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, 2004
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________________ to ____________________
Commission file number 0-11485
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ACCELR8 TECHNOLOGY CORPORATION
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1072256
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7000 Broadway, Bldg. 3-307, Denver, CO, 80221
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(Address of principal executive office)
(303) 863-8088
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(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at December 14, 2004
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Common Stock, no par value 9,961,210
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
October 31, 2004 (unaudited) and July 31, 2004
Statements of Operations 4
for the three months ended
October 31, 2004 and 2003 (unaudited)
Statements of Cash Flows 5
for the three months ended
October 31, 2004 and 2003 (unaudited)
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
Item 3. Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults of Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CERTIFICATION OF OFFICERS 17
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Accelr8 Technology Corporation
Balance Sheets
ASSETS
October 31, July 31,
2004 2004
------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 6,815,161 $ 7,233,430
Trade accounts receivable 11,528 15,948
Other accounts receivable 1,359 50,000
Inventory (Note 3) 25,921 30,287
Prepaid expenses and other current assets 30,451 33,972
Note receivable (Note 7) 133,333 133,333
Current assets of discontinued operations (Note 7) 7,225
------------ ------------
Total current assets 7,017,753 7,504,195
Property and equipment, net 204,615 216,733
Note Receivable (Note 7) 266,667 266,667
Investments, net 742,716 666,305
Intellectual property, net (Note 4) 4,018,119 4,070,832
------------ ------------
Total assets $ 12,249,870 $ 12,724,732
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 115,720 $ 96,844
Accrued compensation and other liabilities 55,844 46,793
Liabilities for discontinued operations (Note 7) -- 43,150
Deferred revenue (Note 8) 90,000 60,000
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Total current liabilities 261,564 246,787
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Long-term liabilities:
Deferred compensation 761,466 741,305
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Total long-term liabilities 761,466 741,305
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Total liabilities 1,023,030 988,092
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Commitments and Contingencies (Notes 5, 6 and 9):
Shareholders' equity (Note 6):
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 (1,823,629) (1,313,829)
Shares held for employee benefit (1,129,110 shares at cost) (273,600) (273,600)
------------ ------------
Total shareholders' equity 11,226,840 11,736,640
------------ ------------
Total liabilities and shareholders' equity $ 12,249,870 $ 12,724,732
============ ============
See accompanying notes to unaudited financial statements.
3
Accelr8 Technology Corporation
Statements of Operations
For the Three Months Ended October 31, 2004 and 2003
(Unaudited)
2004 2003
---- ----
Revenues:
Revenue $ 21,724 $ 22,284
----------- -----------
Costs and expenses:
Cost of sales - OptiChem(TM) 10,530 8,276
General and administrative 261,056 258,341
Marketing and sales 10,749 40,602
Research and development 203,149 142,833
Depreciation 15,405 8,865
Amortization (Note 4) 58,698 58,128
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Total costs and expenses 559,587 517,045
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Loss from operations (537,863) (494,761)
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Other (expense) income:
Interest income 28,766 16,287
Unrealized gain (loss) on investments (703) 11,229
Realized gain on sale of investments -- 1,975
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Total other income 28,063 29,491
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Loss from continuing operations (509,800) (465,270)
Income from discontinued operations (Note 7) -- 42,272
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Net loss $ (509,800) $ (422,998)
=========== ===========
Net loss per share:
Continuing operations $ (.05) $ (.05)
Discontinued operations -- .01
----------- -----------
Basic and diluted net loss per share $ (.05) $ (.04)
=========== ===========
Weighted average shares outstanding 9,961,210 9,961,210
=========== ===========
See accompanying notes to unaudited financial statements.
