-----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, Jlv8DOX9pJb7+VQK9xzasBQdLLEfcSKEJsNThYBxNepd8v7wOj4Gvoy3rTN2pWDb EC5jcnk7FNI/go72pE5czQ== 0001000096-05-000398.txt : 20050614 0001000096-05-000398.hdr.sgml : 20050613 20050614153729 ACCESSION NUMBER: 0001000096-05-000398 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050430 FILED AS OF DATE: 20050614 DATE AS OF CHANGE: 20050614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCELR8 TECHNOLOGY CORP CENTRAL INDEX KEY: 0000727207 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 841072256 STATE OF INCORPORATION: CO FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-31822 FILM NUMBER: 05894821 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 accelr8405.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 April 30, 2005 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ________ to ________ Commission file number 0-11485 ACCELR8 TECHNOLOGY CORPORATION ------------------------------ (Exact name of small business issuer as specified in its charter) COLORADO 84-1072256 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7000 Broadway, Bldg., 3-307. Denver, CO 80221 --------------------------------------------- (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 June 11, 2005 ----- ---------------------------- Common Stock, no par value 9,961,210 INDEX ----- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets 3 April 30, 2005 (unaudited) and July 31, 2004 Statements of Operations 4 for the three months and nine months ended April 30, 2005 and 2004 (unaudited) Statements of Cash Flows 5 for the nine months ended April 30, 2005 and 2004 (unaudited) Notes to Unaudited Financial Statements 6 Item 2. Management's Discussion and Analysis of 9 Financial Condition and Results of Operations Item 3. Controls and Procedures 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 19 CERTIFICATION OF OFFICERS 2
PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- Accelr8 Technology Corporation Balance Sheets ASSETS April 30, July 31, 2005 2004 ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 5,898,398 $ 7,233,430 Accounts receivable 51,918 15,948 Other Accounts Receivable 1,359 50,000 Inventory 24,099 30,287 Prepaid expenses and other current assets 85,206 33,972 Current Assets of Discontinued Operations -- 7,225 Note receivable (Note 7) 133,333 133,333 ------------ ------------ Total current assets 6,194,313 7,504,195 Property and equipment, net 246,511 216,733 Note Receivable (Note 7) 266,667 266,667 Investments, net 744,678 666,305 Intellectual property, net (Note 3) 3,929,237 4,070,832 ------------ ------------ Total assets $ 11,381,406 $ 12,724,732 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 109,488 $ 96,844 Accrued compensation and other liabilities 59,766 46,793 Liabilities for discontinued Operations -- 43,150 Deferred revenue (Note 4) 65,000 60,000 ------------ ------------ Total current liabilities 234,254 246,787 Long-term liabilities: Deferred compensation 797,672 741,305 ------------ ------------ Total liabilities 1,031,926 988,092 ------------ ------------ Commitments and Contingencies (Note 9) Shareholders' equity (Notes 6 & 7) Common stock, no par value; 11,000,000 shares authorized; 9,961,210 shares issued and outstanding, respectively 12,863,020 12,863,020 Contributed capital 461,049 461,049 Accumulated deficit (2,700,989) (1,313,829) Shares held for employee benefit (1,129,110 shares at cost) (273,600) (273,600) ------------ ------------ Total shareholders' equity 10,349,480 11,736,640 ------------ ------------ Total liabilities and shareholders' equity $ 11,381,406 $ 12,724,732 ============ ============ See accompanying notes to unaudited financial statements. 3 Accelr8 Technology Corporation Statements of Operations (Unaudited) Three Months Ended Nine months Ended -------------------------- -------------------------- April 30, April 30, April 30, April 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenues: Consulting fees $ -- $ -- $ 90,000 $ -- License Fees (Note 5) -- -- 62,750 OptiChem(TM) revenue 120,104 26,262 230,109 85,514 ----------- ----------- ----------- ----------- Net revenues 120,104 26,262 382,859 85,514 ----------- ----------- ----------- ----------- Costs & expenses: Cost of sales-OptiChem 49,481 22,243 103,710 38,777 General and administrative 205,526 198,275 703,125 728,193 Marketing and sales 9,880 5,928 32,054 80,605 Research and development 383,190 127,830 808,001 408,194 Amortization 58,827 58,128 176,350 174,384 Depreciation 7,655 13,710 51,318 34,968 ----------- ----------- ----------- ----------- Total Costs and Expenses 714,559 426,114 1,874,558 1,465,121 ----------- ----------- ----------- ----------- Loss from operations (594,455) (399,852) (1,491,699) (1,379,607) ----------- ----------- ----------- ----------- Other income (expense): Interest