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, 2000
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[ ] 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
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(State or other jurisdiction of (IRS Employer
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)
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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 October 31, 2000
-------------------------- -------------------------------
Common Stock, no par value 7,733,817
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Accelr8 Technology Corporation
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Balance Sheets - as of
October 31, 2000 and July 31, 2000 3
Statements of Operations
for the three months ended October 31, 2000 and 1999 4
Statements of Cash Flows
for the three months ended October 31, 2000 and 1999 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Accelr8 Technology Corporation
Balance Sheets
(Unaudited)
October 31, July 31
2000 2000
ASSETS ------------ ------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 10,359,151 $ 10,359,581
Accounts receivable, net 159,790 277,194
Prepaid expenses 60,726 62,253
Income taxes receivable 338,582 --
Deferred tax assets 31,517 424,128
------------ ------------
Total current assets 10,949,766 11,123,156
------------ ------------
Property and equipment, net 162,361 180,436
------------ ------------
Software development costs, less accumulated
Amortization of $2,743,492 and $2,584,492 respectively 923,307 1,066,313
------------ ------------
Investments 766,358 735,813
------------ ------------
Total assets $ 12,801,792 $ 13,105,718
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 247,138 $ 183,751
Accrued liabilities 38,218 130,101
Deferred revenue 53,750 89,937
Deferred maintenance revenue 251,585 218,838
------------ ------------
Total current liabilities 590,691 622,627
------------ ------------
Long Term Liabilities:
Deferred tax liabilities 356,062 410,091
Other long-term liabilities 785,109 810,813
------------ ------------
Total long-term liabilities 1,141,171 1,220,904
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Total liabilities 1,731,862 1,843,531
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Shareholders' Equity
Common stock, no par value; 11,000,000 shares authorized;
7,733,817 and 7,758,817 shares issued and outstanding,
respectively 8,290,621 8,301,876
Contributed capital 315,049 315,049
Retained earnings 2,737,860 2,918,862
Shares held for employee benefit (1,129,110 shares at cost) (273,600) (273,600)
------------ ------------
Total shareholders' equity 11,069,930 11,262,187
------------ ------------
Total Liabilities And Shareholders' Equity $ 12,801,792 $ 13,105,718
============ ============
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Accelr8 Technology Corporation
Statements of Operations
(Unaudited)
Three Months Ended
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October 31, October 31,
2000 1999
------------ -----------
Revenues:
Consulting fees $ 3,500 $ 48,591
Product license and customer support fees 200,111 344,231
Resale of software purchased 156,223 130,575
Provision for returns and allowances (3,500) (13,600)
----------- -----------
Net Revenues 356,334 509,797
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Costs and Expenses:
Cost of services 140,397 112,357
Cost of software purchased for resale 30,032 37,763
General and administrative 231,472 316,648
Marketing and sales 76,807 234,547
Amortization 159,000 201,000
Depreciation 18,075 18,825
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Total Expenses 655,783 921,140
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Income (loss) from operations (299,449) (411,343)
----------- -----------
Other income (expense)
Interest income 165,955 131,476
Unrealized holding gain (loss) on investments (67,153) 63,350
Realized gain (loss) on sale of investments 19,645 (966)
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Total other income 118,447 193,860
----------- -----------
Income (loss) before income taxes (181,002) (217,483)
Income tax benefit 0 77,758
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Net Income (Loss) $ (181,002) $ (139,725)
=========== ===========
Net income (loss) per share - basic $ (.02) $ (.02)
=========== ===========
Net income (loss) per share - diluted $ (.02) $ (.02)
=========== ===========
Weighted average shares outstanding - basic 7,758,545 7,784,813
=========== ===========
Weighted average share outstanding - diluted 7,758,545 7,925,476
=========== ===========
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Accelr8 Technology Corporation
Statements Of Cash Flows
(Unaudited)
Three Months Ended
-------------------
October 31, October 31,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (181,002) $ (139,725)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization 159,000 201,000
Depreciation 18,075 18,825
Unrealized holding (gain) loss on investments 67,153 (63,350)
Realized (gain) loss on sale of investments, interest
and dividends reinvested (22,698) (1,091)
Deferred income tax benefit -- (77,758)
Net change in assets and liabilities:
Accounts receivable 117,404 463,375
Prepaid expenses 1,527 17,692
Accounts payable 63,387 10,092
Accrued liabilities (91,883) (1,467)
Other deferred revenue 32,747 15,700
Deferred maintenance revenue (36,187) (70,987)
Other long-term liabilities (25,704) 83,192
------------ ------------
Net cash provided by operating activities 101,819 455,498
------------ ------------
Cash flows from investing activities:
Software development (15,994) (104,779)
Purchase of property and equipment -- (1,363)
Purchase of investment (75,000) --
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Net cash used in investing activities (90,994) (106,142)
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Cash flows from financing activities:
Repurchase of common stock (11,255) (47,728)
------------ ------------
Net cash used in financing activities (11,255) (47,728)
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Net increase (decrease) in cash and cash equivalents (430) 301,628
Cash and cash equivalents,
Beginning of year: 10,359,581 10,257,175
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Cash and cash equivalents,
End of period: $ 10,359,151 $ 10,558,803
============ ============
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Accelr8 Technology Corporation
Notes to Financial Statements
For the three months ended October 31, 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. These financial statements should be read in
conjunction with the Company's annual audited financial statements dated July
31, 2000, 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. It is
reasonably possible that the Company's recorded estimate of its capitalized
software amortization may change in the near term.
