-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DyLcXnDon+cfrGV8iK+aExPnu9ry5cdA3haG+malTGkjjf+OG5i6pAlYtdIGstKI kI4UzBFtNiQc/hiquV27yQ== 0001000096-01-500196.txt : 20010615 0001000096-01-500196.hdr.sgml : 20010615 ACCESSION NUMBER: 0001000096-01-500196 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCELR8 TECHNOLOGY CORP CENTRAL INDEX KEY: 0000727207 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 841072256 STATE OF INCORPORATION: CO FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-11485 FILM NUMBER: 1661064 BUSINESS ADDRESS: STREET 1: 303 E 17TH AVE STREET 2: SUITE 108 CITY: DENVER STATE: CO ZIP: 80203 BUSINESS PHONE: 3038638088 MAIL ADDRESS: STREET 1: 303 E 17TH ST STREET 2: SUITE 108 CITY: DENVER STATE: CO ZIP: 80203 FORMER COMPANY: FORMER CONFORMED NAME: HYDRO SEEK INC DATE OF NAME CHANGE: 19880802 10QSB 1 accelrq.txt FORM 10-QSB (APRIL 30, 2001) 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, 2001 -------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________________ to ____________________ Commission file number 0-11485 -------------------------------------------------------- ACCELR8 TECHNOLOGY CORPORATION ------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) COLORADO 84-1072256 (State or other jurisdiction (IRS Employer of 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 April 30, 2001 -------------------------- ----------------------------- Common Stock, no par value 7,632,817 --------- Accelr8 Technology Corporation INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - as of April 30, 2001 and July 31, 2000 3 Statements of Operations for the three months and nine months ended April 30, 2001 and 2000 4 Statements of Cash Flows for the nine months ended April 30, 2001 and 2000 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 14 -2-
PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ------- -------------------- Accelr8 Technology Corporation Balance Sheets (Unaudited) April 30, July 31 2001 2000 ---- ---- ASSETS Current Assets: Cash and cash equivalents $ 9,797,584 $ 10,359,581 Accounts receivable, net 59,045 277,194 Inventory 3,500 -- Prepaid expenses 70,745 62,253 Deferred tax assets -- 424,128 ------------ ------------ Total current assets 9,930,874 11,123,156 ------------ ------------ Property and equipment, net 161,982 180,436 ------------ ------------ Software development costs, less accumulated amortization of $3,276,437 and $2,584,492 respectively 407,312 1,066,313 ------------ ------------ Intellectual property, less accumulated amortization of $9,990 443,296 -- ------------ ------------ Investments 549,729 735,813 ------------ ------------ Total assets $ 11,493,193 $ 13,105,718 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 176,579 $ 183,751 Accrued liabilities 31,552 130,101 Deferred revenue -- 218,838 Deferred maintenance revenue 158,004 89,937 ------------ ------------ Total current liabilities 366,135 622,627 ------------ ------------ Long Term Liabilities: Deferred tax liabilities 160,517 410,091 Other long-term liabilities 605,979 810,813 ------------ ------------ Total long-term liabilities 766,496 1,220,904 ------------ ------------ Total liabilities 1,132,631 1,843,531 ------------ ------------ Shareholders' Equity Common stock, no par value; 11,000,000 shares authorized; 7,632,817 and 7,758,817 shares issued and outstanding, respectively 8,197,795 8,301,876 Contributed capital 315,049 315,049 Retained earnings 2,121,318 2,918,862 Shares held for employee benefit (1,129,110 shares at cost) (273,600) (273,600) ------------ ------------ Total shareholders' equity 10,360,562 11,262,187 ------------ ------------ Total Liabilities And Shareholders' Equity $ 11,493,193 $ 13,105,718 ============ ============ -3- Accelr8 Technology Corporation Statements of Operations (Unaudited) Nine Months Three Months Ended April 30 Ended April 30 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Revenues: Consulting fees $ 38,250 $ 109,363 $ -- $ 2,000 Product license and customer support fees 485,157 790,747 126,595 171,526 Resale of software purchased 247,783 354,087 25,665 62,640 Provision for sales returns and allowances (6,330) (29,000) (1,295) (3,600) ----------- ----------- ----------- ----------- Net Revenues 764,860 1,225,197 150,965 232,566 ----------- ----------- ----------- ----------- Costs and Expenses: Cost of services 379,401 347,642 112,423 151,739 Cost of software purchased for resale 70,248 82,747 15,920 2,943 General and administrative 413,157 1,219,464 100,692 328,538 Marketing and sales 198,257 605,384 55,206 190,678 Research and development 