and dividend income 41,213 15,808 109,474 50,059 Unrealized gain (loss) on investment (11,367) (22,270) (6,706) 15,359 Miscellaneous 1,771 -- 1,771 -- ----------- ----------- ----------- ----------- Total other income (expense) 31,617 (6,462) 104,539 65,418 ----------- ----------- ----------- ----------- Income from discontinued operations (Note 8) -- 71,780 -- 184,533 ----------- ----------- ----------- ----------- Net Loss $ (562,838) $ (334,534) $(1,387,160) $(1,129,656) =========== =========== =========== =========== Net loss per share - basic and diluted $ (0.06) $ (0.03) $ (0.14) $ (0.11) =========== =========== =========== =========== Weighted average shares outstanding - basic and diluted 9,961,210 9,961,210 9,961,210 9,961,210 =========== =========== =========== =========== See accompanying notes to unaudited financial statements. 4 Accelr8 Technology Corporation Statements Of Cash Flows For the Nine months Ended April 30, 2005 and 2004 (Unaudited) 2005 2004 ----------- ----------- Cash flows from operating activities: Net loss $(1,387,160) $(1,129,656) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 51,318 31,828 Amortization 176,350 174,385 Increase (decrease) in fair value of stock options granted for consulting services (45,000) Unrealized holding (gain) loss on investment 6,706 (15,359) Reinvestment of interest and dividends (10,079) (7,559) Net change in assets and liabilities: Accounts receivable 12,671 (66,332) Inventory 6,188 (63,303) Prepaid expenses and other (51,234) (19,166) Accounts payable 12,644 23,254 Accrued liabilities 12,973 (637) Deferred revenue 5,000 65,000 Deferred compensation 56,367 79,168 ----------- ----------- Net cash (used in) provided by operating activities (1,108,256) (973,377) ----------- ----------- Cash flows from investing activities: Purchase of fixed assets (81,097) (94,629) Purchase of intellectual property (34,754) (22,427) Purchase of investments (75,000) (75,000) ----------- ----------- Net cash used in investing activities (190,851) (192,056) ----------- ----------- Cash (used by) discontinued operations (35,925) (35,741) ----------- ----------- Net (decrease) increase in cash and cash equivalents (1,335,032) (1,201,174) Cash and cash equivalents, beginning of period 7,233,430 8,711,951 ----------- ----------- Cash and cash equivalents, end of period $ 5,898,398 $ 7,510,777 =========== =========== See accompanying notes to unaudited financial statements. 5
Accelr8 Technology Corporation Notes to Unaudited Financial Statements For the Nine Months Ended April 30, 2005 Note 1. Basis of Presentation 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 our annual audited financial statements dated July 31, 2004, included in our annual report on Form 10-KSB as filed with the SEC. Management 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. The results of operations for the three month and nine month periods ended April 30, 2005 may not be indicative of the results of operations for the year ended July 31, 2005. Note 2. Reclassification Certain reclassifications have been made in the fiscal 2004 financial statements to conform to the classifications used in fiscal 2005. Such reclassifications have no effect on net income (loss) as previously reported. Note 3. Intellectual Property Intellectual property consisted of the following: April 30, 2005 July 31, 2004 -------------- ------------- OptiChem Technologies $ 4,469,517 $ 4,454,538 Patents 200,021 180,245 Trademarks 49,019 49,019 ----------- ----------- Total intellectual property 4,718,557 4,683,802 Accumulated amortization (789,320) (612,970) ----------- ----------- Net intellectual property $ 3,929,237 $ 4,070,832 =========== =========== Intellectual properties are recorded at cost and are being amortized on a straight-line basis over their estimated useful lives of 20 years, which approximates the patent and patent application life of the OptiChem technologies. Amortization expense was $176,350 and $174,384 respectively, for the nine months ended April 30, 2005 and 2004. 6 The Company routinely evaluates the recoverability of its long-lived assets based upon estimated future cash flows from or estimated fair value of such long-lived assets. If in management's judgment, the anticipated undiscounted cash flows or estimated fair value are insufficient to recover the carrying amount of the long-lived asset, the Company will determine the amount of the impairment, and the value of the asset will be written down. Management believes that the fair value of the technology exceeds the carrying value. However, it is possible that future impairment testing may result in intangible asset write-offs, which could adversely affect the Company's financial condition and results of operations. Note 4. Deferred Revenue The deferred revenue amount of $65,000 is composed of prepaid royalty