10QSB 1 0001.txt FORM 10-QSB 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 ----------------- [ ] 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 incorporation or organization) Identification No.) 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 October 31, 2000 -------------------------- ------------------------------- Common Stock, no par value 7,733,817 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 -2-
PART I. FINANCIAL INFORMATION Item 1. Financial Statements ----------------------------- Accelr8 Technology Corporation Balance Sheets (Unaudited) October 31, July 31 2000 2000 ASSETS ------------ ------------ Current Assets: 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 ------------ ------------ Total liabilities 1,731,862 1,843,531 ------------ ------------ 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 ============ ============ -3-
Accelr8 Technology Corporation Statements of Operations (Unaudited) Three Months Ended -------------------------- 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 ----------- ----------- 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 ----------- ----------- Total Expenses 655,783 921,140 ----------- ----------- 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) ----------- ----------- Total other income 118,447 193,860 ----------- ----------- Income (loss) before income taxes (181,002) (217,483) Income tax benefit 0 77,758 ----------- ----------- 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 =========== =========== -4-
Accelr8 Technology Corporation Statements Of Cash Flows (Unaudited) Three Months Ended ------------------- October 31, October 31, 2000 1999 ---- ---- Cash flows from operating activities: 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) -- ------------ ------------ Net cash used in investing activities (90,994) (106,142) ------------ ------------ Cash flows from financing activities: Repurchase of common stock (11,255) (47,728) ------------ ------------ Net cash used in financing activities (11,255) (47,728) ------------ ------------ Net increase (decrease) in cash and cash equivalents (430) 301,628 Cash and cash equivalents, Beginning of year: 10,359,581 10,257,175 ------------ ------------ Cash and cash equivalents, End of period: $ 10,359,151 $ 10,558,803 ============ ============ -5-
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 -------- -------- Net operating loss $ 65,161 $131,038 Deferred income 7,088 80,962 Tax credits 21,208 54,730 -------- -------- 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 ======== ======== -6-
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 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") -7-
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 -8- 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. -9- 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 -10-