32,184 -- 32,184 -- Amortization 446,490 708,164 128,490 306,164 Loss on impairment 255,445 -- -- -- Depreciation 54,355 56,475 18,205 18,825 ----------- ----------- ----------- ----------- Total Costs and Expenses 1,849,537 3,019,876 463,120 998,887 ----------- ----------- ----------- ----------- Loss from operations (1,084,677) (1,794,679) (312,155) (766,321) ----------- ----------- ----------- ----------- Other income (expense) Interest income 449,991 389,983 124,154 124,524 Tax refund - NOL carryback -- 113,054 -- 113,054 Loss on asset disposal (28,877) (10,735) (28,877) (10,735) Realized gain (loss) on investment 42,801 25,670 9,205 15,879 Unrealized gain (loss) on investment (308,310) 212,571 (141,106) (131,244) Other (32,500) (50,000) ----------- ----------- ----------- ----------- Total other income (expense) 123,105 730,543 (86,624) 111,478 ----------- ----------- ----------- ----------- Loss before income taxes (961,572) (1,064,136) (398,779) (654,843) Income tax benefit 164,028 277,363 49,900 95,437 ----------- ----------- ----------- ----------- Net Loss $ (797,544) $ (786,773) $ (348,879) $ (559,406) =========== =========== =========== =========== Weighted average shares outstanding - basic 7,679,840 7,763,041 7,635,233 7,764,617 =========== =========== =========== =========== Net loss per share - basic $ (.10) $ (.10) $ (.05) $ (.07) ----------- ----------- ----------- ----------- Weighted average shares outstanding - diluted 7,679,840 7,763,041 7,635,233 7,764,617 =========== =========== =========== =========== Net loss per share - diluted $ (.10) $ (.10) $ (.05) $ (.07) =========== =========== =========== =========== -4- Accelr8 Technology Corporation Statements of Cash Flows (Unaudited) Nine Months Ended April 30 -------------- 2001 2000 ------------ ------------ CASH FLOW FROM OPERATING ACTIVITIES: Net loss $ (797,544) $ (786,773) Adjustments to reconcile net income to net cash provided by operating activities: Amortization 446,490 708,165 Depreciation 54,355 56,475 Loss on impairment 255,445 -- Loss from disposal of assets 28,877 10,735 Unrealized holding (gain)/loss on investments 308,310 (212,571) Realized gain on sale of investments, interest and Dividends reinvested (47,226) (25,670) Deferred income tax benefit 174,554 (277,364) Net change in assets and liabilities: Accounts receivable 218,149 934,778 Inventory (3,500) -- Prepaid expenses (8,492) (32,330) Income taxes receivable (113,054) Accounts payable (7,172) (13,045) Accrued liabilities (98,549) (13,134) Deferred revenue (218,838) (26,250) Deferred maintenance revenue 68,067 (126,058) Other long-term liabilities (204,834) 294,491 ------------ ------------ Net cash provided by operating activities 168,092 378,395 ------------ ------------ CASH FLOW FROM INVESTING ACTIVITIES: Software development costs (32,944) (269,913) Purchase of property and equipment (521,864) (6,996) Disposed of assets, net of depreciation 32,677 11,276 Loss on disposal of assets (28,877) (10,735) Purchase of investments (75,000) ------------ ------------ Net cash used in investing activities (626,008) (276,368) ------------ ------------ CASH FLOW FROM FINANCING ACTIVITIES: Repurchase of common stock (104,081) (47,728) ------------ ------------ Net increase (decrease) in cash and cash equivalents (561,997) 54,299 Cash and cash equivalents, beginning of period 10,359,581 10,257,175 ------------ ------------ Cash and cash equivalents, ending of period $ 9,797,584 $ 10,311,474 ============ ============ -5-
Accelr8 Technology Corporation Notes to Financial Statements For the nine months ended April 30, 2001 and 2000 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 future. Note 2. Reclassification Certain reclassifications have been made in the 2000 financial statements to conform to the classifications used in 2001. Note 3. Income Taxes The Company recognized an income tax benefit of $164,028 primarily due to a decrease in its deferred tax liability. The Company's net deferred tax asset which consists primarily of a net operating loss carryforward 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 April 30, 2001 and 2000 are as follows: 2001 2000 ---- ---- Net operating loss $ 102,387 $ 50,337 Deferred income 56,881 264,574 Tax credits 21,208 21,498 --------- --------- Total gross deferred taxes 180,476 336,409 Valuation allowance (180,476) -0- --------- --------- Net deferred tax asset $ -0- $ 336,409 ========= ========= Deferred tax liabilities - Amortization and depreciation $ 160,517 $ 465,416 ========= ========= -6- Note 4. Earnings Per Share