fees of $50,000 and $15,000 of training fees included in the "License Agreement" with SCHOTT. See Note 5. Note 5. License and Supply Agreements On November 24, 2004, the Company entered into a worldwide exclusive manufacturing and marketing license agreement (the "License Agreement") with SCHOTT Jenaer Glas GmbH ("SCHOTT"). The Company also entered into a supply agreement (the "Supply Agreement") with SCHOTT for OptiChem coated amine-reactive slides manufactured by Accelr8. Pursuant to the License Agreement SCHOTT paid the Company a non-refundable fee of $100,000, of which ($50,000) of such fee was credited against future royalties. An additional $15,000 in deferred revenue has been recorded for training supplied to SCHOTT. During the 2-year term of the License Agreement SCHOTT agreed to pay Accelr8 a royalty payment equal to 6% of net sales of products licensed under the License Agreement. If the total net sales during the initial 2-year term equal or exceed, $1,125,000, then the total royalty payable by SCHOTT for the initial term shall be a flat fee of $90,000. An optional 1-year extension may be exercised by SCHOTT by payment of a $90,000 upfront renewal fee. Pursuant to the Supply Agreement, the Company will supply SCHOTT 10,000 OptiChem coated microarraying slides, including 1,000 slides purchased prior to the execution of the Supply Agreement, at a price of $14.00 each. The Supply Agreement also includes an option to SCHOTT until December 31, 2005 to negotiate an exclusive license for the application of OptiChem coatings on 96-well microtiter plates. In return, SCHOTT provided 7,500 glass substrates to Accelr8 at no charge. The option is valued at $12,750 and has been recorded as a license fee. The supply agreement was amended on April 25, 2005 to include the purchase of an additional 5,000 slides through July 15, 2005 under the same terms. Note 6. Shareholders' Equity Common Stock Options 7 At April 30, 2005, there were 860,000 stock options outstanding at prices ranging from $1.45 to $3.20 with expiration dates between May 6, 2005 and March 16, 2015. For the nine months ended April 30, 2005 and 2004, stock options exercisable into 860,000 and 762,500 shares of common stock, respectively, were not included in the computation of diluted earnings per share because their effect was antidilutive. Note 7. Employee Stock Based Compensation In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures about the method of accounting for stock-based employee compensation and the effect of the method used on reported results in both annual and interim financial statements. The Company accounts for employee stock-based compensation arrangements using the intrinsic value method in accordance with Accounting Principals Board ("APB") No. 25 and related interpretations and has adopted the disclosure-only provisions of SFAS No. 123 as amended by SFAS No. 148. The following table illustrates the effect on net loss if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation.
Nine Months Ended April 30, 2005 2004 ----------- ----------- Net loss - as reported $(1,387,160) $(1,129,656) Deduct: Total stock-based compensation expense determined under fair value based method for all awards (430,272) (5,595) ----------- ----------- Pro forma net loss $(1,817,432) $(1,135,251) =========== =========== Earnings per share: Basic and diluted - as reported $ (.13) $ (.11) =========== =========== Basic and diluted - pro forma $ (.18) $ (.11) =========== ===========
Note 8. Sale of Software Migration Tools On July 30, 2004, we completed the sale of the assets which consisted of tools for legacy-code modernization and the resale of third-party software (the "Software Migration Business") to Transoft Group Ltd. (the "Asset Sale"). The aggregate purchase price of the Asset Sale was $500,000; which was payable $100,000 in cash and the Company was issued a promissory note payable in three equal annual installments of $133,333 with annual interest of 4% on the unpaid balance payable quarterly. In addition, the purchase price included the assumption of support obligations under pre-existing support and maintenance 8 agreements. The assets, liabilities, results of operations and cash flows for the Software Migration Business have been classified as "Discontinued Operations" in the financial statements. Net income from the discontinued operations for the three and nine months ended April 30, 2004 was $71,780 and $184,533, respectively. A summary of income and expenses for these periods is below: Three Months Nine Months Ended Ended April 30, 2004 April 30, 2004 -------------- -------------- Revenues $105,147 $322,627 -------- -------- Cost of sales 14,725 69,071 Administrative and marketing 18,642 69,023 -------- -------- Total costs and expenses 33,367 138,094 -------- -------- Income from discontinued operations $ 71,780 $184,533 ======== ======== Note 9. Subsequent Event On June 2, 2005, Accelr8 Technology Corporation ("Accelr8") and SCHOTT Jenaer Glas GmbH ("SCHOTT") entered into a supply agreement (the "Supply Agreement"). Pursuant to the Supply Agreement, Accelr8 will supply a minimum of 5,000 OptArray Slide HS streptavidin coated microarrying slides to SCHOTT on a non-exclusive basis, at a price of $20.82 each for the first 1,000 slides and $17.15 for the remaining slides purchased under the Supply Agreement. The Supply Agreement for Slide HS with SCHOTT expires on December 31, 2005. Accelr8 also granted an option non-exclusive right to SCHOTT to negotiate for a non-exclusive right to manufacture and sell, up to 12,500 glass slides, from January 1, 2006 to December 31, 2006. If SCHOTT exercises this right, SCHOTT shall pay Accelr8 $15,000 for training on manufacturing of Slide HS. In addition, for this right, SCHOTT agreed to provide 7,500 glass substrates to Accelr8 at no charge (valued at $12,750). Accelr8 also offered SCHOTT until December 31, 2005 the right to negotiate an exclusive right for the manufacturing and worldwide sales of Slide HS coatings on microarraying slides. Schott must formally initiate negotiations by October 1, 2005. If SCHOTT exercises this right, SCHOTT shall pay Accelr8 $15,000 for training on manufacturing of Slide HS. Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations - ------------------------------------------------------------------------------ Forward Looking Information This Quarterly Report on Form 10-QSB contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company, intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements, which can be identified by the use of words such as "may," "will," "expect," "anticipate," "estimate," or "continue," or variations 9 thereon or comparable terminology, include the plans and objectives of management for future operations, including plans and objectives relating to the products and future economic performance of the Company. In addition, all statements other that statements of historical facts that address activities, events, or developments the Company expects, believes, or anticipates will or may occur in the future, and other such matters, are forward-looking statements. The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on assumptions that the Company will retain key management personnel, that the Company will accurately anticipate market demand for the Company's products and that there will be no material adverse change in the Company's operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following discussion should be read in conjunction with the Company's unaudited 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 including its 10-KSB for the year ended July 31, 2004, could affect the Company's actual results and cause actual results to differ materially from those discussed in forward-looking statements. Overview Prior to January 2001, Accelr8 Technology Corporation ("Accelr8" or the "Company") was primarily a provider of software tools and consulting services. On January 18, 2001, Accelr8 purchased the OpTest technology assets from DDx and commenced investment in development and optimization of OpTest's surface chemistry (OptiChem) and quantitation instrument (QuanDx(TM)). The Company's proprietary surface chemistry and its quantitation instruments support real-time assessment of medical diagnostics, food-borne pathogens, water-borne pathogens, and bio-warfare assessments. Presently the Company sells advanced microarray slides and specialty microtiter plates coated with its proprietary OptiChem activated surface chemistry for use in academic research, drug discovery and molecular diagnostics. This surface coating has the ability to shed sticky biomolecules that interfere with bio-analytical assays such as microarrays and immunoassays. Management believes that this property substantially improves analytical performance by enabling higher sensitivity, greater reproducibility, and higher throughput by virtue of simplified application methods. We believe that the market for DNA/RNA and protein microarrays is growing because of increased demand for gene analysis and molecular diagnostics as measured by industry wide growth in unit sales, i.e., Affymetrix (NASDAQ:AFFX), Agilent (NYSE:A), and Applied Biosciences (NYSE:ABI). 