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
There was no income tax expense attributable to income from operations
for the quarter ended October 31, 2000 due to loss incurred from operations. The
Company's net deferred tax asset for future deductions and its net operating
loss carry forward in excess of future taxable amounts is offset by a valuation
allowance. The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at October 31,
2000 and 1999 are as follows:
2000 1999
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Net operating loss $ 65,161 $131,038
Deferred income 7,088 80,962
Tax credits 21,208 54,730
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Total gross deferred tax asset 93,457 266,730
Valuation allowance (61,940) --
-------- --------
Net deferred tax asset $ 31,517 $266,730
======== ========
Deferred tax liabilities -
Amortization and depreciation $356,062 $595,344
======== ========
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Note 4. Earnings Per Share
October 31, 2000 October 31, 1999
---------------------------------------- --------------------------------------
Income Shares Earnings Income Shares Earnings
(Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share
<S> <C> <C> <C> <C> <C> <C>
Net Income $(181,002) -- $(139,725) --
========== ==========
Basic earnings per share:
Income (loss) available to
common shareholders (181,002) 7,758,545 $(.02) (139,725) 7,784,813 $(.02)
====
Effect of dilutive securities:
Stock options -- -- -- 140,663
----------- --------- ---------- ---------
Diluted earnings (loss)
per share $ -- 7,758,545 $(.02) $(139,725) 7,925,476 $(.02)
=========== ========= ====== ========== ========= ======
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.
Between August 1, 2000 and October 31, 2000 the Company repurchased a
total of 25,000 shares of its common stock at a cost of $11,255. During the
three month period ended October 31, 1999 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 October 31, 2000 there were 961,000 option shares outstanding at
prices ranging from $.36 to $12.00 with expiration dates between November 10,
2000 and August 27, 2009. Included in the 961,000 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 374,000.
No options were exercised during the three months ended October 31,
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. However, the Company is not able to predict the outcome
of the litigation described below so there can be no assurance that the
resolution of one or more of the cases described below may not have a material
adverse effect on the Company. At the time of filing this report, the Company is
involved with seven lawsuits, excluding one involving a former employee. On
November 16, 1999, the United States Securities and Exchange Commission ("SEC")
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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 31,2000. In addition, five
other civil lawsuits have been filed by persons claiming to be shareholders that
are based upon the allegations contained in the SEC's complaint. A seventh
lawsuit has been filed as a derivative action naming the Company's directors and
alleging among other matters breaches of fiduciary duty. Management does not
believe that the allegations contained in these lawsuits have merit and is
vigorously contesting them. For additional information, please see the Company's
annual report on Form 10-KSB as filed November 14, 2000, with the SEC, Part
I-Other Information, Item 3. Legal Proceedings.
Note 8 Delisting from NASDAQ
The Company's common stock was delisted from the NASDAQ National Market System
effective November 21, 2000 for failure to maintain a closing bid price and a
market value of public float of at least $1.00 per share and $5,000,000
respectively. The Company has appealed this decision to the Nasdaq Listing and
Hearing Review Council. For additional information, please see the Company's
annual report on Form 10-KSB as filed November 14, 2000, with the SEC, Part II,
Item 5.