Nine Months Ended Nine Months Ended April 30, 2001 April 30, 2000 --------------- -------------- Income Shares Earnings Income Shares Earnings (Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share Net Loss $(797,544) $(786,773) ---------- ---------- Basic loss per share: Loss available to common shareholders (797,544) 7,679,840 $(.10) (786,773) 7,763,041 $(.10) Effect of dilutive securities: Stock options --------- --------- ------ --------- --------- ------ Diluted loss per share $(797,544) 7,679,840 $(.10) $(786,773) 7,763,041 $(.10) ========== ========= ====== ========= ========= ====== Three Months Ended Three Months Ended April 30, 2001 April 30, 2000 -------------- -------------- Income Shares Earnings Income Shares Earnings (Numerator) (Denominator) Per Share (Numerator) (Denominator) Per Share Net Loss $(348,879) $(559,406) Basic loss per share: Loss available to common shareholders (348,879) 7,635,233 $(.05) (559,406) 7,764,617 $ (.07) Effect of dilutive securities: Stock options --------- --------- ------ --------- --------- ------ Diluted loss per share $(348,879) 7,635,233 $(.05) $(559,406) 7,764,617 $(.07) ========== ========= ====== ========== ========= ======
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, 2001 the Company repurchased a total of 225,800 shares of its common stock at a cost of $345,682. During the nine month period ended April 30, 2001 the Company repurchased a total of 126,000 shares of its common stock at a cost of $104,081. -7- Note 6. Common Stock Options At April 30, 2001, there were 791,000 option shares outstanding at prices ranging from $.36 to $12.00 with expiration dates between July 31, 2001 and August 27, 2009. Included in the 791,000 options are 240,000 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 was 446,500. No options were exercised during the nine months ended April 30, 2001. 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. 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, 2000. A proposal has been submitted to the SEC that would settle the litigation against all parties. The SEC's staff has advised the Company that they will recommend acceptance of the Company's settlement proposal by the Commission. The Federal Court has stayed discovery until further order and set a conference for July 6, 2001. The Commission may or may not accept the recommendation of the local office to enter into the proposed settlement with the Company. Five other civil lawsuits have been filed by certain shareholders that are based upon the allegations contained in the SEC's complaint. An additional 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. Settlement has been reached in the matter of two other lawsuits. One involving a former employee was settled with the Company paying $50,000. The other lawsuit was settled whereby the Company received $17,500 as a result of a lawsuit brought by the Company. Note 8. Software Development Costs The Company's tools and service revenues have decreased significantly, primarily due to the economic slowdown. Accordingly, management has reviewed its capitalized software development costs for potential impairment in relationship to its current and projected sales. As a result, it was determined that a portion of the unamortized balance of Evalu8 and the balance of XML was impaired for a total of $255,445 which was charged against income during the nine months ended April 30, 2001. Note 9. Purchase of OpTest Technology Assets. On January 18, 2001, Accelr8 purchased the OpTest technology assets ("OpTest") from DDx, Inc. ("DDx"). Management believes that the OpTest technologies have a wide range of potential applications to human and veterinary clinical and point of care diagnostics. The technologies are being developed as easy to use, cost-effective, highly sensitive and portable systems for rapid detection and quantification of molecular and microscopic scale affinity binding events. -8- The terms of the Asset Purchase Agreement provided for Accelr8 to pay DDx $500,000 cash at closing and to issue 1,813,793 of Accelr8 "restricted" common shares valued at $1.378 per share in the Asset Purchase Agreement. All shares are to be held in escrow pending the completion of an OpTest Technology Transfer event to a third party within the first year following closing. An OpTest Technology Transfer event may involve technology licenses, research and development agreements, government grants or contracts, mergers, acquisitions, joint ventures, strategic alliances, materials, transfer agreements, and all such similar arrangements. The shares in escrow are to be released from escrow as follows: (A) 50% upon