10 In July 2003, the Company introduced its OptiPlate(TM) products, which are 96- and 384-well glass bottom microtiter plates for multiplexed microarraying. These products allow the customers to print a small microarray (as many as 2,000 spots) in each well. As with OptArray slides, the products support both DNA and protein arraying. The glass and chemical coatings are identical to those used in OptArray slides. Management believes that this high throughput mode is essential in drug discovery and diagnostics where a lab must validate an assay over a large number of individual samples. The Company knows of only one other US company (Apogent Matrix) that is selling a plate for multiplexed microarraying. On November 24, 2004, we entered into an exclusive global manufacturing and distribution licensing agreement (the "License Agreement) with Schott Nexterion (Schott Jenaer Glas GmbH, Jena, Germany "SCHOTT") and a supply agreement (the "Supply Agreement") for microarray slides using Accelr8's OptiChem(R) surface chemistry. (See Note 4 to the Financial Statements.) On June 2, 2005, the Company signed a new supply agreement (the "New Supply Agreement") with SCHOTT for a new product, a Streptavidin coated microarraying slide (the "Slide HS"). (See Note 9 to the Financial Statements.) In January 2004, management commenced development of the BACcelr8r, a rapid bacterial identification and antibiotic resistance detection platform. The BACcelr8r embodies all three of Accelr8's wholly owned core technologies: OptiChem surface chemistry, QuanDx optical detection, and YoDx(TM) accelerated assay processing. We believe that the same integrated technology combination will provide a platform for molecular analysis, as used in genomics and proteomics, and molecular diagnostics. We expect the benefits of BACcelr8r to be very high sensitivity, rapid results, high reproducibility, and relatively low cost per test and expect the BACelr8r will be initially used in the ICU (intensive care units) of hospitals for the diagnosis and treatment assessment of VAP (ventilator associated pneumonia). In fiscal 2005 we intend to complete technical studies on materials and processes to be used in the BACcelr8r system. We believe that the BACcelr8r will significantly speed up bacterial testing and improve treatment outcomes. By developing and selling the system we intend to generate revenues and prove the value of our technology to large diagnostic companies. We believe that the most significant achievement of the BACcelr8r may be its ability to provide the physician with rapid antibiotic susceptibility tests results. We believe that this information should increase the number of lives saved by eliminating the often-ineffective use of "empiric therapy" (when specific bacteria have not been identified, the doctor prescribes a cocktail of drugs, hoping that the combination will kill the bacteria). Furthermore, we believe that dramatic compression of time that the BACcelr8r will provide compared to standard culturing practices, will give doctors an increased chance of getting patients out of the Intensive Care Unit days ahead of present norms (typically 10 extra days for pneumonia). We believe that this reduction in ICU costs, estimated at $3-4,000 per day, should also 11 significantly reduce un-reimbursed hospital costs, improving the bottom line of an operating hospital budget. This is a very important factor in our marketing strategy. While we are aggressive in our estimates of time to market and costs to develop, we believe that we will be able to execute this business plan without further cash infusion at this time. We have an excellent team of fulltime scientists and a well-equipped lab that has allowed us to economically attain our milestones to date. Changes in Results of Operations: nine months ended April 30, 2005 compared to nine months ended April 30, 2004. On July 30, 2004, we completed the sale of the assets related to the Software Migration Business. See Note 8 to the financial statements for details. The following revenues, costs and expenses relate only to our continuing operations. Consulting fees during the nine-month period ended April 30, 2005 were $90,000 as compared to $0 for the nine-month period ended April 30, 2004. The consulting fees were the result of a contract completed on December 31, 2004 for a custom coating for an industrial customer. During the nine month period ended April 30, 2005, license fees were $62,750 as compared to $0 for the nine-month period ended April 30, 2004. The license fees were 16.4% of total revenues. The license fees were the result of the License Agreement with SCHOTT to sell the Company's OptiChem surface chemistry technology (See Notes 4 and 5 to the Financial Statements.) OptiChem revenues for the nine month period ended April 30, 2005 were $230,109 as compared to $85,514 for the nine month period ended April 30, 2004, an increase of $144,595 or 169.1%. This increase was primarily the result of sales of OptArray slides under the Supply Agreement with SCHOTT, and a custom application to a customer of SCHOTT for a new formula not covered by the Supply Agreement. OptiChem revenues for the nine months ended April 30, 2005 were 60.1% of total revenues and 100% of total revenues for the nine months ended April 30, 2004. During