4
Accelr8 Technology Corporation
Statements of Cash Flows
For the Three Months Ended October 31, 2004 and 2003
(Unaudited)
2004 2003
---- ----
Cash flows from operating activities:
Net loss from continuing operations $ (509,800) $ (465,270)
Adjustments to reconcile net (loss) to net cash
(used in) operatin activities:
Depreciation 15,405 8,865
Amortization 58,698 58,128
Unrealized holding (gain) loss on investments 703 (11,229)
Realized (gain) on sale of investments, interest and
dividends reinvested (2,114) (3,426)
(Increase) decrease in assets:
Accounts receivable 53,061 (12,859)
Inventory 4,366 (68,991)
Prepaid expense and other 3,521 22,011
Increase (decrease) in liabilities:
Accounts payable 18,876 17,077
Accrued liabilities 9,051 (5,745)
Deferred revenue 30,000 --
Deferred compensation 20,161 33,405
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Net cash used in operating activities (298,072) (428,034)
----------- -----------
Cash flows from investing activities:
Purchase of furniture and fixtures (3,287) --
Cost of obtaining patents and trademarks (5,985) (7,371)
Contribution to deferred compensation trust (75,000) (75,000)
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Net cash used in investing activities (84,272) (82,371)
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Cash used by discontinued operations (35,925) (30,090)
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Decrease in cash (418,269) (540,495)
Beginning balance 7,233,430 8,711,951
----------- -----------
Ending balance $ 6,815,161 $ 8,171,456
=========== ===========
See accompanying notes to unaudited financial statements.
5
Accelr8 Technology Corporatioin
Notes to Unaudited Financial Statements
For the Three Months Ended October 31, 2004 and 2003
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 period ended October 31, 2004 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. Inventory
The Company purchases raw materials (custom chemicals and glass
substrates) for producing OptArray slides. Raw material on hand at the end of
each reporting period is priced at cost based on the first-in first-out method.
There was no work-in-process or finished goods inventory at October 31, 2004 and
2003, as slides currently are made for specific orders and shipped as produced.
Note 4. Intellectual Property
Intellectual property consisted of the following:
October 31, 2004 July 31, 2004
---------------- -------------
OptiChem technologies $ 4,454,538 $ 4,454,538
Patents 186,230 180,245
Trademarks 49,019 49,019
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Total intellectual property 4,689,787 4,683,802
Accumulated amortization (671,668) (612,970)
----------- -----------
Net intellectual property $ 4,018,119 $ 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 $58,698 and $58,128 respectively, for the
three months ended October 31, 2004 and 2003.
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 5. Employee Stock Based Compensation
The Company accounts for stock based compensation to employees and
directors using the intrinsic value method in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. The Company accounts for stock based
compensation to non-employees in accordance with SFAS No. 123, "Accounting for
Stock Based Compensation", as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation--Transition and Disclosure--an amendment to FASB No.
123."
The Company applies SFAS No. 123 and 148 in valuing options granted to
consultants and estimates the fair value of such options using the Black-Scholes
option-pricing model. The fair value is recorded as consulting expense as
services are provided. Options granted to consultants for which vesting is
contingent based on future performance are measured at their then current fair
value at each period end, until vested.
The following table illustrates the effect on net loss if the Company
had applied the fair value recognition provisions of SFAS 123.
Three Months Ended
October 31,
2004 2003
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Net loss from continuing operations-as reported $(509,800) $(465,270)
Deduct: Total stock-based compensation
expense determined under fair
value based method for all awards (1,025) (1,025)
--------- ---------
Pro forma net loss from continuing operations $(510,825) $(466,295)
========= =========
Earnings per share from continuing operations:
Basic and diluted - as reported $ (.05) $ (.05)
========= =========
Basic and diluted - pro forma $ (.05) $ (.05)
========= =========
7
Note 6. Shareholders' Equity
Common Stock Options
At October 31, 2004, there were 702,500 stock options outstanding at
prices ranging from $1.45 to $3.20 with expiration dates between May 6, 2005 and
August 1, 2011. For the three months ended October 31, 2004 and 2003, stock
options exercisable into 702,500 and 755,000 shares of common stock were not
included in the computation of diluted earnings per share because their effect
was antidilutive.
Contingent options
On July 12, 2003, the Company issued 50,000 options at an exercise price
of $2.25 each, to purchase all rights in technology known as YoDx which will be
integrated into the Company's existing technology. In connection with the
purchase of the YoDx technology, the Company agreed to issue an additional
200,000 stock options with the same terms upon the earlier of (a) the Company
achieving certain accumulated revenue levels associated with the YoDx(TM)
technology, as defined in the agreement, or (b) a change in control of the
Company prior to the expiration date of the options. As of October 31, 2004, the
contingent provisions have not been met and the options have not been granted.