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, general public perception of 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, 2000 compared to October 31, 1999
Net revenues for the quarter ended October 31, 2000 were $356,334 after
a provision of $3,500 or 1.0% of total revenues for possible returns and
allowances, a decrease of $153,463 or 30.1% as compared to the quarter ended
October 31, 1999. Consulting fees for the quarter ended October 31, 2000 were
$3,500 a decrease of $45,091 or 92.8% as compared to the quarter ended October
31, 1999, and represented 1.0% of net revenues. Product license and customer
support fees for the quarter ended October 31, 2000, were $200,111 a decrease of
$144,120 or 41.9% as compared to the quarter ended October 31, 1999, and
represented 56.2% of net revenues. Revenues from the resale of purchased
software for the quarter ended October 31, 2000, were $156,223 an increase of
$25,648 or 19.6% as compared to the quarter ended October 31, 1999, and
represented 43.8% of net revenue. Sales during the last fiscal year and the
first quarter of this year were negatively impacted because many IT
organizations simply "locked down" their computer environments, thus minimizing
business interruptions caused by the introduction of new software into a
"stabilized" environment. This is reflected in the dilemma faced by IT managers
over whether post Y2K IT budgets should be directed towards legacy system
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extension or modernization vs. new expenditures being prioritized towards
becoming internet "enabled" for implementation of B2B or B2C enterprise wide
solutions. While the company's tools and services can support either corporate
direction the selection of vendors by end users is taking extraordinarily long
due to wide fluctuation in personnel costs and contract costs.
During the quarter ended October 31, 2000, sales to the Company's three
largest customers were $149,202; $61,900; and $49,550 representing 42.0%, 17.4%,
and 13.9% of the Company's revenues, respectively. In comparison, 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 for the quarter ended October 31, 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 including amortization and depreciation for the quarter
ended October 31, 2000, was $317,472 a decrease of $14,710 or 4.4% as compared
to the quarter ended October 31, 1999. This decrease resulted from less
amortization of software development costs offset by the cost of engineering
salaries that were not capitalized towards the development of new business.
Cost of software purchased for resale for the quarter ended October 31,
2000, was $30,032 as compared to $37,763 for the quarter ended October 31, 1999.
The cost of software purchased for resale decreased even though revenue from
resale of purchased software increased. These changes were the result of
increased sales price and variations in the product mix of items sold.
General and administrative expenses for the quarter ended October 31,
2000, were $231,472 a decrease of $85,176 or 26.9% as compared to the quarter
ended October 31, 1999, primarily due to the decrease in deferred compensation
resulting from the unrealized loss in marketable securities of the deferred
compensation trust and a reduction in payroll costs because of fewer employees
partially offset by 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, 2000,
were $76,807 a decrease of $157,740 or 67.3% as compared to the quarter ended
October 31, 1999. This decrease was due to decreased costs of personnel, related
employee costs, and commissions paid to non-employees.
As a result of these factors, loss from operations for the quarter ended
October 31, 2000 was $299,449 a decrease of $111,894 or 27.2% as compared to
loss from operations of $411,343 for the quarter ended October 31, 1999.
Interest income for the quarter ended October 31, 2000 was $165,955 an
increase of 26.2% as compared to the quarter ended October 31, 1999. This
increase was primarily due to interest rate increase during the quarter.
Realized gain on marketable securities held in the deferred compensation
trust for the quarter ended October 31, 2000 was $19,645 an increase of $20,611
as compared to the quarter ended October 31, 1999. This gain was the result of
selling trust investments. Unrealized loss on marketable securities held in the
deferred compensation trust for the quarter ended October 31, 2000 was $67,153 a
decrease of $130,503 as compared to the quarter ended October 31, 1999. This
loss was the result of changing market value of securities held by the trust.
Because the company incurred a net loss for the period and can no longer
carry back its operating losses, the quarter ended October 31, 2000 has neither
a tax provision nor a tax benefit. The tax benefit for the quarter ended October
31, 1999 was $77,758.
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As a result of these factors net loss for the quarter ended October 31,
2000 was $181,002 an increase in the loss of $41,277 or 29.5% as compared to the
quarter ended October 31, 1999.
Capital Resources and Liquidity
At October 31, 2000 as compared to July 31, 2000, the Company's current
assets decreased 1.6% from $11,123,156 to $10,949,766 and the Company's
liquidity as measured by available cash, decreased by $430 from $10,359,581 to
$10,359,151 During the same period, shareholders' equity decreased 1.7% from
$11,262,187 to $11,069,930 as a result of the Company's net loss and repurchase
of Company stock. Management believes its current cash balances plus anticipated
cash flow from operations will be adequate to cover its future financial needs.
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.
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,
2000
b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
three months ended October 31, 2000.
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: December 14, 2000
ACCELR8 TECHNOLOGY CORPORATION
By: /s/ Thomas V. Geimer
------------------------------------
Thomas V. Geimer,
Principal Financial Officer
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