the nine months ended April 30, 2005, sales of OptiChem slides to the Company's two largest customers were $216,064 and $6,620, representing 56.4% and 7.7% of the Company's total revenues. During the nine months ended April 30, 2004, sales to the Company's two largest customers were $35,150 and $34,300, representing 41.1% and 40.1% of total revenues. The largest customer during nine month period ended April 30, 2005 is SCHOTT. SCHOTT was the second largest during the nine month period ended April 30, 2004. The loss of this customer would have a material adverse effect on the Company's financial performance if the Company was unable to replace the revenue received from this customer. Cost of sales for the nine months ended April 30, 2005 was $103,710, which represented 45.1% of OptiChem revenue compared to $38,777 during the nine months ended April 30, 2004, which represented 35.4% of OptiChem revenue. The decrease in the cost of sales expressed as a percentage of Optichem revenue was the result of efficiencies in producing a greater number of slides and lower cost of substrates used in the formulation of OptiChem. 12 General and administrative expenses for the nine months ended April 30, 2005 were $703,125 as compared to $728,193 during the nine months ended April 30, 2004, a decrease of $25,068 or 3.4%. This decrease was largely due to the following increases and decreases: Consulting Fees $ 29,175 Corporate & Stockholder (44,743) Corporate Insurance (16,915) Deferred Compensation (22,801) Employee Benefits 9,289 Legal Fees (40,718) Premises Rent (16,598) Salaries 74,165 Other 4,078 -------- Total $ 25,068 ======== Consulting fees increased due to a former employee being hired as a consultant and a consulting engagement for the valuation of our intellectual property. The decrease in Corporate and Stockholder was primarily the result of the payment of the one time fee for listing on the American Stock Exchange of $53,500 during the nine-month period ended April 30, 2004. Corporate insurance decreased due to the elimination of our errors and omissions insurance policy that covered the software development operations. The decrease in deferred compensation was due to the market fluctuations in the holding amounts of the securities in the Trust. Salaries and employee benefits increased due to the hiring of more employees for research and development of for the BACcelr8r project. The decrease in rent was a result of the consolidation of our corporate offices with our laboratory facility. Marketing and sales expenses for the nine months ended April 30, 2005 were $32,054 as compared to $80,605 during the nine months ended April 30, 2004, a decrease of $48,551 or 60.2%. This decrease was largely due to an outside consultant being hired as an employee and the salary being classified in general and administrative and research. Research and development expenses for the nine months ended April 30, 2005 were $808,001 as compared to $408,194 during the nine months ended April 30, 2004, an increase of $399,807 or 97.9%. This increase was largely due to the following: Consulting Fees $240,486 Laboratory Supplies 15,622 Salaries 140,227 Other 3,472 -------- Total $399,807 ======== 13 Consulting fees are due entirely to amounts paid to engineering consultants for work on the BACcelr8r project, as are the increases in laboratory supplies. Salaries increased due to hiring more scientists to perform research for the BACcelr8r project. Depreciation for the nine months ended April 30, 2005 was $51,318 as compared to $34,968 during the nine months ended April 30, 2004, an increase of $16,350 or 46.8%. This increase results from the depreciation of additional laboratory equipment placed into service. The increase in amortization was negligible for the nine months ended April 30, 2005 as compared to the nine-month period ended April 30, 2004. As a result of these factors, loss from operations for the nine months ended April 30, 2005 was $1,491,699 as compared to a loss of $1,379,607 during the nine months ended April 30, 2004, an increased loss of $112,092 or 8.1%. Interest income during the nine months ended April 30, 2005 was $109,474 as compared to $50,059 during the nine months ended April 30, 2004, an increase of $59,415 or 118.7%. Interest income increased as a result of the interest earned on the note from discontinued operations in the amount of $12,055 and an increase in the interest rate on the amounts of cash held by the Company. An unrealized holding loss on marketable securities held in the deferred compensation trust for the nine months ended April 30, 2005 was $6,706 as compared to a gain of $15,359 for the nine months ended April 30, 2004, a difference of $22,065, or 143.7%. The change from a gain to a loss was the result of a decrease in the price of securities held in the deferred