Note 7. Sale of Software Migration Tools
On July 30, 2004, we completed the sale of the assets related to the
Software Migration Business, which consisted of tools for legacy-code
modernization and the resale of third-party software 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 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 months ended
October 31, 2003 was $42,272. A summary of income and expenses for the three
months ended October 31 2003 is below:
2003
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Revenues $103,686
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Cost of sales 19,145
Administrative and marketing 41,093
Depreciation 1,176
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Total costs and expenses 61,414
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Income from discontinued operations $ 42,272
========
Note 8. Proof of Principle Testing Agreement
On April 12, 2004, the Company signed a proof of principle testing
agreement with a major life sciences company (the agreement has a non-disclosure
clause as to name of entity). Under the agreement, Accelr8 agreed to develop a
customized surface coating to be applied to blank substrates provided by the
customer for a total price of $90,000. The agreement included reasonable amounts
of technical support through December 31, 2004. The Company has delivered the
8
required customized coated substrates and has been paid in full at October 31,
2004. In accordance with EITF 00-21, "Revenue Arrangements with Multiple
Deliverables", revenue in the amount of $90,000 has been deferred until no
additional service delivery obligations are required by the Company or December
31, 2004, the expiration date of the agreement.
Note 9. Subsequent Event
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 signed a second supply
agreement (the "Supply Agreement") for OptiChem coated amine-reactive slides
manufactured by Accelr8.
Pursuant to the License Agreement Schott shall pay the Company a
non-refundable fee of $100,000. Fifty thousand dollars ($50,000) of such fee
shall be credited against future royalties. During the 2-year term of the
agreement Schott shall pay Accelr8 a royalty payment equal to 6% of net sales of
licensed products. 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 10,000
OptiChem coated microarraying slides, including 1,000 slides purchased prior to
the execution of the Supply Agreement, to SCHOTT at a price of $14.00 each. The
Supply Agreement with SCHOTT has a term of six months or until delivery of all
of the slides purchased under the Supply Agreement is complete. 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 will provide 7,500 glass substrates to
Accelr8 at no charge. The option is valued at $15,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Result of Operations
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Forward-Looking Statements
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
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 than 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's forecasts 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
9
reasonable, any of the assumptions could prove inaccurate and, therefore, there
can be no assurance that the results contemplated in forward-looking information
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 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 10KSB
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 was a provider of software tools and
consulting services. Since the acquisition of the OpTest suite of technologies,
we have focused primarily upon research and development relating to the
technologies acquired, and the development of revenue producing products related
to that technology. The potential market opportunity in the growing area of
biosciences, coupled with unique patented technology that was beyond initial
development stage, led us to pursue a purchase agreement with DDx.
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 quantitative instrument (QuanDx(R)). Our proprietary
surface chemistry and quantitative instruments support rapid assessment of
medical diagnostics, food-borne pathogens, water-borne pathogens and bio-warfare
assessments. Presently the Company sells advanced microarray slides 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.
On November 24, 2004, we entered into an exclusive global manufacturing
and distribution licensing agreement with Schott Nexterion (Schott Jenaer Glas
GmbH, Jena, Germany) and a second supply agreement for microarray slides using
Accelr8's OptiChem(R) surface chemistry.
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 also intend to begin BACcelr8r
product design and development. During first quarter fiscal 2005 we focused on
10
assay development and refined methods of analyte capture intended for use in
BACcelr8r. With microarraying products, we will continue manufacturing hydrogel
slides for resale to Schott customers pursuant to the Supply Agreement. In
addition, we expect to conduct further custom OptiChem coating development in
projects funded by industrial customers.
See "Note 9. Subsequent Events" for a description of the Supply Agreement and
the License Agreement with SCHOTT.
Changes in Results of Operations: Three months ended October 31, 2004 compared
to three months ended October 31, 2003.
On July 30, 2004, we completed the sale of the assets related to the
Software Migration Business. See Note 7 to the financial statements for details.
As a result, the following revenues, costs, and expenses relate only to our
continuing operations.
OptiChem revenues for the three months ended October 31, 2004, were
$21,724 as compared to $22,284 for the three months ended October 31, 2003 for a
decrease in sales of $560 or 2.5%.
During the three months ended October 31, 2004, sales to SCHOTT, our
largest customer were $19,494 representing 90% of the Company's net revenues.