the consummation of one OpTest Technology Transfer event to a third party (the "First Event"), and (B) 50% upon the consummation of a second OpTest Technology Transfer event to a third party (the "Second Event"); without limitation as to the dollar value of either the First Event or the Second Event. If no such Technology Transfer events are consummated within the twelve months following the Closing of this Agreement, then the buyer stock shall be released from escrow by the Escrow Agent to Buyer. Under the Asset Purchase Agreement, Accelr8 has committed to invest up to an Additional $1,000,000 in further development of the OpTest technology over the next 12 months, of which $73,790 has been spent through April 30, 2001. The total purchase cost to date, including transaction costs of $21,768 totals $521,768 and was allocated based on fair market value of assets acquired, as follows: Supplies/Inventory $ 3,500 Laboratory Equipment 51,887 Other molds and prototypes 16,691 Intellectual Property 449,690 -------- $521,768 ======== Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations - -------------------------------------------------------------------------------- Forward Looking Information 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, whether potential customers decide to modernize their legacy systems or to abandon those systems and purchase or develop new systems, 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. -9- Business While Management is cautious in its outlook for the Company's software business, it is hopeful that its investment in OpTest Technology(TM) will result in new revenue and earnings prospects for the Company. The Company's investment this quarter of $73,790 in the OpTest(TM) technology has been directed toward research, development and testing of its OptChem(TM) surface chemistry technology. Management anticipates filing a provisional patent with the US Patent office prior to the end of June 2001. OptChem(TM) is the proprietary surface chemistry technology component of the OpTest(TM) ultra sensitive Digital Assay(TM) diagnostic technology platform. Management believes that surface chemistry is the key to improving a number of large market diagnostics and materials applications, including immunoassays, DNA probes, and other affinity binding assays. Additionally, the creation of novel biomaterials, the building and screening of pharmaceutical libraries, and other non-biomedical applications would benefit. Specifically for affinity binding assays, a well-designed surface can significantly improve an assay's sensitivity, simplify assay steps, and reduce variability. OptiChem's(TM) family of non-specific binding surfaces will provide tools for highly sensitive, cost effective, user-friendly immunoassays and other diagnostic assays that require low non-specific binding surfaces. Other potential applications of OptiChem(TM) include genetic testing, expression and profiling, proteonomics (the identification of proteins in the body and a determination of their role in such activities as transmitting disease), new drug discovery through high throughput chemistry screening, biochips (may be able to perform thousands of biological reactions in seconds) and biosensors (analytical devices capable of providing either quantitative or qualitative results). Changes in Results of Operations: Nine months ended April 30, 2001 compared to Nine months ended April 30, 2000 Net revenues for the nine months ended April 30, 2001, were $764,860 a decrease of $460,337 from the comparable period in the prior year. In arriving at the net revenue figure of $764,860 a provision of $6,330 or .8% of net revenues for possible sales returns and allowances was used, which represented a decrease of $22,670 or 78.2% as compared to the nine months ended April 30, 2000. Consulting fees for the nine months ended April 30, 2001, were $38,250 a decrease of $71,113 or 65.0% as compared to the nine months ended April 30, 2000, and represented 5.0% of net revenues. Product license and customer support fees for the nine months ended April 30, 2001, were $485,157 a decrease of $305,590 or 38.7% as compared to the nine months ended April 30, 2000, and represented 63.4% of net revenues. Revenues from the resale of purchased software for the nine months ended April 30, 2001, were $247,783 a decrease of $106,304 or 30.0% as compared to the nine months ended April 30, 2000, and represented 32.4% of net revenues. Management believes that revenues for the nine months ended April 30, 2001 from the sale of software tools and consulting services, have been