compensation trust. Discontinued operations during the nine-month period ended April 30, 2005 as $0 as compared to $184,553 during the nine-month period ended April 30, 2004. As a result of these factors, net loss for the nine months ended April 30, 2005 was $1,387,160 as compared to $1,129,656 during the nine months ended April 30, 2004, an increased loss of $257,504 or 22.8%. Changes in Results of Operations: Three months ended April 30, 2005 compared to three months ended April 30, 2004. OptiChem revenue during the three month period ended April 30, 2005 were $120,104 as compared to $26,262 for the three months ended April 30, 2004. This increase was the result of increased sales of Slide H and of Slide HS, to existing customers. During the three months ended April 30, 2005, sales to SCHOTT were $114,664 representing 95.5% of the Company's total revenues. During the three months ended April 30, 2004, sales to SCHOTT were $22,400 representing 85.3% of total revenues. The loss of this customer would have a material adverse effect on the Company's financial performance if the Company was unable to replace the revenue received from this customer. 14 Cost of OptiChem sales for the three months ended April 30, 2005 was $49,481, as compared to $22,243 during the three months ended April 30, 2004, an increase of $27,238 or 122.5% and is a direct reflection of the increased sales. General and administrative expenses for the three months ended April 30, 2005 were $205,526, as compared to $198,275 during the three months ended April 30, 2004, an increase of $7,251 or 3.7% This increase was primarily due to the following increases and (decreases): Salaries and Employee Benefits $ 26,344 Consulting Fees 1,875 Corporate & Stockholder Expense (18,780) Deferred Compensation 8,676 Corporate Insurance (4,283) Legal Fees (8,090) Miscellaneous other 1,509 -------- $ 7,251 ======== Marketing and sales expenses for the three months ended April 30, 2005 were $9,880, as compared to $5,928 during the three months ended April 30, 2004 an increase of $3,952 or 66.7%. This increase was largely comprised of a decrease in consultant stock option expense. Research and development expenses for the three months ended April 30, 2005 were $383,190, as compared to $127,830 during the three months ended April 30, 2004, an increase of $255,360 or 199.8%. The following summarizes the major components of the increase: Outside Engineering $ 198,441 Consultant Option Expense 21,292 Laboratory Supplies and Expense 1,055 Premises Rent (2,029) Conferences (2,300) Salaries 42,230 Miscellaneous other (3,329) --------- $ 255,360 ========= The major increase is in outside engineering fees for development of the BACcelr8r product. Salaries increased due to hiring of additional scientists for the BACcelr8r product. The fluctuations in the other categories are considered normal in the ordinary course of business. The change in amortization was nominal. Depreciation for the three months ended April 30, 2005 was $7,655, as compared to $13,710 during the three months ended April 30, 2004 a decrease of $6,055 or 44.2%. As a result of these factors, loss from operations for the three months ended April 30, 2005 was $594,455, an increased loss of $194,603 or 48.7% as compared to a loss from operations of $399,852 for the three months ended April 30, 2004. 15 Interest and dividend income for the three months ended April 30, 2005 was $41,213, as compared to $ 15,808 during the three months ended April 30, 2004, an increase of $25,405 or 160.7% Interest income increased as a result of the interest earned on the note from discontinued operations in the amount of $400,000 and an increase in the interest rate on the amounts of cash held by the Company. Unrealized gain (loss) on marketable securities held in the deferred compensation trust for the three months ended April 30, 2005 was a loss of $11,367 as compared to unrealized loss of $22,270 for the three months ended April 30, 2004. The decreased unrealized loss was a result of the change in market value of the underlying assets. The unrealized loss in marketable securities is reflected as decreased deferred compensation and included in general and administrative expenses. Discontinued operations during the three-month period ended April 30, 2005 was $0 as compared to $71,780 during the three-month period ended April 30, 2004. The Company has not recorded an income tax provision or benefit in either period. Deferred income tax assets and liabilities are computed to determine differences between the financial statement basis and the estimated income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. As of April 30, 2005, a valuation allowance has been recorded for the deferred tax asset, as management has not determined that it is more likely than not that this amount of the deferred tax asset