During the three months ended October 31, 2003, sales to the Company's two
largest customers were $14,800 and $3,380 representing 66% and 15% of net
revenues. The loss of our major customer and the inability to replace the
revenues with another customer would have a further material adverse effect on
our results of operations.
Cost of sales for the three months ended October 31, 2004 was $10,530,
an increase of $2,254 as compared to $8,276 during the three months ended
October 31, 2003. This increase was primarily due to increased labor incurred in
manufacturing, quality control and shipping of OptiChem slides.
General and administrative expenses for the three months ended October
31, 2004 were $261,056, an increase of $2,715 or 1% as compared to $258,341
during the three months ended October 31, 2003. The major categories of
significant change for the three months ended October 31, 2004 as compared to
the three months ended October 31, 2003 are detailed below.
Consulting fees increased $20,713 primarily due to the cost of an
independent fair value determination of the Company's
intellectual property ($11,200) and accounting fees for work
previously done by an employee ($10,110).
Salaries had a net increase of $21,000, largely due to a former
consultant that was previously charged to marketing and sales
that is now employed as president of the company. Some of this
change was offset by an accounting employee that is now a
consultant.
Corporate and shareholder expense decreased $32,233 in the three
months ended October 31, 2004 as compared to the three months
ended October 31, 2004. In October 2003 the Company was listed on
the American Stock Exchange which required a $55,000 listing fee
plus one month of the annual fee ($1,458) for a total of $56,458
as compared to three months of annual fee ($4,374) in the current
quarter for a net decrease of $52,084. This decrease was offset
by an increase in expense of an investor relations firm ($8,737)
and the cost of a presentation to an investor conference ($6,500)
to increase the Company's profile within the scientific and
investment communities.
11
Corporate insurance decreased $9,016 due to a reduction in cost
of the directors, officers, and Company reimbursement liability
coverage.
Deferred compensation decreased $13,244 due to a change in market
value of investments in the deferred compensation trust.
Payroll taxes and employee benefits increased a total of $10,469
due to a greater number of employees.
Marketing and sales expenses for the three months ended October 31, 2004
were $10,749 a decrease of $29,853 or 74% as compared to $40,602 during the
three months ended October 31, 2003. This decrease was due to decreased
consulting fees ($26,947) because the consultant is now employed by the Company,
as president, and his salary is charged to general and administrative.
Research and development expenses for the three months ended October 31,
2004 were $203,149 an increase of $60,316 or 42% as compared to $142,833 during
the three months ended October 31, 2003. Salaries attributable to research and
development increased $44,708 due primarily to additional employees performing
work on surface chemistry and the BACcelr8r project.
Depreciation for the three months ended October 31, 2004 was $15,405, an
increase of $6,540 or 74% as compared to $8,865 during the three months ended
October 31, 2003. This increase is due to an increased amount of laboratory
equipment placed into service.
Amortization for the three months ended October 31, 2004 was $58,698, an
increase of $570 or 1% as compared to $58,128 during the three months ended
October 31, 2003.
As a result of these factors, loss from operations for the three months
ended October 31, 2004 was $537,863, an increased loss of $43,102 or 9% as
compared to a loss from operations of $494,761 for the three months ended
October 31, 2003.
Interest income for the three months ended October 31, 2004 was $28,766,
an increase of $12,479 or 77% as compared to $16,287 during the three months
ended October 31, 2003. This increase was primarily due to increased interest
rates.
There was no realized gain on marketable securities held in the deferred
compensation trust for the three months ended October 31, 2004 as compared to a
gain of $1,975 for the three months ended October 31, 2003.
Unrealized gain (loss) on marketable securities held in the deferred
compensation trust for the three months ended October 31, 2004 was a loss of
$703 as compared to unrealized gain of $11,229 for the three months ended
October 31, 2003. The 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.
In the three months ended October 31, 2003 there was income from
discontinued operations totaling $42,272. See Note 7 to the financial statements
for details.
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
12
deductible amounts in the future. As of October 31, 2004, 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
October 31, 2004 was $509,800 an increased loss of $86,802 or 21% as compared to
a net loss of $422,998 during the three months ended October 31, 2003.
Capital Resources and Liquidity
Detailed below is a comparison of the Company's capital resources and
liquidity at October 31, 2004 as compared to July 31, 2004.
