, sales to the Company's two largest customers were $129,344 and
$102,989 representing 17.8% and 14.1% of the Company's revenues respectively for
the quarter ended October 31, 1998. The loss of a major customer could have a
significant impact on the Company's financial performance in any given year.
6
<PAGE>
Cost of services for the quarter ended October 31, 1999, was $332,182 an
increase of $76,996 or 30.2% as compared to the quarter ended October 31, 1998.
Cost of services as a percentage of revenues from both consulting fees and
product license and customer support fees increased from 39.7% for the quarter
ended October 31, 1998 to 84.6% for the quarter ended October 31, 1999. This
increase occurred mainly because of decreased revenue plus increased
amortization of software costs capitalized
Cost of software purchased for resale for the quarter ended October 31,
1999, was $37,763 as compared to $3,550 for the quarter ended October 31, 1998.
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 quarter ended October 31, 1999,
were 316,648 an increase of $90,411 or 40.0% as compared to the quarter ended
October 31, 1998 primarily due to additional salary charges that resulted from
an increase in investment income from marketable securities in the Company's
deferred compensation trust, and increased professional fees as a result of the
action by the Securities and Exchange Commission.
Marketing and sales expenses for the quarter ended October 31, 1999, were
$234,547, a decrease of $33,534 or 12.5% as compared to the quarter ended
October 31, 1998. 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 to an independent company.
Investment income for the quarter ended October 31, 1999, was $193,860 an
increase of 52.2% as compared to the quarter ended October 31, 1998. This
increase resulted largely from increased value of marketable securities held in
the deferred compensation trust.
Income tax benefit for the quarter ended October 31, 1999, was $77,758 as
compared to an expense of $23,350 for the quarter ended October 31, 1998. This
decrease resulted from incurring a loss in the current quarter which will allow
a refund of income taxes previously paid plus additional tax credits.
As a result of these factors, net loss for the quarter ended October 31,
1999 was $139,725 a decrease of $219,181 or 276% as compared to the quarter
ended October 31, 1998.
There were no items of comprehensive income during the three months ended
October 31, 1999 and 1998.
Capital Resources and Liquidity
At October 31, 1999 as compared to the Company's most recent fiscal year
end, current assets decreased .9% from $11,658,167 to $11,554,006 and the
Company's liquidity as measured by available cash, increased by 2.9% from
$10,257,175 to $10,558,803. During the same period, shareholders' equity
decreased 1.5% from $12,235,964 to $12,048,511 as a result of a net loss plus
the cost of repurchasing company stock in the amount of $47,728 during the
quarter ended October 31, 1999.
The Company has historically funded its operations primarily through equity
financing and cash flow generated from operations. The company anticipates that
current cash balances and working capital plus future positive cash flow from
operations will be sufficient to fund its capital and liquidity needs in the
foreseeable future.
7
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: There are no exhibits for the three months ended October 31, 1999
b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
three months ended October 31, 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
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUL-31-1999 JUL-31-1998
<PERIOD-END> OCT-31-1999 OCT-31-1998
<CASH> 10,558,803 0
<SECURITIES> 0 0
<RECEIVABLES> 688,142 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,554,006 0
<PP&E> 499,564 0
<DEPRECIATION> 258,789 0
<TOTAL-ASSETS> 13,889,140 0
<CURRENT-LIABILITIES> 674,041 0
<BONDS> 1,166,588 0
0 0
0 0
<COMMON> 8,305,389 0
<OTHER-SE> 3,743,122 0
<TOTAL-LIABILITY-AND-EQUITY> 13,889,140 0
<SALES> 0 0
<TOTAL-REVENUES> 509,797 728,508
<CGS> 0 0
<TOTAL-COSTS> 921,140 753,054
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (193,860) (127,352)
<INCOME-PRETAX> (217,483) 102,806
<INCOME-TAX> (77,758) 23,350
<INCOME-CONTINUING> (139,725) 79,456
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (139,725) 79,456
<EPS-BASIC> (.02) .01
<EPS-DILUTED> (.02) .01
</TABLE>