adversely impacted by a general slowdown in the US economy. Further, management believes that the general build up in computer hardware inventory has caused increased price competition between hardware vendors. Management believes that when hardware vendors significantly reduce platform prices the opportunity for third party software sales to be included in the hardware sales proposal declines significantly. Although management believes that the Company's tools and services can ultimately benefit the hardware solution for end users, hardware vendors are generally not proactive in recommending third party software solutions that would increase the total cost of the sale and jeopardize the purchasers decision to buy new hardware. Additionally, internal budgets for discretionary projects are under pressure which management believes has also negatively impacted the Company's sales. The decrease in resale of purchased software results from a decreased demand by several key customers. During the nine months ended April 30, 2001 sales to the Company's two largest customers were $231,027 and $118,450; representing 30.2% and 15.5% of the Company's net revenues. During the nine months ended April 30, 2000 sales to a single customer were $129,763 representing 10.6% of the Company's net revenues. The loss of a major customer could have a significant impact on the Company's financial performance in any given period. -10- Cost of services, including amortization of software development costs, loss due to impairment of software development costs and depreciation for the nine months ended April 30, 2001 was $1,135,691 an increase of $23,410 or 2.1% as compared to the nine months ended April 30, 2000. This increase resulted from loss due to an impairment of capitalized software development costs of $255,445 plus a higher percentage of total engineering salaries being charged to cost of sales versus development costs offset by a decrease in amortization. Cost of software purchased for resale for the nine months ended April 30, 2001 was $70,248 a decrease of $12,499 or 15.1% as compared to the nine months ended April 30, 2000. The decrease in software purchased for resale results from decreased revenue from resale of purchased software and variations in the product mix of items sold. General and administrative expenses for the nine months ended April 30, 2001 were $413,157 a decrease of $806,307 or 66.1% as compared to the nine months ended April 30, 2000 primarily due to decrease in value of marketable securities in the Company's deferred compensation trust, decrease in auditing fees which included the cost of a three-year audit in the previous period, a decrease in legal fees due to our insurance carrier assuming the cost of defending an employee suit, and decreased salaries and related employee costs due to a lesser number of employees. Marketing and sales expenses for the nine months ended April 30, 2001 were $198,257 a decrease of $407,127 or 67.3% as compared to the nine months ended April 30, 2000. This decrease was due to decreased costs of personnel and related employee costs, marketing expenses and commissions paid to non-employees. Research and development for the nine months ended April 30, 2001 was $32,184 representing research costs since the purchase on January 18, 2001 of the OpTest Technology. As a result of these factors, loss from operations for the nine months ended April 30, 2001 was $1,084,677 a decrease of $710,002 or 39.6% as compared to loss from operations of $1,794,679 for the nine months ended April 30, 2000. Investment income for the nine months ended April 30, 2001 was $449,991 an increase of $60,088 or 15.4% as compared to the nine months ended April 30, 2000. This increase was primarily due to interest rates averaging approximately one-half per cent higher during the current period. During the nine months ended April 30, 2000 the Company received a tax refund of $113,054. There was no comparable refund during the nine months ended April 30, 2001. Loss on disposal of assets no longer needed for the Company's business for the nine months ended April 30, 2001 was $28,877 an income decrease of $18,142 or 169% as compared to the nine months ended April 30, 2000. Realized gain on marketable securities held in the deferred compensation trust for the nine months ended April 30, 2001 was $42,801 an increase of $17,131 or 66.7% as compared to the nine months ended January 30, 2000. This gain was the result of selling trust investments. Unrealized loss on marketable securities held in the deferred compensation trust for the nine months