October 31, July 31, Increase Increase
2004 2004 (Decrease) (Decrease)
------------ ------------ ---------- ----------
Cash and cash equivalents $6,815,161 $ 7,233,430 $(418,269) (5.8%)
Current assets $7,017,753 $7,504,195 $(486,442) (6.5%)
Working capital $6,756,189 $7,257,408 $(501,219) (6.9%)
Shareholders' equity $11,226,840 $11,736,640 $(509,800) (4.3%)
Cash and cash equivalents as of October 31, 2004 decreased by $418,269
as compared to fiscal year end, July 31, 2004. This decrease was largely the
result of a net loss of $509,800 and an increase in deferred revenue of $30,000,
which was the final payment under the Proof of Principal Testing Agreement (See
Note 8) and a payment of $75,000 into the deferred compensation trust, offset by
depreciation and amortization of $74,103.
The Company utilized $298,072 in operating activities in the three
months ended October 31, 2004 compared to cash flow utilized in the amount of
$428,034 in the comparable period in 2003. The principal elements that gave rise
to the difference are changes in receivables, inventory and deferred revenue.
The Company believes that its existing balances of cash and cash
equivalents will be sufficient to satisfy its working capital needs, capital
expenditures and other liquidity requirements for its existing operations in the
next twelve to twenty four months.
Item 3. Controls and Procedures
-----------------------
An evaluation was conducted under the supervision and with the
participation of the Company's management, including Thomas V. Geimer, the
Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of October 31, 2004. Based on that evaluation, Mr. Geimer
concluded that the Company's disclosure controls and procedures were effective
as of such date to ensure that information required to be disclosed in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. Mr. Geimer also confirmed that there was no change in the Company's
internal control over financial reporting during the quarter ended October 31,
2004 that has materially affected or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults of Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's Shareholders was held on December
14, 2004. The matters considered at the meeting were:
a) The election of Thomas V. Geimer, A. Alexander Arnold III, and Charles E.
Gerretson to the Company's Board of Directors;
b) Adoption an amendment to the Company's Articles of Incorporation, as
amended, which would effect an increase in the number of authorized shares
of the Company's no par value common stock (the "Common Stock") from
11,000,000 shares to 12,000,000 shares, without having any effect upon the
issued and outstanding shares of Common Stock;
c) Approval and ratification of the Company's 2004 Omnibus Stock Option Plan,
which authorizes the issuance of up to 500,000 shares of the Company's
Common Stock that may be issued under the Plan; and
d) To ratify the selection of Anton Collins Mitchell LLP as the independent
public accountants of the Company for the fiscal year ending July 31, 2005.
Each of the nominees was elected to the Board of Directors, the
amendment to effect an increase in the number of authorized shares of the
Company's no par value common stock from 11,000,000 shares to 12,000,000 shares
was adopted, the Company's 2004 Omnibus Stock Option Plan, which authorizes the
issuance of up to 500,000 shares of the Company's Common Stock that may be
issued under the Plan was adopted and Anton Collins Mitchell LLP were ratified
as the Company's independent public accountants. The votes cast at the annual
meeting upon the matters considered were as follows:
14
For Withhold
--- --------
Election of Directors
Thomas V. Geimer 7,668,256 192,101
A. Alexander Arnold III 7,847,748 12,609
Charles E. Gerretson 7,840,747 19,610
Adoption an amendment to the Company's Articles of Incorporation, as
amended, which would effect an increase in the number of authorized shares of
the Company's no par value common stock (the "Common Stock") from 11,000,000
shares to 12,000,000 shares
For Against Abstain
--- ------- -------
7,716,610 135,879 7,868
Approval of the 2004 Omnibus Stock Option Plan
For Against Abstain Not Voted
--- ------- ------- ---------
4,448,968 168,309 16,820 3,226,260
Ratification of Anton Collins Mitchell LLP
For Against Withhold
--- ------- --------
7,843,802 8,275 8,280
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 August 4, 2004 disclosing a press release announcing the
sale of the software business.
15
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: December 15, 2004 ACCELR8 TECHNOLOGY CORPORATION
/s/ Thomas V. Geimer
-------------------------------------------
Thomas V. Geimer, Secretary,
Chief Executive Officer and
Chief Financial Officer
/s/ James Godkin
-------------------------------------------
James Godkin, Principal Accounting Officer
16