will be realized. As a result of these factors, net loss for the three months ended April 30, 2005 was $562,838, an increased loss of $228,304 or 68.2% as compared to a net loss of $334,534 during the three months ended April 30, 2004. Capital Resources and Liquidity At April 30, 2005, as compared to July 31, 2004, cash and cash equivalents, decreased by $1,335,032 from $7,233,430 to $5,898,398, or approximately 18.5% and the Company's working capital decreased by 17.9% from $7,257,408 to $5,960,059. During the same period, shareholders' equity decreased from $11,736,640 to $10,349,480 or approximately 11.8% as a result of a net loss of $1,387,160. The net cash used in operating activities was $1,108,256, in the nine months ended April 30, 2005 compared to cash used in operating activities of $973,377 in the nine months ended April 30, 2004. The principal elements that gave rise to the difference are the increase in net losses of $257,504 and an increase in prepaid expenses in the amount of $32,068. The Company has historically funded its operations generally through cash flow generated from operations and equity financing. The Company anticipates that current cash balances and working capital plus cash flow from operations will be sufficient to fund its capital and liquidity needs in the foreseeable future. 16 Item 3. Controls and Procedures Under the supervision and with the participation of our management, including Thomas V. Geimer, the Chief Executive Officer and Chief Financial Officer of the Company, we have evaluated the effectiveness of our disclosure controls and procedures, as defined under the Securities Exchange Act of 1934, as amended, as the end of the period covered by this report. Based on that evaluation, Mr. Geimer has concluded that these disclosure controls and procedures are effective. There were no significant changes in our internal control over financial reporting during the quarter ended April 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings - ------------------------- Not Applicable. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - ------------------------------------------------------------------- Not applicable. Item 3. Defaults Upon Senior Securities - --------------------------------------- Not applicable. Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- Not applicable. Item 5. Other Information - ------------------------- None Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- a) Exhibits: 1. Exhibit 31.1 Certification of Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 2. Exhibit 31.2 Certification of Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 3. Exhibit 32.1 Certification of Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f 2002. b) Reports on Form 8-K: Form 8-K filed on February 23, 2005 Disclosing Change in the Company's Accountants Form 8-K filed on April 23, 2005 with letter to shareholders discussing its current business operations 17 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. Dated: June 14, 2005 ACCELR8 TECHNOLOGY CORPORATION /s/ Thomas V. Geimer -------------------- Thomas V. Geimer, Secretary, Chief Executive Officer and Chief Financial Officer /s/ Joan D. Montgomery ---------------------- Joan D. Montgomery, Principal Accounting Officer 18 EX-31.1 2 accelr84302005exh311.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas V. Geimer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Accelr8 Technology Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as, of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared. b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial report. Dated: June 14, 2005 /s/ Thomas V. Geimer - -------------------- Thomas V. Geimer Chief Executive Officer and Chief Financial Officer EX-31.2 3 accelr84302005exh312.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Joan D. Montgomery, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Accelr8 Technology Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as, of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared. b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial report. Dated: June 14, 2005 /s/ Joan D. Montgomery - ---------------------- Joan D. Montgomery, Principal Accounting Officer EX-32.1 4 accelr84302005exh321.txt SECTION 1350 CERTIFICATIONS EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code, each of the undersigned officer(s) of Accelr8 Technology Corporation, a Colorado corporation (the "Corporation"), does hereby certify, to such officer's knowledge, that: The Quarterly Report on Form 10-QSB for the quarter ended April 30, 2005 (the "Form 10-QSB") of the Corporation fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Dated: June 14, 2005 /s/ Thomas V. Geimer --------------------------------------- Thomas V. Geimer Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----