ended April 30, 2001 was $308,310 a decrease of $520,881 or 245% as compared to the nine months ended April 30, 2000. This loss was the result of declining market value of securities held by the deferred compensation trust. Other income and expense for the nine months ended April 30, 2001, resulted in a net expense of $32,500, an increase of $32,500 over the same period in the prior fiscal year. Other income and expense consists of two separate litigation matters that were settled. These settlement expenses consist of a $50,000 payment on a lawsuit involving a former employee of the Company and the receipt of $17,500 in a lawsuit that was originally brought by the Company. -11- Income tax benefit for the nine months ended April 30, 2001 was $164,028 a decrease of 40.9% as compared to the nine months ended April 30, 2000. This decrease results from a taxable loss in the current period, tax credits, and a decrease in deferred tax liabilities. As a result of these factors net loss for the nine months ended April 30, 2001 was $797,544 an increase of $10,771 or 1.4% as compared to the nine months ended April 30, 20001. Changes in Results of Operations: Three months ended April 30, 2001 compared to three months ended April 30, 2000 Total revenues for the three months ended April 30, 2001 were $150,965 after a provision of $1,295 or .9% of net revenues for possible sales returns and allowances, a decrease of $2,305 or 64.3% as compared to the three months ended April 30, 2000. There were no consulting fees for the three months ended April 30, 2001, a decrease of $2,000 or 100% as compared to the three months ended April 30, 2000. Product license and customer support fees for the three months ended April 30, 2001, were $126,595 a decrease of $44,931 or 26.2% as compared to the three months ended April 30, 2000, and represented 83.9% of net revenue. Revenues from the resale of purchased software for the three months ended April 30, 2001 were $25,665 a decrease of $36,975 or 59.3% as compared to the three months ended April 30, 2000, and represented 17.0% of net revenue. Management believes that revenues for the three months ending April 30, 2001 from the sale of software tools and consulting services, have been adversely impacted by a general slowdown in the US economy. Further, management believes that the general build up in computer hardware inventory has caused increased price competition between hardware vendors. Management believes that when hardware vendors significantly reduce platform prices the opportunity for third party software sales to be included in the hardware sales proposal declines significantly. Although management believes that the Company's tools and services can ultimately benefit the hardware solution for end users, hardware vendors are generally not proactive in recommending third party software solutions that would increase the total cost of the sale and jeopardize the purchasers decision to buy new hardware. Additionally, internal budgets for discretionary projects are under pressure which management believes has also negatively impacted the Company's sales. The decrease in resale of purchased software results from a decreased demand by several key customers. During the three months ended April 30, 2001, the Company had sales in excess of 10% of net revenues to three customers in the amount of $56,550; $33,700; and $17,115 representing 37.5%; 22.3% and 11.3% of the Company's net revenues respectively. In comparison, the Company had sales in excess of 10% of total revenues to two customers of $51,770 and $37,300 representing 22.3% and 16.0% respectively of the net revenues for the three months ended April 30, 2000. 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 three months ended April 30, 2001 was $259,118 a decrease of $217,610 or 45.7% as compared to the three months ended April 30, 2000. This decrease resulted from decreased amortization, engineering salaries, and premises rent. Cost of software purchased for resale for the three months ended April 30, 2001, was $15,920 an increase of $12,977 as compared to the three months ended April 30, 2000. The increase in software purchased for resale results from decreased revenue from resale of purchased software offset by variations in the product mix of items sold, and returned product. -12- General and administrative expenses for the three months ended April 30, 2001, were $100,692 a decrease of $227,846 or 69.4% as compared to the three months ended April 30, 2000, primarily due to a decrease in auditing fees which included a portion of the cost of a three year audit in the previous period, a decrease in legal fees due to our insurance carrier assuming the cost of defending an employee suit, and decreased salaries and related employee costs due to a lesser number of employers. Marketing and sales expenses for the three months ended April 30, 2001, were $55,206 a decrease of $135,472 or 71.1% as compared to the three months ended April 30, 2000. This decrease was due to decreased costs of personnel and related employee costs, marketing expenses and commissions paid to non-employees. Research and development for the three months ended April 30, 2001 was $32,184 representing research costs since the purchase on January 18, 2001 of the OpTest Technology. As a result of these factors, loss from operations for the three months ended April 30, 2001 was $312,155 a decrease of $454,166 or 59.3% as compared to loss from operations of $766,321 for the three months ended April 30, 2000. Interest income for the three months ended April 30, 2001, was $124,154 a decrease of $370 as compared to the three months ended April 30, 2000. During the three months ended April 30, 2000 the Company received a tax refund of $113,054. There was no comparable refund during the three months ended April 30, 2001. Loss on disposal of assets for the nine months ended April 30, 2001 was $28,877 an increase of $18,142 or 169% as compared to the nine months ended April 30, 2000. Other expense for the three months ended April 30, 2001 was $50,000 an increase of $50,000 over the three months ended April 30, 2000. This increase resulted from settlement of a lawsuit with a former employee. Realized gain on marketable securities held in the deferred compensation trust for the three months ended January 30, 2001 was $9,205 a decrease of $6,674 as compared to the three months ended April 30, 2000. This gain was the result of selling trust investments. Unrealized loss on marketable securities held in the deferred compensation trust for the three months ended April 2001 was $141,106 an increase of $9,862 as compared to the three months ended April 30, 2000. This loss was the result of declining market value of securities held by the trust. Income tax benefit for the three months ended January 30, 2001 was $49,900 a decrease of 47.7% as compared to the three months ended April 30, 2000. The tax benefit is primarily due to the decreased amount of deferred tax liability. As a result of these factors net loss for the three months ended April 30, 2001 was $348,879 a decrease of $210,527 or 37.7% as compared to the three months ended April 30, 2000. -13- Capital Resources and Liquidity At April 30, 2001, as compared to at July 31, 2000, the Company's current assets decreased 10.7% from $11,123,156 to $9,930,874; and the Company's liquidity, as measured by cash and cash equivalents, decreased by 5.4% from $10,359,581 to $9,797,584; and the Company's working capital decreased by 8.9% from $10,500,529 to $9,564,739. During the same period, shareholders' equity decreased 8.0% from $11,262,187 to $10,360,562 as a result of a current period net loss of $797,544 and the cost of repurchasing 126,000 shares of the Company stock for a total of $104,081 during the nine months ended April 30, 2001. 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 2. Changes in Securities and Use of Proceeds - ------- ----------------------------------------- On January 18, 2001, Accelr8 purchased the OpTest technology assets (OpTest") from DDx. The terms of the Asset Purchase Agreement provided for Accelr8 to pay DDx $500,000 cash at closing and to issue 1,813,793 of Accelr8 "restricted" common shares to DDx. See Note 9 to the financial statements above for additional information. In issuing the securities, Accelr8 relied upon the exemption from the registration requirements set forth in Sec. 4(2) of the Securities Act of 1933, as amended. DDx made representations to Accelr8 in connection with the issuance of the shares into escrow to support the issuance of the shares under the exemption, the certificates were legended, and the stock transfer agent was instructed to enter stop-transfer instruction into its records. Item 6. Exhibits and Reports on Form 8-K a) Exhibits: There are no exhibits for the three months ended April 30, 2001. b) Reports on Form 8-K: There were no Form 8-K's filed during the quarter ended April 30, 2001. 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, 2001 ACCELR8 TECHNOLOGY CORPORATION /s/ Thomas V. Geimer ------------------------------------------------ Thomas V. Geimer, Principal Financial Officer -14- -----END PRIVACY-ENHANCED MESSAGE-----